Maruti heat likely on Nano vendors

The Nano's incredible costing structure could put greater pressure on some of its suppliers who also meet the needs of Maruti.

Big names like Rane, Sona, Lumax, Mahle Migma, Minda Industries, Rico, Bosch, Federal Mogul, Endurance, GKN Driveline etc who played a big role in the Nano are now likely to face a situation where some will be asked to reduce prices for similar parts supplied to models like the Maruti 800.

"We do believe that this is inevitable especially when Suzuki has been talking of making the 800 cheaper to take on the Nano. As is always the case, component manufacturers will be the fall guys," sources said.

• Auto Expo 2008: View Special

None of the vendors was willing to be named but admitted that they feared a backlash of sorts from Maruti. Hyundai could also follow suit as it has gone on record to say that it is developing a people's car though it is at a conceptual stage.

Vendors say that it would be unfair to "compare apples to oranges".

According to them, the Nano at least assured huge volumes to make up for the competitive costing. This is not true for the 800 which barely does 7,000 units a month.

Further, Tata Motors involved suppliers for a long while preceding the launch and, to that extent, they were prepared for what was in store.

"The automaker went that extra mile in ensuring that all of us participated in the process and that made a difference," sources said.

What is even more significant is that a big global brand like Bosch has met the costing challenge for the Nano in terms of engine management systems.

The German company has, time and again, driven home the message that it is gearing up to supply to low priced vehicles in countries like India and China.

"This is what could put some Indian vendors in a spot. Should Maruti (and Hyundai) refer to the Bosch example and ask us to reduce prices, we are in trouble. Some of us may have to comply," one of the suppliers said.

Not everyone is worried though as they believe that both Maruti and Hyundai are getting the "best deals" from the viewpoint of costing and that it is unfair to use the Nano as a benchmark. "It was clear that there would be a lot of cost-cutting for this car. We cannot replicate this for multinationals in their own compact models which are designed and engineered differently," sources said.

What is clear from public response to the Nano is that Tata Motors has a winner on its hands. Segments like autorickshaws are going to feel the pressure as also two-wheelers.

Maruti's concern for the 800 is also justified and the only way it can slash prices and stay competitive is to ask vendors to cut costs. And this is what is getting most of them worried.