59th ACMA Annual Session: Embracing the discontinuity in growth
At the 59th ACMA Annual Session, the stakeholders of the auto components industry strengthened their resolve to embrace the discontinuity and strive for growth.
The 59th ACMA Annual Session had stakeholders of the auto components industry deliberate on ways to embrace the discontinuity in growth. Held on September 06, 2019, it gave a sense of how the market sentiments had nosedived from just a year ago. After a phenomenal run in the previous financial year (FY2019) when the industry registered strong growth, the auto component industry finds itself jostling for growth. The undercurrents were reflective of the sentiments experienced when the Original Equipment Manufacturers (OEMs) took the stage a day prior, at the 59th SIAM Annual Convention, held at the same venue, in New Delhi. There was a unanimous consensus among those gathered, on July 2019 and August 2019 particularly being the worst performing months for the industry. A few admitted to registering zero growth owing to the slumber in the economy, and that there was a need to find ways of embracing the discontinuity and strive to get back to growing ways.
In his welcome speech, outgoing President - ACMA, and Director, Amalgamations Components Group, Ram Venkatramani, President, ACMA set the context by thanking the government for its recent corrective measures in a lead up to the event. Venkatramani especially thanked the government for standing by the industry in these trying times. He then put forward the industry’s demand for a GST rate cut to 18 per cent across vehicle segments to boost demand and cushion the industry from the prevalent negative sentiments. To help the industry tackle the slowdown in the domestic market, it was
suggested that the government encourages export incentives. He called for the need to optimise duty structures, and expressed hope from the new input credit scheme announced. To his peers in the audience, Venkatramani urged the need to leverage the Industrial Internet of Things (IIoT) 4.0, to create a Centre of Excellence (CoE) that would encourage innovation, besides urging the need to look at ways of transitioning from labour arbitrage to knowledge arbitrage. Averred Rajan Wadhera, President Siam and President, Automotive Sector, M&M, that the auto components industry is the pride of the Indian manufacturing sector contributing to 15 per cent of the GDP. “The slowdown is not the first we’ve seen. But some may argue it’s different,” he quipped.
He urged the government to step in and revive the sinking sentiments in time for the festive season. Further, Wadhera went on to raise concerns on the difficulty in predicting sales and as a result of the production plan in a manner that the industry settles for a zero inventory, a day after March 31, 2020, when BSVI comes into play. Wadhera admitted that while the industry was prepared to take the hit of the transition to BSVI, it was equally aware of the next decade being equally disruptive with a whole range of technological changes on the anvil that the industry needs to factor in while strategising for growth. Speaking on the immediate focus areas for the industry, Wadhera pointed at the need to relentlessly focus on the end customer; gauging customer requirements and fulfilling them; valuing the workforce and keeping the entrepreneurial spirit high. Lauding the efforts of the components industry, Wadhera expressed confidence in Indians entering the ‘Top 100 Global Suppliers List’.
Attention was drawn to ACMA’s formation by the Confederation of Indian Industry (CII) at a time when manufacturers were claimed to not have a strong say. “The Auto industry akin to Chandrayaan landing on the moon has decelerated from growth to witness a slowdown,” quipped Shobana Kaminemi, Past President CII. “India Inc. is all about hope and courage,” she expressed. Echoing a similar sentiment, stated Kenichi Ayukawa, MD, Maruti Suzuki India, “OEMs and suppliers are ONE.” “There are changes in global trade patterns that affect us all in India with a direct impact,” cautioned Ayukawa. He advocated for the need to be ready to take on the market and global trade environment risks in the horizon. Admitting that predicting the government policy in advance is never easy, said Ayukawa, that there was a need to enhanced Research and Development (R&D) capabilities. “If the government sets a target and allows industry the freedom to choose technology to achieve the end goal, it would be the ideal way forward,” he opined. Asking the industry to enhance its capabilities, Ayukawa added that there was a need for India to manufacture zero defect products. “Quality deserves much greater attention from the top management gathered here who need to take ownership of the quality of their suppliers in turn,” he mentioned. He drew attention to Maruti Suzuki’s business model with claims of 90 per cent localisation and 10 per cent import requirements for parts in use.
Guenter Butschek, MD and CEO, Tata Motors revisited his suggestions to the government and the industry, made a day prior at the SIAM convention. Taking off from where he left, Butschek stated, “The unique growth story of the Auto Industry is about to collapse.” Attributing the beginning of the end to the liquidity crisis in the industry, and the axle load norms in case of CVs, Butschek further drew attention to the uncertainties pertaining to the future technology playing on the mind of the customers. It is a big concern, he opined. Urging the industry to
strive for growth at a pace faster than the industry got pulled in by the slowdown, he lauded the suppliers and cautioned them against the bar being raised by the customer, who he said had evolved. He urged the industry peers to work at ways of enhancing customer awareness pertaining to the regulatory-driven safety and emission standards in a bid to pave the way for wider acceptance. As an extension of Internal Combustion Engines, Butschek expressed confidence in the hybrid technology for the industry to comply with the Corporate Average Fuel Economy (CAFE) norms. On the faster adoption of EVs, he said that there was a need to look at it as an opportunity for growth as opposed to looking at it as a threat. Of the opinion that the demand environment would remain volatile in terms in volume terms, Butschek pressed for the need to drive higher productivity in the entire supply chain with the use of IIoT 4.0. This he opined would make the supply chain inturn more predictable. Butschek mentioned that there was a need to go beyond customer relationships to strike strategic partnerships in an effort to be ahead of the curve. Guenter further expressed displeasure in the Government’s deadline of April 01, 2020 to make available the BSVI fuel. Urging the stakeholders to look at electrification as a complete ecosystem, he called the exercise of looking at the commercial viability of EVs a futile exercise in the near future. Butschek expressed confidence in technological advances remaining agnostic for the foreseeable future.
Anurag Thakur, MoS Finance and Corporate Affairs praised the component’s industry for its efforts towards realising the aspiration to double the contribution to the
manufacturing GDP. “It takes 1800-1900 components in the making of a car. Then consumer demands more than ever before. It is an opportunity for growth,” he averred. Claiming that the over 50 startups working on new technologies are fast gaining ground, Thakur gave an example of luxury features in vehicles being offered as standard features today. He also touched upon the cost composition undergoing a sea change. Citing global OEMs, said Thakur, that the top 10 manufacturers globally were today present in 50 per cent additional sub-categories compared to the past. Cautioning Indian OEMs against spreading themselves too thin, he urged the Indian cos to emulate the latter for a better chance at growth. He also urged the industry to spearhead agricultural innovation.
Acknowledging the industry’s demand for a uniform 18 per cent GST, the minister strongly urged the industry to stop the prevalent practices of fake invoices and zero billing, and address the counterfeit component sellers. Arjun Ram Meghwal, MoS Heavy Industries and Public Enterprises quipped, “the industry needs a soft and safe landing.” “When the Government is talking of building a USD five trillion economy why will we not look at your sector,” he questioned. Defending the government’s choice to advocate the use of EVs, explained Meghwal, that the government was bound by its commitment as per the US Paris Agreement. He said that EVs were a means for the government to live up to that commitment. “Co2 emission reduction is the end objective which has to be attained,” he stated.
Despite the current slowdown, the long term growth story for the Indian automotive industry is still intact according to Shivanshu Gupta - Sr. Partner, McKinsey India. In the closing remarks, averred Ashok Taneja
- MD & CEO, Shriram Pistons & Rings, “The current slowdown is unlike anything we have ever seen before and affects all sectors across the industry simultaneously not limiting itself to the auto components industry alone giving the industry a ray of hope.” On the best technology for the industry, cautioned Thomas Flack, Chief Procurement Officer at Tata Motors, “For those who have been in the industry for 15 years, know that electrification has created more casualties. Be cautious and don’t blindly jump the bandwagon.” “50 per cent of the Indian population currently uses a bicycle or walk to work, so they’ll opt for ICE vehicles instead of EVs, whenever the disruption happens. ICE tech is here to stay,” opined Eric Vas, President, Urbanite Business, Bajaj Auto. Explained R S Phokela, Chief Business Officer, Ather Energy, that customers would buy EVs because it’s an advanced technology and not because of paying heed to the environmental concerns or the price points at which they are made available. At the 59th ACMA Annual Session, TeamVerbena, Sundaram Auto Components Ltd was declared the winner of the National Quality Circle Competition QAS2019.