Boom­ing busi­ness lies ahead for In­dia’s au­to­mo­tive com­po­nents in­dus­try

Electronics Bazaar - - Contents - By Baishakhi Dutta

The In­dian au­to­mo­tive in­dus­try is go­ing through a dra­matic trans­for­ma­tion. Po­lit­i­cal sta­bil­ity, new reg­u­la­tions, in­creas­ing com­pe­ti­tion and ris­ing con­sumer ex­pec­ta­tions are bound to re­shape the way au­to­mo­bile and com­po­nents man­u­fac­tur­ers go about their busi­ness in In­dia.

At present, the In­dian au­to­mo­tive in­dus­try is one of the largest in the world, ac­count­ing for 7.1 per cent of the coun­try’s gross do­mes­tic prod­uct (GDP). The two-wheeler seg­ment ac­counts for around 80 per cent of this mar­ket share. And the grow­ing in­ter­est among au­to­mo­bile com­pa­nies to ex­plore mar­kets in ru­ral In­dia prom­ises to boost the growth in this sec­tor.

In­dia: The new R&D des­ti­na­tion

In­dia is grad­u­ally trans­form­ing into a global R&D hub for the au­to­mo­tive and auto-com­po­nents sec­tors, as most au­to­mo­bile gi­ants are set­ting up their R&D cen­tres in the coun­try.

In­dia of­fers sev­eral key ad­van­tages to these global auto ma­jors, like lower R&D costs, avail­abil­ity of skilled man­power and a po­ten­tially large do­mes­tic mar­ket that justifies the in­vest­ments made. Hav­ing es­tab­lished it­self as a small car hub, In­dia is now be­com­ing the pre­ferred choice for R&D ac­tiv­i­ties. Auto gi­ants, in­clud­ing small car mak­ers and lux­ury car man­u­fac­tur­ers like Mercedes-Benz, have set up R&D cen­tres in the coun­try over the past few years.

The in­creas­ing use of elec­tron­ics in the auto sec­tor glob­ally, fu­elled by trends such as mo­bil­ity, con­nec­tiv­ity, fuel ef­fi­ciency, elec­tric cars and au­ton­o­mous driv­ing, has broad­ened the scope for in­no­va­tions on In­dian soil. The In­dian au­to­mo­tive com­po­nents sec­tor is al­ready driv­ing in­no­va­tion and has started in­creas­ing its in­vest­ments in the R&D do­main.

Chang­ing mar­ket dy­nam­ics

Ac­cord­ing to a re­cent IBEF (In­dian Brand Eq­uity Foun­da­tion) re­port,

In­dia is also a ma­jor au­to­mo­bile ex­porter, and is aim­ing for strong growth in ex­ports in the near fu­ture. Over­all, au­to­mo­bile ex­ports grew 15.81 per cent, year-on-year, be­tween April 2017 and Fe­bru­ary 2018. In ad­di­tion, due to sev­eral ini­tia­tives by the gov­ern­ment of In­dia and the ma­jor au­to­mo­bile play­ers, In­dia is ex­pected to rank amongst the world lead­ers in the two-wheeler and four-wheeler mar­kets by 2020.

Ac­cord­ing to the So­ci­ety of In­dian Au­to­mo­bile Man­u­fac­tur­ers (SIAM), In­dia sold 17.7 mil­lion twowheel­ers in 2016 (over 48,000 units ev­ery day), against China’s sales of 16.8 mil­lion two-wheel­ers.

While many global OEMs are in­creas­ing their fo­cus on de­signs for the In­dian mar­ket, most of the new launches here have also achieved suc­cess glob­ally. In order to keep up with grow­ing de­mand, sev­eral global au­to­mo­bile mak­ers have started in­vest­ing heav­ily in var­i­ous seg­ments of the in­dus­try dur­ing the last few years. The In­dian au­to­mo­bile in­dus­try has at­tracted for­eign di­rect in­vest­ments (FDI) worth US$ 18.4 bil­lion be­tween April 2000 and De­cem­ber 2017, ac­cord­ing to data re­leased by the De­part­ment of In­dus­trial Pol­icy and Pro­mo­tion (DIPP).

At present, China is the world leader in the au­to­mo­bile space, with Korea try­ing to over­take Japan for sec­ond place. In­dia is also catch­ing up fast, in tune with this fast-chang­ing mar­ket. And in re­sponse to cli­mate change and a gov­ern­ment di­rec­tive, the In­dian in­dus­try is be­gin­ning to ex­plore the man­u­fac­ture of elec­tric and hy­brid ve­hi­cles to pro­mote clean and green en­ergy.

In­ter­est­ingly, the top four au­to­mo­bile mak­ers in In­dia ac­count for 90 per cent of the mar­ket, mak­ing it a unique mar­ket space. The twowheeler seg­ment, es­pe­cially mo­tor­cy­cles, is ex­pected to grow even big­ger in In­dia in the near fu­ture.

The lat­est buzz

Recog­nis­ing the mas­sive busi­ness op­por­tu­nity, au­to­mo­tive com­po­nents and so­lu­tions providers are also bet­ting big on the In­dian mar­ket. For in­stance, auto com­po­nents ma­jor, ROHM, has re­cently in­tro­duced panel chipset so­lu­tions in the In­dian mar­ket to bring bet­ter safety func­tions to nextgen­er­a­tion au­to­mo­tives, in­clud­ing two-wheel­ers.

The in­creased use of LCD pan­els for the in­stru­men­ta­tion clus­ter in next-gen­er­a­tion ve­hi­cles—for nav­i­ga­tion, elec­tronic mir­rors, and other sys­tems—with larger, higher res­o­lu­tion dis­plays, im­plies an in­crease in the num­ber of driver and con­troller chan­nels. This makes sys­tem con­fig­u­ra­tion and op­er­a­tion ver­i­fi­ca­tion more dif­fi­cult, favour­ing chipset so­lu­tions. In ap­pli­ca­tions such as elec­tronic mir­rors, mal­func­tions can lead to se­ri­ous ac­ci­dents and func­tional safety is re­quired.

ROHM’s newly launched chipset has been de­signed to drive and con­trol au­to­mo­tive LCDs, in­clud­ing larger high res­o­lu­tion mon­i­tors used for nav­i­ga­tion and the in­stru­ment clus­ter. The ex­panded line-up is com­pat­i­ble with func­tional safety mea­sures for speedome­ters, side mir­rors and other ve­hi­cle sys­tems. ROHM’s global rev­enue from this panel chipset so­lu­tion is pro­jected to hit US$ 100 mil­lion (from a cur­rent rev­enue of US$ 60 mil­lion) by 2021, with a CAGR of 13 per cent.

“The In­dian au­to­mo­tive in­dus­try is one of the prime driv­ers of the In­dian econ­omy. This in­dus­try’s R&D is an in­te­gral part of en­abling man­u­fac­tur­ing and in­no­va­tions in In­dia. ROHM has in­tro­duced the lat­est tech­nol­ogy in panel safety, which has en­joyed im­mense suc­cess in Europe and Japan,” says Daisuke Naka­mura, MD, ROHM Semi­con­duc­tor In­dia.

He fur­ther com­ments that there are am­ple op­por­tu­ni­ties for the com­pany in the ex­pand­ing au­to­mo­tive mar­ket and, hence, it is aim­ing at a CAGR of 42 per cent in the next three years, ex­clu­sively in In­dia. Though the auto com­po­nents com­pany is cur­rently wit­ness­ing tremen­dous rev­enues from the twowheeler do­main, it plans to ex­pand into the four-wheeler space too.

Britto Ed­ward Vic­tor, head, de­sign cen­ter, ROHM Semi­con­duc­tor In­dia states that in In­dia, the com­pany is work­ing to­wards en­abling in­no­va­tions in the In­dian two-wheeler mar­ket. The or­gan­i­sa­tion is now work­ing with key In­dian two-wheeler OEMs to cus­tomise so­lu­tions for the In­dian mar­ket.

The fu­ture looks promis­ing

The In­dian au­to­mo­bile in­dus­try is sup­ported by var­i­ous fac­tors such as the avail­abil­ity of skilled labour at a low cost, ro­bust R&D cen­tres and low-cost steel pro­duc­tion. The In­dian au­to­mo­tive mar­ket is es­ti­mated to grow at around 10-15 per cent to reach US$ 16.5 bil­lion by 2021 from around US$ 7 bil­lion in 2016. It has the po­ten­tial to gen­er­ate up to US$ 300 bil­lion an­nual rev­enue by 2026, cre­ate 65 mil­lion ad­di­tional jobs and con­trib­ute over 12 per cent to In­dia’s GDP.

The long-term out­look re­mains pos­i­tive for strong fun­da­men­tal rea­sons such as high GDP growth, avail­abil­ity of ad­e­quate fi­nance, higher per capita in­come, de­creas­ing un­em­ploy­ment, favourable de­mo­graph­ics, and ris­ing con­sumer ex­pec­ta­tions.

EB: What are the ma­jor projects that have helped BEL reach this im­por­tant mile­stone?

Bharat Elec­tron­ics Ltd (BEL) has achieved the land­mark turnover of more than `100 bil­lion (pro­vi­sional and unau­dited) dur­ing the fi­nan­cial year 2017-18, sus­tain­ing dou­ble-digit growth over the pre­vi­ous year’s turnover of ` 88.25 bil­lion. Some of the flag­ship projects ex­e­cuted dur­ing the year in­clude the in­te­grated air com­mand and con­trol sys­tem (IACCS), weapon lo­cat­ing radar (WLR), hand­held ther­mal im­ager (HHTI) and its vari­ants, the Akash weapon sys­tem (Army), the naval fire con­trol sys­tem, an in­te­grated com­mu­ni­ca­tion sys­tem, the 3D tac­ti­cal con­trol radar (TCR), elec­tronic war­fare sys­tems, the L-70 gun up­grade, elec­tronic vot­ing ma­chines (EVM) and voter ver­i­fi­able pa­per au­dit trail (VVPAT), the Schilka up­grade, etc.

EB: What key busi­ness strate­gies have you em­ployed?

With the open­ing of the de­fence seg­ment to pri­vate sec­tor par­tic­i­pa­tion, BEL is be­ing ex­posed to in­creas­ing com­pe­ti­tion. How­ever, it has been con­tin­u­ously un­der­tak­ing sev­eral ini­tia­tives with a thrust on in-house R&D and in­di­geni­sa­tion. These in­clude in­creased out­sourc­ing to In­dian pri­vate in­dus­tries in­clud­ing MSMEs, pub­lic-pri­vate part­ner­ships, part­ner­ships with for­eign OEMs, ca­pac­ity ex­pan­sion and moderni­sa­tion, and new busi­ness ini­tia­tives.

We are con­tin­u­ously ex­plor­ing other op­por­tu­ni­ties in de­fence and al­lied non-de­fence ar­eas for en­hanced growth, lever­ag­ing the strengths and ca­pa­bil­i­ties ac­quired in the de­fence elec­tron­ics do­main, as a di­ver­si­fi­ca­tion strat­egy. Though the de­fence seg­ment con­tin­ues to be BEL’s main busi­ness and pro­vides close to 80 per cent of its rev­enues, this PSU has been us­ing its knowl­edge and ex­pe­ri­ence ac­quired in this field to of­fer spin-off tech­nol­ogy prod­ucts for non-de­fence ap­pli­ca­tions too.

EB: How do you plan to go for­ward from here, and what is the next mile­stone that you are tar­get­ing?

We will con­tinue to fo­cus on in­di­geni­sa­tion for self-reliance, per­haps with more vigour. Be­sides that, ca­pac­ity build­ing, ex­pan­sion and en­hanced out­sourc­ing to the SME/MSME sec­tor are other ar­eas we plan to move for­ward on. Also, BEL has been able to main­tain good order ac­qui­si­tions this year. These will help BEL sus­tain its growth and con­sol­i­date its mar­ket lead­er­ship in the de­fence busi­ness. With a healthy order book and good busi­ness in­flow pro­jec­tions, we are tar­get­ing a healthy growth of 10-12 per cent dur­ing 2018-19.

EB: What are the busi­ness ben­e­fits of the mul­ti­ple on­go­ing col­lab­o­ra­tions and ven­tures, such as those with BHEL and GE?

BEL has two joint ven­ture com­pa­nies – one with Gen­eral Elec­tric, USA, and the other with Thales, France – as well as one 100 per cent owned sub­sidiary called BELOP, in Pune.

Of these, GE BE Pvt Lim­ited (GEBEL) was set up in 1997 as a joint ven­ture be­tween Bharat Elec­tron­ics Lim­ited and Gen­eral Elec­tric Med­i­cal Sys­tems. The fa­cil­ity man­u­fac­tures CT Max and other state-of-art X-ray tubes. The prod­ucts are ex­ported world­wide, and meet in­ter­na­tional safety and reg­u­la­tory stan­dards. The GE-BE joint ven­ture com­pany is per­form­ing well, and BEL is sup­ply­ing some parts re­quired for the prod­ucts man­u­fac­tured by this JV. How­ever, the JV is con­tin­u­ously ex­plor­ing new mar­kets and prod­uct vari­ants.

BEL-Thales Sys­tems Lim­ited is en­gaged in the de­sign, de­vel­op­ment, mar­ket­ing, sup­ply and sup­port of civil­ian and select de­fence radars for the In­dian and global mar­kets. The JV presently has taken up the up­grad­ing and AMC ac­tiv­i­ties of ATM radars for the In­dian Navy. It has also en­tered into a strate­gic col­lab­o­ra­tion agree­ment with Thales to jointly de­velop multi-tar­get track­ing and fire con­trol radars for both gun and mis­sile sys­tems.

Re­gard­ing BELOP, BEL formed a JV with de­fence ma­jor Delft, Nether­lands, in the 1990s for man­u­fac­tur­ing im­age in­ten­si­fier (II) tubes, which are used in the night vi­sion de­vices be­ing supplied to the Army, cen­tral para­mil­i­tary forces and other se­cu­rity agen­cies. This JV has been con­verted into a 100 per cent sub­sidiary of BEL called BELOP and is cur­rently in­volved in man­u­fac­tur­ing sta­teof-art II tubes with trans­fer of tech­nol­ogy (ToT) from Pho­to­nis, France.

BEL is look­ing for sim­i­lar joint ven­ture part­ner­ships with re­puted com­pa­nies that have com­ple­men­tary strengths in tech­nol­ogy, to ad­dress emerg­ing new busi­ness.

We are tar­get­ing a healthy growth of 10-12 per cent dur­ing 2018-19

We are open­ing new in­ter­na­tional mar­ket­ing of­fices to pro­mote ex­ports

EB: How do you see the In­dian A&D sec­tor grow­ing, and what would your advice be to help it im­prove faster?

Aero­space and de­fence (A&D) is a high-tech­nol­ogy busi­ness re­quir­ing huge ex­pen­di­ture in R&D and some crit­i­cal tech­nolo­gies to be painstak­ingly de­vel­oped in­dige­nously. This sec­tor re­quires state-of-art in­fra­struc­ture and re­sources such as labs, sim­u­la­tion tools, test set­ups and fa­cil­i­ties for qual­i­fi­ca­tion. The A&D sec­tor in In­dia has been un­der­go­ing ma­jor changes, and the in­dus­try needs to ad­dress the fol­low­ing:

• In­dige­nous de­vel­op­ment of core sen­sor tech­nolo­gies • In­creased in­vest­ment in R&D for the de­vel­op­ment of cut­tingedge tech­nolo­gies

• Sup­ply chain man­age­ment/ de­vel­op­ment of a qual­ity ven­dor base • Com­pe­tency de­vel­op­ment of man­power in spe­cialised ar­eas • Main­tain­ing strin­gent qual­ity and re­li­a­bil­ity stan­dards, and ad­her­ing to com­plex man­u­fac­tur­ing pro­cesses • En­sur­ing com­po­nents and raw ma­te­rial avail­abil­ity in the coun­try

EB: Apart from set­ting up a cus­tomer co-or­di­na­tion cell, what other cus­tomer en­gage­ment strate­gies are you im­ple­ment­ing?

BEL al­ways looks for­ward to work­ing closely with its cus­tomers to ad­dress their re­quire­ments. Some of its many ini­tia­tives in this re­spect in­clude the fol­low­ing:

• BEL has cre­ated prod­uct sup­port groups, headed by a GM to fo­cus on cus­tomer sup­port ac­tiv­i­ties and prod­uct life cy­cle man­age­ment. BEL is ex­pand­ing its prod­uct sup­port net­work by adding new re­gional prod­uct sup­port cen­tres on a pan-In­dia ba­sis to ex­tend the reach and ser­vice to its cus­tomers.

• BEL has im­ple­mented an on­line in­ven­tory man­age­ment sys­tem for the In­dian Navy and is in the process of es­tab­lish­ing it for other agen­cies. We have added the cus­tomer re­la­tion­ship man­age­ment (CRM) mod­ule to our SAP ERP sys­tem, which mon­i­tors all the CRM ac­tiv­i­ties – from the man­age­ment of leads to prod­uct sup­port. • We also con­duct reg­u­lar in­sti­tu­tional meet­ings at the high­est level with the cus­tomer and user agen­cies for the ex­change of in­for­ma­tion and feed­back. BEL even con­ducts reg­u­lar train­ing pro­grammes for its cus­tomers, on op­er­at­ing and main­tain­ing equip­ment. Apart from these, we are open­ing new in­ter­na­tional mar­ket­ing of­fices to pro­mote ex­ports. BEL strives to work closely with the cus­tomer, right from the con­cep­tu­al­i­sa­tion of the so­lu­tion to com­mis­sion­ing and life cy­cle sup­port.

EB: Do you have any busi­ness en­gage­ments with pri­vate or­gan­i­sa­tions?

We recog­nise out­sourc­ing as one of the strate­gic routes to achieve cost ben­e­fits, and also to com­ple­ment the strengths of the pri­vate sec­tor for build­ing a strong in­dus­trial base. This ini­tia­tive helps BEL to fo­cus more on core ar­eas and on R&D.

BEL has been tak­ing sev­eral steps to broaden the do­mes­tic ven­dor base by for­mu­lat­ing a long term out­sourc­ing and ven­dor de­vel­op­ment pol­icy, im­ple­ment­ing on­line ven­dor regis­tra­tion and e-pro­cure­ment pro­cesses, etc. Nodal of­fi­cers are nom­i­nated specif­i­cally for out­sourc­ing and ven­dor de­vel­op­ment in all our nine man­u­fac­tur­ing units. BEL out­sources its ac­tiv­i­ties to the pri­vate sec­tor to a con­sid­er­able ex­tent – which in­cludes a pro­cure­ment level of around 30 per cent from MSMEs.

A col­lab­o­ra­tive R&D process has been put in place to fur­ther aug­ment BEL’s R&D and prod­uct de­sign efforts, and to bridge the tech­nol­ogy gaps with the in­volve­ment of academia and the pri­vate sec­tor, in­clud­ing MSMEs and star­tups. BEL also par­tic­i­pates in an­nual con­fer­ences and work­shops to iden­tify prod­ucts for de­vel­op­ment and pro­cure­ment from MSMEs.

One of BEL’s poli­cies is to al­low pri­vate en­ti­ties – in­clud­ing star­tups, MSMEs and other pri­vate firms – from across the coun­try to use our test­ing fa­cil­i­ties. We also ex­tend a lot of other sup­port to startup ini­tia­tives. We have re­laxed the el­i­gi­bil­ity cri­te­ria such as turnover, ex­pe­ri­ence, etc, for star­tups to sup­ply their prod­ucts to BEL. We have also part­nered with large pri­vate sec­tor com­pa­nies un­der the con­sor­tium mode and through the PPP model to ex­e­cute turnkey projects. BEL also part­ners with OEMs for the trans­fer of tech­nol­ogy for crit­i­cal items.

EB: Can you cite a re­cent ex­am­ple that high­lights the suc­cess of BEL’s PPP model?

The in­dige­nous de­sign, de­vel­op­ment and man­u­fac­ture of the Akash mis­sile sys­tem is a great suc­cess story and the best ex­am­ple of a suc­cess­ful de­fencere­lated pub­lic-pri­vate part­ner­ship model in In­dia. More than 90 per cent of the to­tal in­puts have been sourced from within In­dia. Akash is the first in­dige­nously de­vel­oped air de­fence mis­sile sys­tem in our coun­try, re­alised by DRDO with sup­port from BEL, Bharat Dy­nam­ics Lim­ited (BDL) and pri­vate firms like Tata and L&T. Many of the sub-sys­tems are sourced from In­dian pri­vate com­pa­nies for projects re­lated to radar, elec­tronic war­fare, sonar sys­tems, etc.

EB: What more should the gov­ern­ment do to pro­mote ESDM, A&D and other tech in­dus­tries in In­dia?

The In­dian strate­gic elec­tron­ics sec­tor still lags be­hind in sev­eral crit­i­cal tech­nolo­gies, which are only avail­able with for­eign OEMs. The gov­ern­ment of In­dia has ini­ti­ated sev­eral schemes to pro­mote in­no­va­tion in the sec­tor and is propos­ing plans to of­fer fi­nan­cial sup­port to com­pa­nies for the de­vel­op­ment of these crit­i­cal tech­nolo­gies. The gov­ern­ment is also plan­ning to cre­ate the frame­work for es­tab­lish­ing com­mon re­search cen­tres, with the re­quired fund­ing, con­sid­er­ing the core tech­nol­ogy re­quire­ments of the coun­try.

In­dus­try must in­vest in de­vel­op­ing the crit­i­cal tech­nolo­gies re­quired for the strate­gic sec­tor. Skills de­vel­op­ment plays a crit­i­cal role and is a ma­jor con­trib­u­tor to­wards the progress of the sec­tor. There is a need for bet­ter train­ing, in­fra­struc­ture and skills de­vel­op­ment to cre­ate tech­ni­cally sound and in­dus­try-ready per­son­nel.

In­dus­try should fo­cus on in­creased in­dus­try-academia col­lab­o­ra­tion with suit­able fund­ing mod­els, and there should be in­creased syn­ergy be­tween sec­tors like space, in­for­ma­tion tech­nol­ogy, de­fence and tele­com.

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