In rich countries, the automotive industry contributes nearly 10% to the GDP; in India it’s around 8%. But today, in spite of the car industry being one of the largest in the world, investors are pessimistic. As a guesstimate, the industry is sitting on $1.3 trillion worth of legacy investments in factories that rely on a technology that ought to become obsolete—the internal-combustion engine. Now, with car sales collapsing, a dinosaur business that employs 10 million people directly faces a moment of truth. Long synonymous with hubris and the inept allocation of capital, it needs to look to the future.
Much of the focus today is on the electric vehicle. There’s a desperate race to launch and do better than the next guy. However, carmakers also continue to invest in ensuring that the petrol and diesel cars are state-of-the-art and some with some mean gadgets. In the bargain, they are also hunting for the best minds who can inspire them to do better.
All things Indian
All carmakers are sure of one thing. Investments in technology, backend integration, manufacturing excellence are necessary if India is to become a global manufacturing hub.
SS Kim, MD & CEO, Hyundai Motor India, is bullish on the long-term growth prospects of the Indian auto industry. “We are focusing on aspects like electrification, connected features and autonomous technology as part of our future product strategy. With over $4 billion investments so far in India alone, we are looking closely at digitisation across verticals and focus on mobility services to push growth.”
As an OEM, the company is preparing various steps depending upon the market dynamics. It, however, promises to bring in advanced technologies and models in the market.
SAIC-owned MG Motor (Morris Garages) which entered the Indian market in 2017 and began by setting up MG Motor India by taking over General Motors’ brown field plant in Halol, Gujarat, is now looking to enhance the localisation content in its locally-made products. Gaurav Gupta, chief commercial officer, MG Motor India, says, “We have taken a step to enhance localisation in the Hector by a further 10% this year. Our teams are taking the challenge to even localise some of the electronics and modules which are currently being imported.”
Currently, it has some electronics and modules coming from China, while at the same time, a lot of semiconductors and chips are coming from Europe as well. It also aims to completely localise its powertrains going forward. “But for powertrains to be localised, one requires a lot of volumes. But fortunately, in India it is possible even with 50,000 annual units. So, complete localisation of the powertrain is also on the cards in the near future,” added Gupta.
For the country to be a manufacturing hub, there needs to be mass customisation, focus on technologies such as IoT and 3D, and companies need to adhere to compliance standards. Manufacturing must be made environmentally-friendly, socially inclusive, economically efficient, morally ethical.
The government too is working towards making India a global automobile manufacturing hub in the next five years. It is confident because of the scrappage policy, which means availability of more raw materials like steel, plastics, rubber, among other things. Keeping this in mind, this is the right time to create automotive clusters and particularly near port areas.
Building it up
A few months back, when the companies worldwide started recovering from the pandemic-hit lows, they had no idea that another challenge was waiting for them. From electronic appliance makers to car manufacturers and mobile makers — all had to hold back the production after the $450 billion industry for semiconductors got ravaged by the after effects of the covid-19 pandemic. Probably the reason why most car companies are looking at increasing the level of localisation in vehicles. However, according to most of them, certain components cannot be made in India as it would be highly expensive to set up units. Imports are cheaper.
Speaking at the sixth ACMA Technology Summit & ACMA Awards 2020, Kenichi Ayukawa, president of SIAM and MD at Maruti Suzuki had said that the government’s support is needed since investments required for localisation of semiconductor is large and the beneficiaries include companies from the non-auto sectors also. “SIAM and ACMA have identified specific areas such as engine transmission, electrical, tooling, grade of steel etc that has good scope for localisation. For semiconductor parts government support is required for localisation as it needs huge investments. Auto demand alone is not enough for localisation in electronics,” Ayukawa said.
Raju Ketkale, deputy MD, Toyota Kirloskar Motors, says that the automotive industry worldwide is passing through technological disruptions and many of these are influenced by the urgent need for sustainable technologies and solutions. “Concern over climate change, pollution and the efficient use of resources are driving this transition and changing the way the sector operates. India is not isolated and recently we saw a major milestone of BS6 rollout. This shift was achieved in a short duration and involved huge investments from oil and the auto industries. It will significantly bring down PM 2.5 emissions levels thereby reducing vehicular pollution in our cities,” he added.
The responsibility assumes significance in light of the greater emphasis on personal transportation in the post-covid world. Rajeev Wasan, sr VP, manufacturing, Honda Cars India, says, “The market indicators point towards a preference to own vehicles due to concerns over social distancing and emerging difficulties in intra and inter-state travel faced by people across the country. Given the introduction of BS6 technology, India has rightly rolled out a scrappage policy to take the older more polluting vehicles off the roads. In this regard, we must also look at bringing in the end-of-life vehicle regime as a car is essentially an assembly of more than 800 parts and its disposal can be harmful to the environment if done unscientifically.”
In December, HCIL realigned its manufacturing operations with the goal of improving business efficiency. To maintain sustainability of operations by leveraging production & supply chain efficiencies, HCIL decided to consolidate the manufacturing operations for vehicles and components at its Tapukara plant in Rajasthan with immediate effect for all domestic sales and exports.
Minda Corporation plans to incorporate a wholly-owned subsidiary Spark Minda Green Mobility Systems in India for the design, development and manufacturing of electric vehicle parts and components. According to Nitin Saxena, COO, Spark Minda, “The Spark Minda Technical Centre is an Advanced Engineering Centre of Electronics & Mechatronics. The vision behind SMIT is to evolve as a full-fledged advance technology provider that enables the existing businesses to innovate futuristic technologies in automotive sub-systems.We have an edge as it allows EMC testing, HIL testing, proto shop & reliability engineering to increase the quality and efficiency of the R&D.”
Phanindra Karody, head of Bangalore plant, Continental Automotive India, says, “Operational optimisation has been the key priority, especially in production and supply chain. They have been practicing agility measures across departments to ensure flexible, prompt, and accountable decision making and working processes. Of course, they strictly follow both the government directives and Continental safety protocols. The company has been extensively employing Industry 4.0 practices such as automated guided vehicles (AGVs), cobots, automation, AI, AR & VR.”
The lockdowns reinforced the importance of localization like never before. The closures in different regions and locations varied in terms of timing and severity. This created major disruptions in the supply chain. Moreover, the availability of labour became critical, since the migrant labour did not return to the same locations once the unlocking started. This has led to the realization that the processes in manufacturing has to become lesser and lesser skill dependent. It is also important to note that even in the shop floor, there has been quite some advancements in the areas of digitalization and virtual working, even though the opportunities were quite limited compared to other functions.
Suresh KV, president, ZF India, says, “As a global company, ZF has inherent advantages. Cross region learning is a natural phenomenon in organisations spread across the world. As in Q1 2020, wherein people learnt about the precautionary measures taken by its sister entities in other countries, today also, it is exchanging the experiences which they have, with other locations. The biggest impact is normalization of the so-called “new normal” seen in 2020.”
Ather has a strong local supplier base, nearly 90% of the product built and sourced in India. Tarun Mehta, founder, Ather, says that the challenge is to scale up with not just production capacity but also find the right supply partner. If one has a strong supply chain, it incentivises new players to come in as they are not at the mercy of a handful of component manufacturers. The new factory at Hosur, Tamil Nadu, which can be scaled up to a capacity of half a million scooters a year. It has already crossed the pre-covid levels in demand coming in for Ather products.
Sulajja Firodia Motwani, founder and CEO, Kinetic Green, believes that The government should include electric vehicles under priority lending sector to boost financing support needed to sell EVs. To protect interest of banks, they should finance EVs, which are qualified under GOI’s FAME II scheme and limit tenure to 3 years.
Jeetender Sharma, founder & MD, Okinawa Autotech, says, “2021 can prove to be a revolutionary year for the electric vehicle (EV) industry. They have high hopes and are optimistic that the government will continue to take the right steps to place India on the global EV map. With that said, there is a need to reconsider the current taxation framework applicable on raw materials and the final product in case of EVs. While the GST input on raw material is 18%, the tax on outward supplies currently stands at 5%, leading to an implicit inverted duty structure for manufacturers. This move could help in optimizing the cash flows.”