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Steve's Blog

Tata, Fiat and Premium Brands

Friday, 18 January 2008 00:00

Finally Ford have confirmed what the rumour mill has been saying for some weeks now, that Tata is the preferred bidder for Jaguar and Land Rover. Various observers have raised objections about the qualifications of Tata to be a good home for these British premium brands. These comments are ill-informed and arguably rooted in prejudiced stereotypes, rather than cultural and industrial reality. As someone who has worked and travelled in India fairly extensively, I can only say that Tata Group serves up luxury, for example in their Taj Hotels, as well as any other premium provider. The key is recognising the target customer, and I am certain that Tata recognise the difference between the customer for a Jaguar XK and that for a Tata Indica car or Novus truck. The Indians in general can also do “traditional British” better than the Brits themselves, so little risk there either.

 


More interestingly, the industrial logic seems clearer to me than other observers. It is already public knowledge that Tata has a close and developing relationship with Fiat Group. Ratan Tata sits on the Fiat Board, and the groups have joint initiatives in trucks, tractors and cars in India. Fiat confirmed publicly last September that they were prepared to offer technical support to Tata if they acquired Jaguar Land Rover. Surely this all points towards further evolution of the Fiat-Tata relationship? A new “Premier Automotive Group” combining Alfa Romeo, Maserati, perhaps Ferrari and a now potentially viable Lancia, with Jaguar and Land Rover. Complementary brands, real scale economies in premium product and distribution and a precursor perhaps to the next industry mega-merger – that of Fiat and Tata?

 

Tata Nano – “one lakh car”

Thursday, 10 January 2008 00:00

After four years wait, Tata finally unveiled their “one lakh car” – the Tata Nano, priced (excluding tax and delivery) at one lakh rupees, around US$2,500  http://www.tatanano.com/tatamotors .  Sceptics firstly did not expect them to achieve the price target, and if they did, then only by having a product which was more like a four wheeled motorcycle.  As the price target has been met, and the Nano is clearly a proper car, the sceptics have now turned on the environmental impact of half a million Nanos htting Indian roads every year.


Anyone who has worked or travelled in India as I have will be familiar with the state of the roads.  I know one Indian businessman who treats north and south Mumbai (Bombay as was) as different destinations.  He does not make appointments in both the same day, and changes hotels if has meetings in both parts of the cities on consecutive days.  The traffic is chaotic and mainly stationary.  The pollution is noticeable, but the main culprits seem to be the aging truck and bus population, and the “tuc-tuc” three wheelers, some of which seem to burn more oil than petrol.

Ratan Tata said that he was inspired to develop the Nano by seeing families of four riding around on a motorcycle, and feeling that they deserved a safer method of transport.  This is not an unusual sight, and four is by no means the limit that an Indian can fit on a motorbike.  One one occasion, I saw what appeared to be a house move under way, with a family of five plus various household goods, all on one motorbike, obviously none with helmets.

How much pleasure the new Nano owners will get from their cars, as they sit (without air conditioning) in an even bigger traffic jam, rather than weaving through on their overloaded motorbike, I don’t know.  However, I do know that around the world everyone places a high priority on personal mobility, and the Tata team are to be applauded for delivering a viable car at this price level.

It emphasises how car companies have got onto a vicious circle of adding feature and performance, much of which the customer does not want or use, and in doing so building in more complexity and cost.  In the IndeGo concept, we felt that too much emphasis was placed on performance and handling, and not enough on the features that might deliver real value to the typical customer every day – more High Street, less Nurburgring!

The development approach also in part reflects that proposed for IndeGo. Around 100 suppliers were involved from the start of the project, and were given responsibility for coming up with lighter, smaller, cheaper solutions to providing targeted functionality.  The result is a car which weighs only 580kg, accommodates five people and sells for $2,500.  Expect to see high sales of Nano to global competitors and an increasing trend for “less is more” in future new car launches.
 
 

Telematics

Tuesday, 08 January 2008 00:00


The recent email I received from Flexcar on their merger implementation with Zipcar also highlighted the technology challenges in car sharing. The systems which allow the customers to gain access to and mobilise the vehicle from the car pool are completely incompatible. As a result, during an interim period whilst the technology is switched over to the Zipcar standard, customers require two different access methods to use cars from the larger combined fleet.

Read more: Telematics

   

Car Club Consolidation

Saturday, 05 January 2008 00:00

I have just received my monthly e-newsletter from Flexcar the US car-sharing company that announced in October that it was to merge with Zipcar. I have followed both companies as they embody some of the principles that lay behind IndeGo. To quote from the Flexcar website “why own the car when you can just own the drive?”
 


 

The merger (which looks more like an acquisition by Zipcar in fact) demonstrates some of the issues with this type of business. Short term car sharing depends on having a readily accessible pool of cars within an acceptably short walking time from potential customers. This is driven by the combination of the fleet size that your business volume justifies and the availability of parking spaces which you can secure for your operation. The same pressures that drive people living in urban areas to consider car sharing as opposed to car ownership, i.e. parking difficulties, mean that pressure on car sharing parking sites is intense. By splitting the available sites between two or more competing businesses makes the challenge of having cars available close to the customer tougher. Simple statistics tell us that the challenge is already going to be significant if two companies with discrete fleets are competing for the same customer.

 

Car sharing is therefore linked to scale. It is the reason why Netjets can make a commitment to their customers to have an executive jet available on demand, whereas a smaller operator could struggle to match a specific booking request weeks in advance. If consumers are going to be attracted in larger numbers to any form of car sharing, whether it is short term like Flexcar and Zipcar, or longer term like IndeGo, there needs to be a minimum scale that allows you to economically always be able to meet the transportation need on demand with the minimum capital tied up in an idle fleet.

 

2008 Outlook

Wednesday, 02 January 2008 00:00

As we enter 2008, it seems like a good time to consider what the major strategic moves will be within the next 12 months in the automotive industry.  It is always tough to anticipate which moves will turn out to be truly strategic – game-changing, rather than simply actions with the potential to be that, but which then fail through poor planning or execution.  However, I feel that there are three areas where there will be game-changing moves.
 

Read more: 2008 Outlook

   

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