Dilip Chhabria: Tapping into India’s Promise as a Global Hub for Car Design

Boutique car designer Dilip Chhabria, 54, says he has the world’s best job because he is “able to dream with other people’s money.” His Mumbai-based firm, DC Design, has created luxury cars for the rich and famous worldwide. A graduate of the Art Center College of Design in Pasadena, Calif., he honed his skills at General Motors’ Design Center in Detroit before setting out on his own. According to Chhabria, DC Design is the world’s biggest independent car design firm by volume.

Last month, Chhabria announced plans to set up India’s first car design institute in Pune. He hopes to train not just car designers, but also engineers and marketing professionals with specialization in the automobile industry. His target market is made up of both local automobile manufacturers and multinational auto majors that are setting up design centers in the country. He spoke with India Knowledge@Wharton about his premium niche, the reception of Tata Motors’ new Nano and why the country is such a hot market for the world’s car makers. Excerpts from the interview follow.

India Knowledge@Wharton: What are you trying to achieve with the design institute?

Chhabria: India’s automobile industry is expected to grow from the current level of $35 billion to $150 billion by 2015, when it will constitute 8% to 9% of our GDP, much like in most developed economies. We have to grow from seven cars per thousand people to the U.S. average of 1.2 people per car.

That growth is expected to create 25 million new jobs. The automobile industry will need competent manpower across all disciplines — design, testing, service, marketing, etc. More importantly, to survive, Western car makers will need to increasingly shift more and more development work to lower-cost countries like India. Once the competencies and capacities are available, they would willingly shift their activities to India.

Also, DC Design has been a role model of entrepreneurship for Indian youth. For the last five to seven years, I have been getting calls from parents and youngsters who want to make car designing their career. They are encouraged by the huge growth potential of the Indian automobile industry; it is seen as a sunrise industry, unlike in the West where it is seen as a sunset industry.

All those factors come together to convince me that there is a huge need for an institute that turns out competent designers.

The unique selling proposition of this institute is that DC Design will be an arm attached to it. For the first time in the world, you are going to have a disruptive way of learning where the student actually goes and builds a real car. It is possible to build a real car in India because of the low development costs; this won’t be possible in the U.S. or Germany or England.

India Knowledge@Wharton: What are your plans for the institute?

Chhabria: It will be set up in Pune [90 miles east of Mumbai], where we are scouting for land; Pune is one of the strong centers for automobile development. The project would cost Rs. 60 crore [$16 million]. We are talking to some investors and it should be tied up in the next three to six months. Funding will not be an issue; India has been able to attract foreign investors.

We plan to start in a phased manner, beginning with digital modeling courses in August 2009. The institute will offer undergraduate and graduate courses of up to four years, with an annual intake of close to 400 students. At any given time it will have 1,300 to 1,400 students.

It will be more than just a design institute; it will be automotive centric and offer automotive engineering and automotive marketing courses. In our experience, auto makers looking to hire marketing talent go to the IIMs [Indian Institutes of Management] or other management schools. The people they hire don’t really contribute for the first two years because they don’t have a deep knowledge of the automobile sector, per se. Our courses will be multidisciplinary, in that sense.

It is a challenge to offer courses that not many have done so far successfully. It’s my personal passion, and I am going to drive this institute to make sure it is successful, since it carries my name. It would be a for-profit model; a driving force is the opportunity to cash in on the DC Design brand. We expect to break even in the second year.

We have been talking with several prestigious institutes around the world for certification. We have in-principle agreements with the Polytechnic University in Turin, Italy, for the engineering course’s certification, and the Instituto Europeo di Design, or IED, also in Turin, for design certification. Turin tends to be a hub for auto design from a non-American point of view.

I will be talking to my alma mater, the Transportation Design Center at the Arts Center College [of Design] in Pasadena, too. But European institutes tend to be more relevant than those in the U.S. for the Indian automobile industry. Also, they are keener to have some association with India; they don’t have that Ivy League branding of the Arts Center.

India Knowledge@Wharton: What industry-level partnerships do you plan for the institute for internships, placements and faculty support?

Chhabria: It’s too early in the day to start talking to automobile companies; we would do that once the infrastructure is up and running. However, we have been in touch informally with the auto majors. Every global car maker would be in our sights. They are all setting up design centers in India in an effort to contain their costs. General Motors and Renault have already opened India-centric design centers in Bangalore and Mumbai (respectively).

India Knowledge@Wharton: What is DC Design’s market niche?

Chhabria: We design and build cars, vans, high-end buses. Our niche is really in providing a special application that mainstream manufacturers are not able to [provide] because they are volume driven.

Our business is segregated across two markets. One is the business-to-business segment, where our revenue comes from OEM (original equipment manufacture) work such as prototyping work or consultancy. We are doing this increasingly for car makers such as Renault, General Motors and Ford.

The other part is a B2C (business-to-consumer) business where we execute special projects or make special vehicles like vans. These are not just for celebrities but also for those who need them for special purposes. CEOs use these for personal transportation, for traveling with senior executives from one plant to another; they want vehicles that are fully equipped, like Air Force One on wheels. We will grow in revenue largely in this segment.

What we do is akin to the 1920s when customers bought the chassis and the engine from automobile manufacturers and went to coach builders to build their own vehicle bodies.

India Knowledge@Wharton: How expensive are your vehicles?

Chhabria: These days we are breaching the $1 million mark for designing high-end vans. For custom-made cars, the minimum value-add that is viable for us is $150,000. We have orders from California, England, Dubai and all parts of the world.

As one who wears a designer’s hat, I think I have the best job in the world; I am able to dream with other people’s money, and I am dreaming adventurously. As India grows we will continue to grow in that market. If you were to talk to me three years from now, I would say my average job is worth about $5 million.

India Knowledge@Wharton: Where does DC Design rank among global boutique car designers?

Chhabria: If you exclude the design departments of the major car manufacturers, I would presume we are the biggest in the world. We have put out 550 vehicles since 1993; we do about 80 cars annually.

India Knowledge@Wharton: Who are among your multinational clients?

Chhabria: General Motors is a client. We prototyped the GM Beat, which got a fantastic reception in the April 2007 New York Motor show. It was on ABC Nightline as well. We have Ford, Renault and many others.

India Knowledge@Wharton: What do you see as the opportunities ahead for India’s automobile industry?

Chhabria: Indian auto makers are now coming of age. They know they have their place in the sun. In the coming years, they will probably lead the pack among the growth economies. As I said, the auto industry is a sunrise industry in India. Indian auto makers are making big strides in acquisition; they have their focus on design and development. They will not only survive but also grow handsomely if they bring products that are desirable for the market. They can service not only India but also kill other birds — other markets — with the same stone.

India’s advantage is in catering to niches that don’t justify the volumes needed by U.S. or European car makers. Cars with a market volume of only 50,000 may not make sense for a General Motors or a Ford but they make eminent sense for an Indian auto maker.

Development costs in India are so low. Typically, it costs about $150 million in development and manufacturing to put out a vehicle on the market in India, versus $600 million to $800 million in the U.S. That is a new opportunity not available to Western car makers.

India Knowledge@Wharton: Who are some of your high-profile customers?

Chhabria: Currently we are building two projects for [Indian movie stars] Vivek Oberoi and Sanjay Dutt….  We have built vehicles for almost all the major [Indian] celebrities.

India Knowledge@Wharton: Do you think the Tata Group’s Nano, at a price point of $2,500, is a design triumph?

Chhabria: From a price point, it is a lot of car and a lot of good design for the money, no question about it — even if you take the price point much higher. I never expected the car to be this good at $2,500. At that price, the customer would have accepted much less, as long as he got decent transportation. The Tatas have made sure the car doesn’t look funny or ugly or like a caricature. I think design is one of the key reasons why the car is talked out, because you have this nice looking car and it is a lot better than many cars that are four times the price. It is too good to be true.

India Knowledge@Wharton: Do you have others lined up for leadership roles at DC Design?

Chhabria: My son Bonito, who is 29, has joined me and he is very passionate about cars and design. He has been tutored by me, as have many of our employees. I might tell you that we have had no employee turnover. They all know the pitfalls of working in a large, bureaucratic organization. One reason why the job is exciting is we are not brand centric. We work on a Rolls Royce and we work on a Nano and on a Ferrari, so that makes the job far more interesting.

India Knowledge@Wharton: Some industry watchers feel India has a long way to go in meeting Western standards, such as emission control.

Chhabria: From an automobile perspective, there is no such thing as an Indian design. We haven’t really proven to the world that we are competent designers, in that sense. Whatever Indian design has turned out has been pretty poor, basic stuff in the commercial vehicle segment that was geared to the Indian market or other emerging markets. Obviously, some people are going to be skeptical about our ambitions and our aspirations.

But that’s an ivory tower they will be sitting in. Indians have historically been very good at quality. We are not good in public relations and marketing, but there is more depth in Indian products and Indian companies than these [critics] have seen so far. If they ignore us, it is going to be at their own peril, definitely.

India Knowledge@Wharton: Does the Nano help rebut some of the criticism?

Chhabria: The Nano may not satisfy the sensibilities of the West, but it was not created for that market. But you have a seemingly competent car at a price point where they are scratching their heads; they can’t do it. I am sure it is not because the Tatas have found a magic pill or a magic potion — it has a lot to do with their risk-taking ability. Maybe what Tata is leveraging is his group’s market capitalization ($85 billion for the group’s publicly held companies), which even a GM ($14.8 billion market cap) or a Ford ($13.6 billion market cap) cannot talk about, and using it in an indirect manner to profit. That really is a fantastic strategy to browbeat the other car manufacturers at their own game.

India Knowledge@Wharton: What makes you and DC Design tick? There must be a lot of sweat and grunt work behind the glamour.

Chhabria: If you are a passionate designer and you enjoy your job, you profit from that and you can enhance the standard of living for your family. You get geared towards it, and the adrenalin push you get is a big addiction. Beyond that is the sheer profit that is there in each product. As I said, if my customers are paying me $1 million to dream….

A lot of car designers come in from all across the world to visit us. These are people who work for the multinational car companies we do prototyping work for; they all envy us. When you work for a large company, you are answerable to a committee, your board, and you don’t really have your way. That’s the freedom that I have.

It is a daunting task to make a car. I don’t think any designer in any of the design centers of the major automobile manufacturers gets to do more than maybe 10 or 15 concepts in a year; these are concepts that are not necessarily sold or tested in the market. We are doing 80 projects a year, and have been growing at 40% a year. If you show our work to any of the jaded, cynical auto executives in the U.S., they will say wow!

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