At least 12 per cent of India’s GDP will come from the fast-growing auto industry in the next 10 years. Ashok Belani says the auto industry transformation in India will be driven by vehicle electrification, followed by significant growth in shared mobility.

 

As the India growth story continues to shine, the Indian auto industry is expected to be the one to benefit immensely from this. The rapidly growing Indian auto industry is set to become the third largest market in the world and expected to contribute 12 per cent to the GDP in the next 10 years.

 

Globally, the automotive industry is being disrupted by three simultaneous revolutions – the electrification of the powertrain, the rise of the autonomous vehicle and the digital revolution, which is paving the way for new user practices.

 

However, in India these revolutions are shaping a little differently. The growth in economy and the sudden spurt in urbanisation has led to significant increase in pollution and congestion, and decrease in road safety. These inherent sustainability challenges are compelling the government and the industry to adopt corrective measures, which is shaping the future of the auto industry in the country.

 

The auto industry transformation in India will be driven by vehicle electrification, followed by significant growth in shared mobility, and increase in connected and safer cars. Autonomous driving is expected to follow much later.

 

Electrification

India is exploring cost-effective and viable solutions to combat excessive dependence on oil and the problem of poor air quality in many cities. Electrification of vehicles in India has just begun with EVs forming less than 1 per cent of the market. However, the thrust by the government to achieve significant electrification by 2030 through various initiatives is generating momentum among all stakeholders.

 

Shared mobility

The limited and unreliable public infrastructure and the need for last mile connectivity combined with the technology availability has resulted in growing popularity for alternative solutions like cab sharing. Currently at 3 per cent, shared mobility is expected to grow to 15 per cent by 2030.

 

Connected and safer cars

The government’s commitment to improve road safety has resulted in policy measures to include application of intelligent driving and manufacture safer vehicles with features as per international standards. These dynamic shifts in the industry and the legislative demands are forcing all stakeholders to reinvent the traditional business models, which has made investing in research & development (R&D) more and more compelling than ever before.

 

As per industry data, the R&D spending by large home-grown automotive players such as Tata Motors, Mahindra & Mahindra and Ashok Leyland has increased significantly in the last few years. Although the top 25 automakers have together invested Rs 6,344 crore during FY 2017, but the numbers are still not, as much when compared to the industry needs.

 

While the top OEMs and auto component makers have understood the need of innovation to sustain in the fast-changing markets and are making focussed efforts, a large percentage of the industry that consists of MSMEs are yet to catch-up. The positive news is that India is becoming a country of choice for many global auto companies to invest in R&D. In the past decade alone, Maruti Suzuki, Volvo, General Motors, Renault, Nissan, BMW, Mercedes and recently Volkswagen have set-up R&D centres in India. 

 

The availability of skilled work force, the inherent entrepreneurial culture and the frugal mind-set with lower R&D costs and a large potential domestic market has made the country an ideal R&D destination, and has attracted the global players. However, the development of technology and the high-tech industries are still at a nascent stage in the country. The increasing demand for skilled manpower combined with legal, funding and infrastructure challenges are compelling many companies to absorb existing technologies for applications rather than innovation for future benefits. India has the potential to become the global R&D hub for the automotive industry. For this to become a reality, the government, industry and academia should collaborate much more than ever before for creating a well-defined R&D plan.

 

Government: The government has to work closely with the industry and academia to create frameworks that govern R&D investments, educational development, infrastructure development, private-public partnership, industry academia partnerships and intellectual property rights. An open, transparent and collaborative approach with all stakeholders for drafting the legislation will benefit everyone in the long run.

Industry: Organisations have to approach ‘innovation’ in a phased manner. It is important to define the duration and pace of the R&D projects. This definition will help the organisation to control the input costs for R&D initiatives and help them to scrap the projects that are not needed. They should work towards getting the innovation market-ready within the specified time, as soon as it can provide an incremental benefit to the customer. The innovation can then be tested and moved to the next phase for further development based on the market feedback.

Organisations with global presence should tap into their counterparts outside India to leverage higher level of expertise and competencies. They should focus on expanding their R&D operations and implement different approaches to address different markets, such as adaptive R&D for the local markets and innovative R&D for global markets. It is important for the organisations to own and develop a workforce with advanced skillsets to provide futuristic solutions to the customers. They should also focus on partnering technology start-ups for harnessing innovative ideas that can be developed and brought quickly to the market.

 

Academia: Electrification and connected technologies call for a new approach of curriculum at universities. Therefore, educational institutions should work along with the industry to upgrade and develop a multi-disciplinary curriculum that includes mechanical, automotive, electronics hardware and software as subjects for the students, so that they become industry-ready. Specifically they should work closely with corporates to initiate programmes such as setting up of centres of excellence, mentorship and incubator support for developing and nurturing new ideas. Nurturing talent at an early stage will immensely benefit both the students and the industry.

 

All stakeholders have to come together for creating and implementing a coherent R&D strategy road map for development of both short-term and long-term, so that it benefits the auto industry both within the country and across the globe.  India has a lot of potential and what is needed is a concerted effort to transform India into a global R&D hub.

 

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Ashok Belani is a seasoned industry professional and a senior leader with over three decades of experience in the manufacturing sector. He is the Group President and Managing Director of Valeo India Private Limited and a Member of the Board for all Valeo entities in India.

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