Posted on 09/26/2009 11:13:29 PM PDT by IndianChief
This week, Ford Motors announced that India would be a global manufacturing hub for its new small car, the Figo. This underlines a remarkable new development. India has overtaken China as a car exporter this year, exporting 201,138 cars in January-July against China’s 164,800. What’s more, Indian exports in this period went up 18%, while China’s fell by 60%.
............. What accounts for India’s success? Visionary planning? Long-term strategy? No, India’s triumph was completely unplanned. No planning document ever envisioned or planned for beating China.
Analysts say China has become a great auto exporter because of huge subsidies, an undervalued exchange rate and dirt-cheap credit. But India never aimed at an undervalued exchange rate to pile up large trade surpluses — rather, it aimed to keep the real effective exchange rate unchanged from 1993 onward. India’s interest rates were always among the highest in Asia. It stubbornly refused to reform its inflexible labour laws, with adverse effects on productivity and wages relative to Asian competitors. No Indian strategic vision targeted special provisions or subsidies to the auto sector. Indeed, the sector for years suffered exceptionally high excise duties and sales tax.
How then did this sector become world class? In the early 1990s, auto production was freed for investment by any domestic and foreign investor. Indian planners as well as foreign investors regarded India as a low-skilled, low-productivity country producing third-rate cars like the Ambassador and Premier. Foreign investors came only because car imports were virtually banned. The small size of the Indian car market created serious scale diseconomies.
Critics from both the Right and Left criticized the new auto policy. Leftists claimed foreigners would decimate the industry. Freemarketers complained that foreigners were being wooed to create an inefficient, high-cost industry behind high tariff walls.
Nobody foresaw what fierce competition would do. Auto companies compete by constantly producing new models with improved features like fuel efficiency. Indian consumers are very price-sensitive , so design changes to reduce costs are also vital. India’s auto parts companies had rarely been asked for innovative changes during the old licence-permit raj, when the Ambassador and Premier faced little competition. But MNCs brought in competition, and started a dialogue with auto ancillary manufacturers on constant design changes. To their surprise, they found that Indian engineers had considerable skills, and could make improvements quickly and cheaply.
Bharat Forge, which makes auto forgings like crankshafts and axles, was among the first to realize that India’s big advantage was not cheap labour but cheap skills. The company decided to have no blue collar workers at all, only engineers. This yielded a huge rise in innovation and productivity, and soon made Bharat Forge the second biggest auto forging company in the world.
Excerpted.. more at link
Good grief. The export quantities involved are minor so far compared to the numbers exported from Japan or Germany (even the U.S. exports far more than 200,000, I’d estimate). What really matters is where they will be 5 or 10 or 20 years down the road. India and China certainly have the potential to be massive exporters, eventually passing Japan in that regard. The volatile small numbers at this point, though, aren’t of much interest in themselves.
India not communist.
You know, I've wondered about doing this very thing myself. I am an engineer at a auto supplier in the U.S. The idea of a smaller number of 'masters' with a high level of expertise and training operating equipment (with apprentices being mentored as necessary to provide adequate coverage over time), seems like a feasible alternative to larger numbers of less educated and less motivated blue collar workers. (At least for some manufacturing processes and products.) And it would help put another stake into unions.
How does this work having no blue collar workers?
It is easier to sell cars if you have nice Tatas....
the real reason is, yes, India is a democracy and China is not. Only individuals are creative. It is an elusive trait easily lost with a “collective”. Communist China is a classic example of how to kill the creative spirit. India shows how leaving enough room for individuality can enable the creativity of an engineering culture to flourish, somewhat, and put them ahead of the centralized, planned, economy of China. Low innovation? China leads. High innovation? China eats dust.
I would imagine the engineers operate the equipment themselves. Depending on the nature of the process they would either run an assembly line part time and then take care of other duties part of the time. Or if the work is organized into work cells (which I think more likely), each engineer or work team would work out their schedule and how much time they need and coordinate it with the rest of the plant to achieve a good work balance between blue collar work and the white collar activities.
Every major auto manufacturer is expanding in China. They will eventually reach a point, where the Chinese market is not expanding as fast as they are adding capacity. Which, at that point, exports will begin to grow substantially.
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