Aroop Zutshi, Global President & Managing Partner, Frost & Sullivan

Q. How are you looking at CVs playing a role globally?

A. Commercial vehicles are a big part of every economy in the developed world as well as the developing world. We are seeing tremendous changes in the way technology is finding its way into CVs in the developed markets. In the US, visibility of hybrid CVs is rising. Much discussion is on about autonomous trucks. They are expected to enjoy big sales numbers in the future. Many companies, including the likes of Tesla are turning active in CVs. There are many challenges in terms of legislation at the federal level, and at the state level to ensure that such trucks are safe and secure on the road. There is a need to ensure accountability in case of a fatality. Be it the truck owner, the insurance company or the technology provider within the company. These are some of the interesting challenges that are currently being faced. Overtime many of these challenges will get resolved as new solutions to tackle them are found. This would pave the way for implementing technologies in countries like the US. Technologies like these have a tremendous application potential. Significant upside in segments like ecommerce is providing a basis for such technologies to be implemented. The last mile delivery and movement of goods has actually increased manifold. With ecommerce expected to double and quadruple in the coming years, tremendous opportunities for CVs will be unleashed. From a technology standpoint, the emphasis is on driver safety, driver health, wellness and well-being. The productivity of drivers is becoming more and more important. The more an asset is sweat, the more returns it gets. Much emphasis is therefore laid on building that capability into the trucks by the OEMs. As the gender mix in the trucking industry changes, the design of CVs is changing to accommodate women. A shift is beginning to be seen on the CV side as well as the passenger vehicle side. In the US, there is data that indicates that women on an average drive vehicles longer than men do. With more and more women entering the CV space, manufacturers are beginning to look at their needs. Triggers like these are leading a transformation in the CV industry. Vehicle platforms are changing; technologies are changing. Like connected cars, there will be soon connected trucks.

Q. Given the changes that are visiting the CV space, where do the developing economy markets stand?

A. Shifting focus from developed economies like Europe and the US, India is an important market. India is a fast developing market, and many technologies that are becoming visible in the developed markets will percolate to India. They will start from the safety perspective; from convenience and comfort perspective. Most CVs in India are not air-conditioned. Not having it increases driver fatigue and reduces productivity. As the preference for features like air-conditioners goes up, productivity will also go up. A CV will spend more time operating. The return on investment will improve. As India moves from BSIV to BSVI emission norms, product development will become a lot more interesting. OEMs can now develop a product that is not only suitable for the developing markets, but also for the developed markets. Once the CV industry moves to BSVI, the whole concept will change dramatically. Many technologies will find their way into this part of the world as well. The revenue mix will change overtime. Today, a good deal of revenue comes from products. A lot of value added services will begin to emerge. Especially in CV markets like India where an amount of inefficiency still exists. Much of this would be directed towards the maintenance and repair of vehicles. The wear and tear in this part of the world is much more than the wear and tear in other parts of the world. Many OEMs will start delivering service to the end-customer; to the fleet owner. The benefit of this will be the reduction in downtime. This will lead to better efficiency and productivity. New business models will emerge, and present additional revenue streams. They will in-turn provide a lot of convenience and comfort to the end customer. That is how the revenue mix will change. From products to services, and to value-added services, the data from CVs in operation will generate additional revenue models. It could be used and analysed, and will help in developing strategies for optimal route mapping and load pickups, which will further strengthen the bottom-line of fleet operators. An incredible change is underway.

Q. What do you think will constitute the core of technologies that will emerge?

A. Many technologies that we are seeing becoming common are linked to Artificial Intelligence (AI) and Internet of Things (IoT).

Going forward, the vehicles will be a lot more connected. They will be connected inside as well as with the infrastructure. This would have a profound effect on how vehicles move from point A to point B. This will lead to some interesting opportunities. Companies will have to prepare themselves to take advantage of the opportunities. Some global majors made investments in growing markets like India. They are likely to exit, or are said to have already taken a decision to exit the Indian market. It is perhaps because the Indian context does not fit into their global strategy. They would however not completely disappear. They would continue to provide service and support to their clients. They will very likely re-enter and re-engage in the Indian market in some other form in the future. The reality is, the Indian market will continuously increase and grow. Based on government initiatives, many growth drivers are expected to emerge, including market currents like ecommerce, which in India, is still at a nascent stage. As internet penetration increases from 35 per cent to 54.4 per cent, which is a global standard, the ecommerce thrust will increase. The movement of goods will increase in a timely way in the last mile. The Indian market is poised for good growth. There are a lot of opportunities in the offing. The inclusion of technologies will lead to a significant increase in productivity and efficiency of the fleets.

Q. How important is the driver going to be with autonomous technologies on the horizon?

A. There is significant development in automation at the passenger vehicle and CV level happening. Lots of the investments are happening in this field, and in various parts of the world. Apart from the US and Europe, China is also making a lot of investments in this direction. The whole concept of automation will however take longer than anticipated. Our estimate is 2025 or 2030. Full implementation of automation is still a good 10 to 15 years away. Till the full implementation of autonomous driving technologies, the driver will remain an important element of the CV space. It is therefore necessary to ensure that the driver has the necessary comfort and convenience. It is necessary to monitor driver’s health and well-being. It is necessary to make provision for the same. Doing this would ensure that this mode of transportation is effective, efficient and provides high degree of productivity. It would also ensure returns in the shortest possible time. The driver is not going to disappear even when the first phase of autonomous driving comes into the picture. To make people feel 100 per cent secure, many issues surrounding autonomous driving like legislation and government policies will have to be in place.

Q. How do you look at technologies having their own limitations when it is about relating to people and the environment?

A. There’s always a limitation with anything. Technology is no exception. Technology no doubt is an enabler, it is also a disrupter. It however has limitations at the end of the day for a given application. This would be visible in every aspect of the connected world. This would also apply to CVs. Certain limitations will be there. Immediate implementation of exciting new technologies in CVs will take time. It is therefore essential that the CV industry builds multiple redundancy. Failure can be catastrophic. The technologies that would lead to automation will take time to develop. As technologies develop it will get safer, better, and easy to control. It will be easy to manage the whole system. It is however years away to getting to the level of efficiency and safety that is necessary. Technologies still have to go the distance. Even AI, which is pretty much a part of the many CV functions is in the early stages of development. A lot of testing and user cases (validation) will be needed to ensure that such technologies deliver the promise they have made. Technologies thus have a certain level of limitation. Within the context of what they are defined to do, they can serve the purpose.

Q. Are the regulatory developments seen in India a common phenomenon in other parts of the world?

A. It is a common phenomenon whether ones likes it or not. Governments play an important role. They are the so-called neutral body that can help in the development, implementation and monitoring of a policy. If there’s a need, it is the Government’s who can do that. Interaction with the ecosystem is essential. To make a policy that is an enabler rather than a disrupter, interaction with the industry is necessary. I think no policy should be developed by any Government without the direct involvement of the industry. It is necessary that the industry gives its input and has fingerprint on the policy. Most governments in most countries are the drivers of policies because they are by nature a neutral body, and have an obligation to not only protect the industry, but an obligation to protect the entire ecosystem. In any country, there are multiple stakeholders. Every stakeholder is protected when a policy is implemented.

Q. So where do the industry forces figure?

A. When it is about an industry, it is about the people who make the products and provide service to the end customer. When industries provide input to the government, it is based on the feedback they receive

from their customers. So, there’s always a connection between the people who make and the people that consume. It is this connection that gets delivered to the government. Market forces are embedded in the feedback that the manufacturers provide to the government. This is also the reason behind the government coming up with multiple versions of a policy. The feedback that the manufacturers provide is after taking into consideration the supply chain, price of oil, foreign exchange, trade barriers, etc. They influence in shaping a policy, and also include feedback from the end customer.

It is an interactive process, and the government that really get involved, see the power of this.

Q. How do you look at a scenario where policy revisions take place multiple times? A.

The stability of the government is very important. When there is a change in government, there’s also the risk of change in policies. It is one of the reasons why multiple changes could be witnessed. The government has the responsibility to look at not one, but all the stakeholders. Sometimes it so happens that the industry provides a myopic view. They fail to understand the implications a policy would have. The need is to have a holistic approach. If the frequency of change is very high, and has a negative impact, industry bodies have the task in front of them to provide a perspective.

Q. How do you see the quest for alternate fuels, available locally in abundance, in view of rising fossil fuel prices? A.

The quest for alternate fuels or a move away from dependence on fossil fuels is an important geopolitical trend. Fuel, independent of how it is generated, has had a massive impact world over. The US at one time was a net importer is a net exporter now. It was at one time the largest consumer of fossil fuel. This has led to a complete disruption of the oil industry, including the OPEC-based countries world wide. Barrel prices plummeted sometime back from over USD 120 to USD 30-35. They are picking up again. This is followed by the trade barriers. These amount to the geo-political disruptions seen. Countries like the US that have understood this they cannot depend on fossil fuels have come to look at alternate fuels, leading to a transformation of the country’s economics. Countries like India that are heavily dependent on fossil fuels, are being hit. The resulting trade imbalance against the US Dollar is likely to lead to other challenges like inflation, etc. In the short-term there is no answer. Especially for emerging markets. Over time, the situation will stabilise. There will be however short-term volatility, and in a scenario where more embargoes are coming in, the trend of oil prices going up is highly likely. Especially in proportion to the geo-political changes that are taking place. Countries with alternate fuel solutions will be less impacted, and reap the benefit of their efforts. Market with higher dependence on fossil fuel will suffer in the short term.

Q. Diesel as a preferred fuel for CVs is under pressure and criticism. How will it affect the future of CV industry? A.

Given the geopolitical situation, the cost of fuel will keep rising. There’s much being done to make the fuel better, more combustible and less polluting. The quality of fuel has improved. It would lead to less maintenance, and wear and tear. Amid all this, the cost of fuel is going to go up. At the other end, maintenance cost is going to go down. With the driver becoming more and more productive, over the next five to seven years, the cost of ownership and the cost of managing the fleet will increase marginally. There will be pluses and minuses, but the overall change will be minor. This will make it viable to continue to invest in capacity. With so much happening in the area of technology, customer relations, and in other areas, the demand and need for goods is only going to increase. To support this need, there will be demand for CVs. The demand for trucks would be influenced by the need for more more goods to be transported across the country.

Q. How do you look at inefficiencies being taken out of the ecosystem? A.

I would apply this to the logistics sector. Almost every part of the logistics industry – from end to end, is transforming. The whole sector is undergoing a big change. Seeking new participants, the quality of last mile delivery is increasing. This will lead to the availability of better products in time. They will be safely transported to the doorstep.

Q. How do you look at startups playing a role? A.

Start-ups are driving a change. Look at the entire value chain and the subcomponents of the system, and most disruptions are being caused by startups. Start-ups understand the challenge, and provide solutions by leveraging technology that is increasingly getting cheaper, better and faster. Start-ups are playing the role of drivers in reducing the inefficiencies. Overtime, start-ups will merge, get aggregated, and come under one umbrella. This would make for a seamless experience. Start-ups are important, and not worth ignoring since it is they who are going to be big disruptors.

Q. How do you look at electric and IC engine tech complementing each

other, and if the two will co-exist? A.

There will be significant changes in keep with the phrase, “change is a constant’. Rather than change, it would be better to term the development as a transformation. Traditional IC engine based CVs will continue to exist. Hybrid, electric and other alternate fuel vehicles will start to come in. It will be the case with autonomous vehicles as well. The two will coexist. IC engine will gain significantly in efficiency. Fuel economy will improve and emissions will go down. The cost of battery at the other end will continue to go down. Battery technology however will continue to have certain challenges like travel range. To extract good range of travel, high-speed charging will be necessary. To ensure this, it will essential to build the infrastructure, and this will take time. Electric and IC engine CVs will co-exist therefore. In some areas electric CVs will be beneficial. In many areas, IC engine CVs will be beneficial. Travel over longer distances will see the preference tilting in favour of IC engines. For city use, the preference would be for electric.

Q. Where do suppliers stand in this? A.

Globally, the phenomenon is towards clean usage of fuel. Global warming is an important factor. More and more corporates and big businesses are aligning towards being environmentally responsible. This is the case with consumers as well. This will lead to an increase in demand for electric vehicles in the future. It is necessary that OEMs start to engineer to electric vehicles as part of their portfolio. As a traditional IC engine vehicle manufacturer, they could do so by partnering or acquiring electric vehicle technology. In-line with the changes at the OEM level, tier 1 and tier 2 suppliers will have to transform themselves. They will have to build capacities to serve both, the traditional and electric product needs. If the ratio of electric vehicles becomes greater than IC engine vehicles, it would have a big impact. It will be highly disruptive. To tackle such disruptions, it is necessary that the suppliers prepare themselves. Provide products that better fit the electric vehicles.

Q. Like the oil industry that grew alongside IC engine vehicles, what will be the form of the supporting industry in the case of electric and alternate fuel vehicles?

With the proliferation of alternate fuel vehicles, the industries and markets supporting IC engine vehicles will be greatly impacted. The use of their products will go down. If this is triggering the massive changes in oil producing nations, new players will enter the vehicle scenario. They will help build a new ecosystem. Much would also depend on how the logistics sector shapes up. How it evolves over time. How factors like warehousing evolve. Depending upon the requirements, there would be a need for fleets that go long distances. Traditional IC tech and fuel will still be required for that. Lot of unknowns are happening, and so it will take time to find out which way the markets are shifting. What is safe to assume at this point in time is that the use of traditional fossil fuels will go down. At the other end, alternate fuel technologies are picking up.