Nanjing Tata AutoComp Systems has got ahead in China by staying eagle-eyed on quality, cost and delivery, while immersing itself in the country’s culture of business
For overseas enterprises coming into China, the benefits of doing business in the land of the Great Wall far outweigh any barriers they may encounter. It’s a reality that has held true for Tata AutoComp Systems from the time the automotive-parts supplier got serious about the country back in 2007, and that has continued to be its experience in the decade since.
Incorporated as a ‘wholly foreign-owned enterprise’, Nanjing Tata AutoComp Systems (NTACO) established its first plant in 2008, encouraged and enabled in speed of execution by local government and regulatory bodies that embody the swiftness China is famed for in business matters (see Marvels everywhere).
The NTACO facility, in the Jiangning Economic and Technology Development Zone in Nanjing — an ancient city of politics and culture reordered in the image of modern China — marked the beginning of what has been a steady story of growth for NTACO.
The China move was logical for Tata AutoComp to make. The company was looking for opportunities to develop an international presence during a period when it was supplying products for the global programmes of carmakers such as General Motors and Ford. China was the place to be in, and adding to the allure for Tata AutoComp was an already secured piece of business from Ford to supply large-size components.
“The thought process was to have a manufacturing base in China to supplement what we were doing in India,” says Narendra Chavan, who has been the chief executive of NTACO from 2009. “We knew we could service the domestic market as well as supply to other regions. Labour costs were competitive and we were certain China would help expand the business.”
China has been a revelation for NTACO, as a base for business and as an enriching experience. There was a hitch in the initial stage, though, precipitated by the global economic meltdown of 2008-09. Consolidation became the watchword for Tata AutoComp, which closed offices in the United States and an office and a manufacturing unit in Europe. China remained in the mix, not least because it had just been set up.
The decision has proven to be propitious. “We were able to concentrate on supplying to the European and American markets, not by choice but due to the China connect with these markets,” explains Mr Chavan. “China-to-Europe and China-to-the US is typically how it unfolds when vehicle manufacturers kick-start their global programmes. We were in the right place.”
China got better still for NTACO in October 2015, when the subsidiary went onstream with a second plant in the country, this one in Changshu near Shanghai. The basic idea was to feed further on the nourishment the country had to offer, targeting as it did a jump in supplies to automakers in China as well as global markets.
What makes the new facility in Changshu a striking deal for NTACO is its proximity to the manufacturing operations of Chery Jaguar Land Rover (CJLR), the extremely successful Sino-British joint venture (see Two together in cruise control). “We started this solely for CJLR, but we are working to cater to other customers,” says Mr Chavan.
The NTACO agenda is all about collaborating closely with customers and there are two streams to its business. One of these is kinematic components for the interiors of vehicles, or moving parts. Air outlets are the biggest draw in this bag, pulling in up to 65% of total revenues. Assist handles, placed on the roof liners of vehicles, are another large-selling component, as are ashtrays and cup holders. The second set of products that NTACO specialises in are mid- and large-size injection-moulded parts, the kind that are made on giant machines and don’t have any movement involved in its working.
“Kinematic parts are critical for us and that explains our focus on these,” says Mr Chavan. “They have a primary design appeal to customers, which is why automakers give it so much importance. Appearance counts and so does functionality and what we call ‘feeling’ or ‘haptics’. They have to work smoothly and nothing about them must jar. There are very few products in the interior area with these three requirements and our customers have a magnifying lens on them.”
The experience of China as a country and as a business hub has been challenging and enlightening in roughly equal measures for Nanjing Tata AutoComp Systems (NTACO), and entirely rewarding. The prime reason is China itself, the nature of the nation and how it welcomes those coming to its shores.
Nanjing was selected as the site for NTACO’s first plant for purely business reasons. What followed in getting the facility ready was an eye-opener for those in charge of the venture’s well-being, especially Narendra Chavan, the chief executive helming the operation.
Mr Chavan’s first taste of China could have turned out to be bitter but, instead, it made him an unabashed admirer of the country. It was May 2009 and Mr Chavan had arrived at the plant right after landing at Nanjing airport and freshening up at his hotel. That’s when local government health officials came calling at the facility and announced that he would have to be quarantined.
Swine flu was the culprit. A passenger on Mr Chavan’s flight had contracted the highly contagious respiratory disease, then rife in the region, and all those seated three rows in front of and behind him would have to be isolated as a precautionary measure in a government hospital, the officials said.
One week was the quarantine sentence. “There was an ambulance and an escort waiting and a government car too,” recalls Mr Chavan. “I wasn’t allowed to even take my bags, so there I was in a bare room, all alone, just over an hour after arriving in Nanjing. The adjacent rooms had others in the same predicament. I stayed there for a week and the only people I met face-to-face were hospital staff wearing masks.”
That was the tough part. The healthy bit was being treated with goodwill and there was genuine regret for the hassle involved. “The local officials kept sending me bouquets and cold-drink crates,” says Mr Chavan. “When I finally got out of the hospital, there were more flowers and visits by senior officials. I was amazed.”
Mr Chavan, a native of Pune in India who has been with Tata AutoComp Systems for 21 years, came to China at about the time NTACO started production. “The process leading up to that point was scarcely believable for somebody like me, used as I was to delay-prone India. The local government and its officials were more than supportive in helping us set up. There was a one-point contact to resolve issues and the entire infrastructure — roads, footpaths, landscaping — was in place before we even started the plant’s construction.”
That was standard fare for China, where visitors from abroad are constantly astonished by the alacrity with which local officials, regulators and others in government facilitate businesses. “They had a specific official designated to help us with bottlenecks,” says Mr Chavan. “They were proactive rather than reactive.”
Language can be a hurdle, though. “You need to know at least a bit of Chinese or there will be a disconnect,” says Mr Chavan. “English is not enough, especially on the factory floor. But, culturally speaking, China is quite similar to India. There are plenty of common threads.”
NTACO designs and develops about 90% of its products and making them is a painstaking process. “The development time for an air outlet is, typically, almost equal to that for the entire car,” adds Mr Chavan. “We have a design centre in Germany with eight designers. And we work with other Tata companies, Tata Technologies among them, to tap into the automotive expertise in the group.”
NTACO’s intellectual quotient is an advantage — the China patent authority granted it 15 patents in 2016 — but a greater strength is what the organisation as a whole has been engineered to deliver. Three factors count for most here: quality, where no customer will accept more than 20 defective parts per million; cost, which is about the initial price and targeted reductions every year; and delivery, perhaps the most complicated of the lot.
“As a global supplier, we ship the components we make to China, Europe and the US, and we are the sole suppliers to all three regions for any given programme,” says Mr Chavan. “We have to ensure that our parts are reaching all regions on time, that we are not the cause for a line stoppage. Shipping, custom clearances, local transportation, warehousing and more — all of that is our responsibility.”
CJLR, General Motors and Volvo are the ‘anchor customers’ for NTACO, constituting almost 75% of its business. There are no easy pickings here, not even with a company like CJLR, despite the prominent Tata link. “They have been cautious with us,” says Mr Chavan. “They gave us the chance to prove our credentials before giving us any business. We gained their confidence, as we did with Ford, General Motors, Volvo, Mercedes Benz, Peugeot and Renault. With CJLR we were the first at the finish line among 140 suppliers and they appreciated it.”
Mr Chavan emphasises the relationship dimension that has made such progress possible for NTACO in China. “It is vital in the automotive business. Customers need to trust us and that’s where relationships come in. You also have to be perfect on regulatory issues at every level. Being a Tata concern, we can see beyond the bottom line and that is respected.”
On the people front, NTACO has taken the high road to get ahead. It has a workforce of 370 people, 366 of them Chinese nationals, with an average age of 29. “Close to 60% of my department managers are founder members of the enterprise,” says Mr Chavan. “This is unique because in China, though the market is now slowing down, there was a time not far back when we saw a mad rush to recruit. Our people stayed with us through this.”
The enterprise may not be in the fast lane yet but the portents look promising. Fresh acquisitions and development programmes have added to the kitty at NTACO, which increased its turnover from about $15 million in 2015-16 to more than $33 million a year later. (Tata AutoComp, the parent company, registered sales of $395 million in 2016-17 and $491 million in 2017-18. It has been a dividend-paying business for three years.)
NTACO itself has been a profitable entity since the third year of its operations. As for the future, Mr Chavan is convinced it can notch up revenues of $100 million by 2022. “The gap is about $65 million and we have a plan to close it. We have a sound foundation and a wonderful team of people, and we are rich in experience. There’s no reason we cannot.”