Outsource domestic car manufacturing to India?
Outsourcing, or contracting what are traditionally internal company
functions to outside vendors (i.e., help desk) is an action normally associated with the computer industry. But with
few notable exceptions (e.g., surgery, food preparation, etc.), virtually any company can outsource all of its
functions. This includes automakers who have, for decades, outsourced such functions as crash-test results, all in the
name of cutting costs.Could the Big Three (or 2½) one day outsource an entire vehicle design, from conception to working model, to another company and even another country? That’s what Tata Technologies, based in Puna, India, is hoping. Says Tata’s COO Jeffrey Sage, “"I think we are only a couple years away from seeing this happen. It is imminent."
The advantages offered by outsourcing to firms such as Tata Technologies are numerous: a well-educated, highly-technological staff whose salaries can be a quarter of a similarly educated U.S. staff member.
Could this happen? Should it? What's your thought? An earlier post on India’s ambitions to become a major designer for the world’s auto makers can be found here.
Reader Comments (Page 1 of 2)
Vibhav 3:55PM (2/06/2006)
Hi - Covered this article on my blog, along with a few comments:
http://www.outsourcereporter.com/2006/02/06/outsource-domestic-car-manufacturing-to-india/
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tarique 7:12AM (8/02/2006)
Outsourcing needs to be checked and balanced. As a nation we need to create jobs in our own communities to increase economic growth for our economy to survive micro levels rather than outsourcing for bigger gains. For example the telecommunication (telemarketing firms) industry should not be able to outsource our target market to foreign markets. We created and invented the predictive dialer, we created our sales force, and we created our niche markets. It is our duty as corporate owners and constituents to build our corporate foundation by hiring from with-in. Our economy is dependent on our corporate and franchise owners to keep outsourcing to a level of check and balance leaving U.S. united while bringing our people closer in time of need.
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Gundar 8:58AM (2/05/2006)
Kiss the domestic auto industry goodbye - along with the American middle class, and eventually, the entire U.S. economy.
Pretty soon the only jobs left in America will be waiting tables and flipping burgers. Oh, yeah, and mandatory military service to fight wars instigated by a government essentially in the pockets of the military industrial complex.
Is this even a debate?
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I_Hate_China 9:00AM (2/05/2006)
Car engineering offshoring is only for those 3rd world auto companies lacking internal engineering resources and experiences to outsource their car designs to likes of Lotus or Porsche Engineering, not for developed world's auto companies to outsource to some 3rd world engineering house to save a few bucks.
The reason you keep engineering inhouse is simple. You need engineers who know about all aspects of your car in every square inch available at site to fix any problem that inevitably arises. Once you outsource, then you don't really know the product you are building.
Beside, does anyone really expect Tata(By the name I assume it to be the affiliate of Tata Motors) Engineering to come up with a car design that could meet all US and EU crash and emission regulations and compete with likes of Toyota and Honda? Won't happen.
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emulous1974 10:29AM (2/05/2006)
Hasn't this already been happening in one form or another for a long time. From something as little as Izuzu Impulse's with their suspensions designed by Lotus, to the Chevy Aveo (yes I know GM owns Dihautsu, but it's still a form of outsourcing). A Cadillac Allante's body was designed and manufactured outside the U.S., anyone remember Chrysler's TC by Masareti? Porcshe Boxtster and the older Saab 900 Convertibles weren't manufactured by their parent companies and were assembled in Finland.
Outsourcing of parts, design, and enginnering have been comonplace for so long now, that I'm willing to bet that the majority of parts in a car are designed, engineered and manufactured outside of the manufacturer of said car.
It's pretty ignorant to think that a company in India or China can not build a car to U.S. Specs. That kind of thinking aligns itself up nicely to the view of the American Auto Industry's view of the Japanese in this Country 30-40 years ago. They were kinda wrong about that impact, huh? And while we were sleeping the Korean Auto Manfucaturers are making the same move.
In my opinion, the American Car manufacturers have no one to blame but themselves for not being able to successfully compete in their own home markets. From the way in which they design and build cars, to how they deal with the unions and the consumer.
Do they have the capability to change. Yes, and we're seeing that now.
Americans want low prices on the products they buy, but want high paying jobs. That is why outsourcing is necessary. Bitching isn't going to change the trend.
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Finished.Law.School 11:32AM (2/05/2006)
Anything would be a massive improvement over having anyone affiliated with the UAW touching American made cars.
It doesn't sound as if "Gundar" knows what he is talking about...
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Whydrive 11:41AM (2/05/2006)
So if the Japanese decide to switch to Indian resources to build the cars, what will you folks say about the jobs then?
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adi 11:50AM (2/05/2006)
Are we, North Americans running out of brain power ? or is it because we are too expensive ?
Would'nt R & D and design outsourcing make us and our degrees potentially useless in North America ? This is a country at war against its own people.
Let India or CHina or whoever develop their own Auto Industry with the brains that they have, why bother taking up American contracts ? And why are American companies (which are essentially publicly traded) doing this to their own people ? If we are out of work, we cannot afford cars anyway. I'm just ranting on, but I think this is outrageous.
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Rastus 12:22PM (2/05/2006)
Would you like a Slupree with your Chevrolet Cobolt?
In all honesty, being a global economy is a double-edge sword. If things can be outsourced, they Will. That's why one must look for jobs that are insulated from that behavior...though those jobs are becoming increasingly rare. Maybe LawSchool knows a thing or two :)
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Lithous 12:29PM (2/05/2006)
"Bitching isn't going to change the trend."
Yeah, so shut up and be a good little lemming. No more Bostom Tea Party like protesting of anything, just bend over and shut up. Don't attempt to bitch and bring attention to any negative ideas about globalization.
"Anything would be a massive improvement over having anyone affiliated with the UAW touching American made cars."
I don't quite understand that statement. Do you mean "American branded cars" when you say "American made cars"? Because in relation to this blog post it would mean Indians making the American branded cars outside the U.S. (i.e. they wouldn't be "American made cars" if they were OUTsourced to India).
"Pretty soon the only jobs left in America will be waiting tables and flipping burgers."
Even those jobs are taken in many places by the 11 billion illegals here. So basically you will either be unemployed or a CEO. After a few years of that, then the American companies will get bought out and the American execs pushed out. A few years of that and we'll be able to compete with Chinese labor rates. Then we will come back just like China did because of cheap labor from all the jobless... (no wait, the foriegn companies won't be so dumb as to let us come back, they'll be smart enough to protect what they have and keep it from us).
"Oh, yeah, and mandatory military service to fight wars instigated by a government essentially in the pockets of the military industrial complex."
We'll only be fighting gun toting Asimo dudes. We'll be too low tech to compete in any war. The foreign countries who stuck to manufacturing (and not servants in the service economy) will have laser weapons and and incredible armour.
Gundar, you are way to optimistic about the future of the U.S. for my liking.
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Lithous 12:46PM (2/05/2006)
"In all honesty, being a global economy is a double-edge sword."
Wow, Rastus, I never thought we'd agree on anything.
"If things can be outsourced, they Will."
Not necessarily. GM gave those IT contracts so far to 3 American companies (EDS,HP and Compu), 1 Indian (Wipro) and 1 French (Capgemini). GM could have given the contracts to Infosec and Wipro and Capgemini and whatever other foreign IT companies that are out there. Believe me, there are good foreign IT companies out there.
"That's why one must look for jobs that are insulated from that behavior..."
Or not be a lemming, thoughtless consumer when Americans purchase products. You either buy more things from your own coutry now (and sometimes "settle" on your own terms for what you don't think is the absolute best) or HAVE to settle in the future for what is left out there. I mean, if you bought the American product and wrote the company and told them that is one of the reasons why and state the other reasons too if compelled, I'm sure the Pavlov's dog affect will kick in and the companies would slow down outsourcing and know what direction to take for their products. Maybe the consumer needs to do some work as much as the companies.
And no, Rastus, I am not attacking you (notice I spelled your username correctly), just making some points of my own from seeing yours.
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UH2L 12:56PM (2/05/2006)
- #2 Tata already has sold a car in Europe, for Rover I believe. If China can sell in the U.S., I assure you that India will be able to as well. Wouldn't you rather help a country with a democratic government than a communist government? I would. See the product portfolio of Tata here...
http://www.tatamotors.com/
- #7 Stereotypes about Indians (or anybody else) add nothing to the discussion but immaturity.
- #8 Those "11 billion illegal immigrants" (there are only 300 million people in this country), do many of the jobs that us Americans would never do, they help our economy in certain ways.
- What's happening is that, this is becoming a global economy. The world will (in the long term), move towards a global standard of living and we in the U.S. have nowhere to go but down. I agree that the government can and should do something to encourage job creation here instead of job outsourcing. But they do nothing. Instead the Repubs encourage this wealth disparity that is widening.
- My advice to everybody here is to get an education and work towards jobs that cannot be outsourced as easily, (as #7 says), such as marketing (have to understand the local culture), medical, legal service industries, high tech...
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WillDaThrill 3:30PM (2/05/2006)
If anybody is helping with the downfall of the American economy, it's our own fault. Everytime you turn around somebody sues some company for something. Yet people still don't realize the the cost of that lawsuit (won or lost) is passed off to the consumer. In this case we, as well as the UAW are somewhat forcing the hand of the autogroups. The basis of outsourcing is to cut cost and yet in the face of the automakers gloom the UAW is asking for more pay, benefits, etc. Who's is going to pay for those increased benefits? If you don't know, you are part of the problem.
Oh yeah, and for the illegals' comment; when Americans start fighting to work under a blazing sun in crop fields or do landscaping exactly the way you want it without charging for every little thing, then I'll jump on that wagon with you. These guys are more than happy to do jobs that most bums would turn their noses up at and you're mad because they have a job. Sure I don't like the fact that they are illegally here, but at least they aren't sitting on their asses, getting fat, complaining about needing more pay and benefits.
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I_Hate_China 3:59PM (2/05/2006)
UH2L
I know what Tata is capable of engineering, and no I am not impressed at all after looking at Tata Indica in person. The idea that Tata would engineer for somebody else when they can't engineer their own cars straight is so ridiculus.
Automotive engineering is something that can never effectively be outsourced. Only BMW engineers can engineer a BMW right. No Thank you to IndianMotorWorks.
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Charles S 6:46PM (2/05/2006)
I find it ironic that Americans, now that they fear for their jobs, are only concern about the word "outsourcing" when it's been done for several decades now.
How many people think it was beneath them to work for a fast food resturant when they were teenagers? The illegals that worked for our fast food joint were hard working and took their job seriously. It doesn't justify it, but they were willing to work, and most Americans were not.
We have a shortage of engineers in US, and since there are so many anti-immigration sentiment for bringing foreign graduates to US, saleries for tech jobs skyrocketed. College kids with NO experience get paid $60K as a starting salary. Sounds great til companies can't afford to hire them and then they start looking to outsourcing as a method to save costs.
Who is to blame? I don't know. The market evolves that way because it has to. If people want to believe in "free market" economy, then they better learn to live with outsourcing.
If people want protectionist economic prolicies, then be prepare for price increase in everything we do in our lives. We are able to buy so many things because we are living off the labor of 3rd world countries, and cheap Chinese laborers; this, too, is a form of outsourcing.
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donnybarsco 10:35AM (7/29/2007)
well, all what is on this blog is pretty correct, i think both ends are making sense so i dont see anybody ranting or stereotyping. to tell u the truth, anything could be made anywhere....that "anywhere", could sell their products anywhere, nothing will come close to what we do in america...and that is the tech know how. we are loosing it on that end and that is what bothers me...for starters...can anyone here name a college that offers a B.S Automobile Engineering, in the US....Europe and India do.
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Lithous 10:56PM (2/05/2006)
"Oh yeah, and for the illegals' comment; when Americans start fighting to work under a blazing sun in crop fields or do landscaping exactly the way you want it without charging for every little thing, then I'll jump on that wagon with you."
What wagon are you talking about? Please reread my statement if you have to. I never said anything like, "those f-ing illegals". A scenario was presented that the burger flipping jobs would be our last hope and I was saying that it may not be the case. If simply stating a scenario is putting down anybody please let me know how.
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Amit Das 11:45PM (2/05/2006)
>> #
I know what Tata is capable of engineering, and no I am not impressed at all after looking at Tata Indica in person. The idea that Tata would engineer for somebody else when they can't engineer their own cars straight is so ridiculus.
Really... when you saw it in person did you also include the price of the car in your conclusion:
The base Indica goes for 6100 USD ... still not impressed
Tata and other companies in India have to first think about their local market before venturing out to cater to oversea markets. Indica is the working man's car in India and as his requirements grow so will the quality of Tatas products.
Remember Tata Motors works very closely with Tata Consultancy Services, the second largest IT company in the country, and other entities in the consortium.
Old news:
"Ferrari Selects TATA Consultancy Services for Pole Position"
http://www.tcs.com/0_media_room/releases/200412dec/Formula_One_Circuit.htm
This approach has been critized by many analysts watching India's economic linearization... yet somehow the "local first" slow and tractable growth might be India's path to optimized growth.
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I_Hate_China 12:40AM (2/06/2006)
> when you saw it in person did you also include the price of the car in your conclusion: The base Indica goes for 6100 USD ... still not impressed
$6100 is a rip-off for a car that poor. No wonder Tata is the distant third in its own home market, while Suzuki(aka Maruti) and Hyundai fight it out.
> Tata and other companies in India have to first think about their local market before venturing out to cater to oversea markets.
Nothing prevents Tata from selling inexpensive small cars that are as good as Suzuki kei-cars and Toyota subcompacts. Well, the lack of engineering expertise, of course.
> Indica is the working man's car in India and as his requirements grow so will the quality of Tatas products.
Well, Tata has to first prove that its own cars could compete with Japanese and Korean cars before offering to engineer cars for the others.
> Remember Tata Motors works very closely with Tata Consultancy Services, the second largest IT company in the country
What does Tata's software offshoring business have anything to do with car engineering?
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Amit Das 3:01AM (2/06/2006)
>>$6100 is a rip-off for a car that poor. No wonder Tata is the distant third in its own home market, while Suzuki(aka Maruti) and Hyundai fight it out.
whoa.. those are some big claims... would you like to back them up...
Let me give you the REAL figures taken from Tata Motors, Maruti and Hyundai India press releases
Jan 2006
Maruti
Domestic Car Sales 48222
Of those 8262 were for the M800 ~5500 USD... thats right an 800cc car
Hyundai India
Domestic Car Sales 11,710 (negative growth from JAN05)
Tata Motors
Dom. Passenger Cars 20,765
With Tata introducing a genuine passenger line beginning in 99 with the Indica, many think they are doing well and Indian consumers are warming up to the automaker after 25 years of Suzuki Maruti domination.
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>>Nothing prevents Tata from selling inexpensive small cars that are as good as Suzuki kei-cars and Toyota subcompacts. Well, the lack of engineering expertise, of course.
Like I said before, Tata has created a car for the domestic market and then tries to market it around the world. There are many consumers especially in the developing world that find the value proposition ideal with Tata.
Check out this article from South Africa:
http://www.mg.co.za/articlePage.aspx?articleid=261260&area=/insight/insight__africa/ The Indica retails from R69 995 and the Indigo from R92 995, which makes them affordable compared to most models, but it is features such as power steering, electric windows, central locking, air conditioning and remote-controlled side mirrors which Tata says distinguishes it from its competitors.
the company aims to sell 18 000 light commercial and passenger vehicles a year by the end of 2007.
They are very serious players, says Beeton. People laughed at them when they entered the market, which was a mistake, and now they are going to have to be taken seriously.
With established consumers in many countries, when Tata decides to roll out larger, more sophisticated and pricier vehicles then the Japanese and Koreans will feel the pressure.
> Remember Tata Motors works very closely with Tata Consultancy Services, the second largest IT company in the country
>>What does Tata's software offshoring business have anything to do with car
engineering?
You are slow arent you. Do you think there will not be any engineers who are working on foreign automobile projects willing to share some of their knowledge with Tata Motors.
Please if you do reply. back up your claims
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