In talks with local vendors to supply auto parts, which would be cheaper compared to those manufactured in the West.
A clutch of domestic auto parts manufacturing companies, which supply to Tata Motors, will see an additional flow of demand from Jaguar Land Rover as the latter two brands seek to maintain their profitability.
The purchasing office of the two brands, based in Pune, has sounded out a more aggressive push towards sourcing of parts from local vendors.
According to vendor sources, the two brands have had discussions with multiple component manufacturers and have asked them to ramp up supplies. This hints at a rise in momentum in sourcing activity, especially after the new assembly plant for Land Rover at Pune becomes operational later this year. Although senior Tata Motors officials have not divulged the details of sourcing from India alone, the overall component sourcing done from low-cost countries is 20 per cent with India commanding a lion's share.
An official from Delhi-based Lumax Auto Technologies, which supplies lighting solutions to Land Rover, said, "We bagged the contract for supplying LED high-mount stop lamps for the Land Rover and are expecting this demand to go up considerably.”
A more affordable variety of auto parts from India, better realisation on premium products such as the newly launched Jaguar XJ and favourable swing of the forex boosted JLR's earnings despite a meeker absolute sales growth recorded during the last quarter. JLR posted a five-fold growth in profits at £275 million (about Rs 2,000 crore) in the recently concluded quarter while also posting a marked increase in its margins. The substantial growth in profit was despite sales growth of just 11 per cent to around 63,000 units during the quarter compared to the same quarter a year ago.
Tata Motors is aiming to increase the component volumes from India and take it to 30 per cent levels in the coming period. This will reduce the cost of the product significantly since Indian auto parts are 30-40 per cent cheaper than those manufactured in the West.
A vendor based in Maharashtra said, "The JLR team have held discussions with vendors regarding manufacturing and quality guidelines. Supply targets have also been shared with them for the coming months."
"While ensuring that the quality is not compromised, they are sourcing the components in a systematic way so that there is no difference in parts manufactured from India and those in Europe," said another vendor.
The decision to raise imports of auto parts from India is perhaps linked to the idea of increasing production at the manufacturing plants in the UK to 300,000 units per annum or beyond from 270,000 units at present.
C R Ramakrishnan, CFO, Tata Motors said, "We may have to do that (take capacity beyond 300,000 per annum). We have not taken a decision yet. We will watch the development. We also talked about possible manufacturing footprint in China, which would be one way to augment capacity. Some of these are still in exploration stage, we will reach a decision quickly."
