Auto Components industry is asked to be prepared for the future challenges
Turning the spotlight on new methods of mobility, the Indian auto industry, under the patronage of Auto Components Manufacturers Association (ACMA), stressed upon electrification of vehicles and components. The 58th annual convention held in New Delhi on September 5, 2018, themed ‘Preparing for the future’, bought in a number of thoughts and ideas for the future of the component industry in India. Component manufacturers, along with the stakeholders from the Government of India, came together bringing in ideas for the future and their learning from the past.
The present picture for the component industry is clear and the future is aligned with a cleaner mobility solution. On the need to have right policies in place along with incentives and subsidies, Nirmal Minda, President, ACMA said, “E-mobility is fast catching the imagination of our policy makers; a definite policy delineating the roadmap for e-mobility in India is therefore the need of the hour. We are confident that as hybrid and electric technologies gain traction, vehicle manufacturers will support localisation of components. Going forward, the Automotive Mission Plan 2026, the rising GDP and infrastructure will contribute significantly.”
Standing on the cusp of technological change, Dr Abhay Firodia, President of Society of Automobile Manufacturers (SIAM) and Chairman, Force Motors, highlighted the need to gear up for making contraptions, vehicles and devices with advanced technology. “The software and hardware will have to contend with a changing market and both component makers and vehicle industry will face difficulties. The Indian auto component industry is like an iceberg, you only see the tip. The unseen great depth is the real strength of the component makers.” Dr Firodia said. Rakesh Bharti Mittal, President, Confederation of Indian Industry (CII) and Executive Vice Chairman, Bharti Enterprises, talked about the industry’s growth uptrend, which as a matter of fact boosts employment. To meet the growing demand, Kenichi Ayukawa, Managing Director, Maruti Suzuki, appealed the industry to triple
the efforts as the current industry size is nearly 4.1 million units per year and it is expected that the passenger vehicle industry will reach 10 million units per year by 2030.
Anant Geete, Union Cabinet Minister for Heavy Industries, Government of India and Public Sector Enterprises, said, “The automotive industry is the top contributor to the Government of India’s Make in India initiative and has accounted for maximum investments under the program. Going forward, we would be framing the auto policy in accordance with the current state of the automotive industry and demands of the future. I assure the ministry of heavy industries will support the industry to resolve all issues and concerns.”
Optimistically foreseeing the growth, Nitin Gadkari, Union Minister, Ministry of Road Transport and Highways, Government of India, said, “To strengthen the economy, our government is actively pursuing the policy of substituting imports and boosting exports. I am pleased to see the auto component industry perform remarkably well. I believe there are immense possibilities for this sector to grow further. Our government is driving the agenda of promoting innovation, entrepreneurship, technology and research. The government is working towards various kinds of alternative fuels as an effort to reduce carbon footprint by introducing first generation bio ethanol. The industry should come forward to develop the technologies to power the new generation engines.” At the convention, Gadkari also announced permit exemption for all electric and alternative fuel vehicles. Guenter Butschek, Managing Director and CEO of Tata Motors, said, “Our intention was to engage suppliers in a strategic dialogue to face challenges, and translate change into opportunity for industry. However, more intensive dialogue is required between vehicle manufacturers and suppliers to capture the magnitude of change. Nonetheless, suppliers have their own dynamics in their own competitive environment. The industry is undergoing a silent transformation in terms of the changing consumer preferences, intensifying competition and an evolving eco-system. There is a growing demand for shared mobility compared to owning a vehicle. Then there’s the unexplored multi-modal transport, which we see more as an opportunity than a threat and possibly a theme of the future.”
He further said, industry faces new competition and there are global players as well as disruptive startups entering the mobility space and innovative solutions from non-OEMs are posing a challenge to traditional automakers. This also means the market is further getting segmented in terms of white spaces and new revenue streams are emerging due to limitations from mainstream businesses. Industry now also has to contend with rapid regulatory changes like BS VI, stringent safety norms and payload limits.
On facing challenges, Butschek said, “OEMs alone cannot face the challenges, we have to jointly develop solutions. We have to reinvent ourselves. Over the years, industry has tended to become complacent. At the end of the day, it is all about getting faster to the market. The changes are so fundamental that we are in a process to redefine ourselves. We jointly need to tap the opportunity landscape. One of the starting points of innovation is the discovery of pain areas road safety, pollution and fuel costs.”
From a practical standpoint, commercial vehicles powered by electricity will have limitations and ‘range anxiety’ could be a major hindrance. However, various global companies are looking at alternates such as solid state batteries, FCEVs (Fuel-Celled Electric Vehicles) which would also prove to be a possible green alternative, especially in the commercial vehicle sector.
The overall component industry is looking at a shift from the existing components to new ones which would not just be limited to electrification of vehicles. Autonomous vehicles, shared mobility and connected driving are also the key factors that would affect the components and therefore, vehicles of the future. The challenges here are vast which would mean that policies and subsidies need to be designed in a way where they have a positive impact on the growth of the component industry of the future. Companies investing in components related to battery technology as well as alternate fuel sources for vehicles may also have an incentive-based programme as well as subsidies to encourage growth of these companies.
Dr Pawan Goenka, Managing Director of Mahindra & Mahindra, emphasised 2 major enablers to steer through disruptive times. He said, “Partnership and trust between OEMs and component suppliers needs to go up. The war will be won with the right talent. Don’t let good people go. Good talent is always high maintenance. No matter what happens, the Indian auto industry has the desire and capability to succeed. They will pay in the long run.”
Minoru Kato, President and CEO, Honda Motorcycle & Scooter India (HMSI), expressed the company’s roadmap for advanced preparation ahead of BSVI implementation. Hopeful about utilising the upcoming technological advancements, Dr Pawan Goenka, Managing Director, Mahindra & Mahindra said, “Government of India needs to provide a long-term road map which would encourage new technologies to come through at viable cost to enable the industry to adapt to cleaner mobility solutions. At present, the customer is willing to pay a premium for safety, which is a new phenomenon we’re entering in.”
The upcoming FAME II (Faster Adoption and Manufacturing of hybrid and Electric vehicles) scheme, if positioned in the right manner, may encourage the component industry to manufacture products which are environment-friendly. At the same time, renewable sources of electricity generation are also being looked upon to reduce the carbon footprint.
Confident that the auto industry can bring in growth, both in manufacturing and services, Suresh Prabhu, Union Minister for Commerce & Industry and Civil Aviation, Government of India, said “Government has set a vision of realising a national GDP of USD 5 trillion in next seven years with manufacturing sector accounting for USD 1 trillion where the auto and auto component industry will contribute significantly.”
This year, ACMA also brought forward an in-depth study by McKinsey & Company on the component industry’s future preparedness. This study involved various parameters such as the right policies, trends, new technologies and discontinuities in order to better understand the vision that the Government wants to achieve in parallel with component manufacturers.
Ashok Taneja, Managing Director & CEO, Shriram Pistons & Rings, moderated a power-packed panel and laid the groundwork for future of the auto component industry. Even though the electrification is inevitable, CV Raman, Senior Executive Director, Maruti Suzuki India critically examined the adoption of such newer technologies by the customer. Emphasising the need to understand the variable demands of the customer, Vikram Kasbekar, Executive Director, Hero MotoCorp, said, “The quality is not what you make, but what
the customer perceives and the demands are massively varying across the globe”. In the era of constant transformation, flexibility and adaptability towards different technology and R&D is a must, added Kasbekar. Hemant Sikka, President – CPO, Mahindra & Mahindra, urged the suppliers to invest ‘without skepticism’ in both manufacturing capacities and newer technologies. On becoming an export ‘powerhouse’, Sandeep Sinha, Managing Director, Cummins India said, “Export opportunities will grow for us as India is being prepared for newer technologies which are already being practised by many parts of the world.”
Growth indicators paint a picture of optimism for India – by 2023, it could be the world’s fifth-largest economy, with a GDP of USD 4.7 tn. Anticipation of a growing consumer class, enhanced ease of doing business, expanding infrastructure – such favorable factors could propel the country forward, and, with it, India’s automobile industry. The Indian automotive OEM industry is
already in a strong position. Globally India’s automotive industry is at the forefront of many segments – leading in twowheelers, segment a cars, and tractors.
Trends shaping the automotive industry
As auto component manufacturers prepare for a future where they ramp up performance in India and globally, they need to account for numerous trends along 4 key dimensions that are shaping the industry: Constantly shifting market dynamics due to changing customer demands, manufacturing locales, operating models and priorities; The changing needs of OEMs, who are likely to want different, more agile and rapid component inputs as demand, timelines and processes keep shifting; Technological improvements and discontinuities that are already starting to change revenue pools, trigger new competition and invite new forms of cooperation; An evolving regulatory and trade environment forming the backdrop for it all.
The opportunities ahead
The interplay of trends across these themes could fashion 10 exciting opportunities for auto component manufacturers: Pursue export opportunities aggressively, Enhance import substitution, Offer premium features at “Indian costs” more rapidly than before, Focus on component categories that could contribute more to vehicle costs in the future, Expand aftermarket offerings to capture value from enhancing existing vehicle parc and aftermarket exports, Offer “rising star” components which could take off in the long run due to increase in electric vehicle (EV) sales, Offer new or modified features that will be in demand with an increase in shared mobility penetration, Develop data-enabled services and solutions, Form partnerships and ecosystems to create and capture value and Expand portfolio to serve adjacent industries. Identifying which opportunities fit best, and working strategically to seize them, could create a successful future for auto component manufacturers.
Panellists for the session on ‘Component Industry Preparing for the Future’. L-R: Sandeep Sinha, MD, Cummins India; Ashutosh Padhi, Senior Partner, McKinsey & Co India; CV Raman, Senior ED, Maruti Suzuki India; Vikram Kasbekar, ED, Hero MotoCorp; Ashok Taneja, MD and CEO, Shriram Pistons & Rings; NK Minda, CMD, Minda Group; Hemant Sikka, President CPO, M&M; and Shivanshu Gupta, Partner, McKinsey & Co India.
Minoru Kato, President and CEO, Honda Motorcycle & Scooter India (HMSI), Nirmal Minda, Past President, ACMA, Dr Pawan Goenka, Managing Director of M&M & Ram Venkataramani, President, ACMA & MD, India Pistons Rings