Cost Management and StrategyTata's big miracle machine stunned the entire world. Critics who often said that it was not possible to produce a car for less than $3,000 were taken to the background when Ratan Tata, chairman of Tata Motors, introduced this car in New Delhi at a price of $2,500. Since then it has been in the limelight and making headlines in the automotive industry around the world. Much of India's low-cost manufacturing advantage comes from low-cost labor, and much of the low-cost assembly in factories and plants is done through manual operations. However this situation is changing rapidly with companies looking to increase productivity by automating their lines. Tata has reduced costs by minimizing components, particularly steel, and taking advantage of India's low manufacturing costs. Because of its size, it requires less metal, has a smaller and lighter engine than other cars, smaller tubeless tires, and a basic interior. Tata has divided the components into two types: proprietary design and Tata Motors design. For proprietary design components, Tata turned to established suppliers who then worked on the development from Indian technology centers, thus saving further costs. The cost associated with hiring engineers in international development centers was an expensive affair that pushed Tata to use local design capabilities. For internally designed components and systems, Tata Motors chose suppliers with strong process capabilities who could provide valuable suggestions and improvements in designs. Almost everything was sourced locally and the Nano boasts over 95% of its content sourced locally from day one. Tata's suppliers were an integral part of the design and development process. Tata has not only worked on its own processes but also helped its suppliers to innovate. Instead of annual contracts, Tata has opted for long-term volume contracts with its suppliers, further reducing costs. A three-shift operation and consolidated purchasing with suppliers enabled further cost reduction. Impact on 2-wheeler industry Nano is expected to change the automotive market in India. It would suit a typical middle-income Indian family of four who wants to avoid rain, wind and dust. His freedom for four. Currently, middle-income families cannot afford a 4-wheeler and are forced to opt for a two-wheeler option. But things could change once Nano enters the market. Nano is much safer than two wheels, where the mortality rate is double that of cars.