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Tata Motors of India will soon unveil a $2,500 car that is a not only a marvel of low-cost manufacture but a novel business model innovation. The “People’s Car” (this nickname sounds like the original Beetle, right?) is the latest incarnation of India’s ability to change the way business is organized and managed to produce low-priced products services for people at the Bottom of the Pyramid. India is pioneering in low-cost eye surgeries, low-cost telecom services and low-cost retailing (with tiny sachets of shampoo and other products).
There is a challenging attitude toward the norm among Indian business people that generating business model innovation on a widening scale there and atracting the attention of US, European, Korean and even Chinese CEOs. This Indian innovative mindset combines irreverance for existing business models with a goal of creating through frugality. The end result is very, very low-cost products and services. This emerging model is as important as the US quality movement and the Japanese just in time movement.
Tata rethought not only the parts going into a car but the process of getting them. It is using the auction system on the internet to supply 30% to 40% of the parts for its cheap automobile. Most car makers use the web to supply 10% - 15% of their parts.
As for the car, Indian engineers rethought virtually every component with an eye toward cutting costs. Tata’s goal was to provide a four-wheeled vehicle for families now using two-wheeled motorcycles. Everything is minimalist.
My own concerns about the $2,500 car is that Tata didn’t go far enough. Putting millions of additional cars on India’s terrible roads will cause a nightmare of even more pollution and crowding. If India and China follow the Western model in lifting their people out of poverty into the middle class, global warming can only become much worse. This may not be fair to Indians and Chinese but it is, alas, probably true.
Families of four riding a motorcycle that gets 70-80 miles per gallon will now get around in a small car that gets maybe 40-50 miles per gallon. This is a problem. I saw small cars with electric engines while I was in Bangalore. Tata would do well to offer up a plug-in electric model in selling the People’s Car. And Tata might think of innovating the electric car motor to bring down the price for autos all over the world. That would be disruptive innovation and give Tata a huge global advantage.
For now, I can’t wait to see an image of this $2,500 auto.
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