Auto Com­po­nents in­dus­try is asked to be pre­pared for the fu­ture chal­lenges

Auto components India - - CORPORATE - Story by: Gun­jan D Bi­dani

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

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