The Automotive Component Manufacturers Association of India (ACMA) and Society of Indian Automobile Manufacturers (SIAM) recently announced the setting up of Auto Data Exchange 'Auto DX', an electronic data interchange (EDI) platform aimed at integrating OEMs and suppliers on a common data exchange standard. On the sidelines of this event, we talked to Harish Lakshman, President, ACMA to get his views on the present state of the component industry and the road ahead.
Having taken over as the President of the industry body at a difficult time, Lakshman has only witnessed the scenario getting worse by the day. With a dismal performance in Q3 of the present fiscal and Q4 not presenting any hopes going by January 2014 figures, Lakshman doesn't expect any immediate or short-term uptick in the business environment for the Indian automotive industry. He added that there are already too many constraints playing along, including low GDP, present ban on the mining sector and slow-paced growth of infrastructure.
These factors are the fundamental drivers of growth in a market such as India and their negative performance is hampering the automotive industry significantly, he added. Owing to these factors, the commercial vehicle (CV) segment has been hit hard but the passenger vehicles segment too is facing a slowdown. Like most others, Lakshman too is hoping for a turnaround after the national elections take place and a stable government takes charge. Realistically, that could mean sometime in 2015.
Pushing For Opportunities Amid Downturn
Both ACMA and SIAM are lobbying with the government for introduction of some sort of a stimulus to improve the condition of the industry, Lakshman said. He cited examples of European countries and the US, where stimulus packages were introduced during the economic downturn. Reduction in excise duties has been a long standing demand of the industry. In the interim budget announced by the Union Finance Minister recently, that demand has somewhat been addressed.
In addition, a pending request on the government desk is the scrapping of old vehicles. Lakshman said that these measures are being seriously considered and that their implementation could provide some short-term stimulus for the industry.
When asked about the sustainability of stimulus policies, Lakshman admitted that stimulus can only improve demand in the short-term basis, but long-term growth of the sector will depend on the factors discussed earlier in this report. He also mentioned that the Auto Expo will serve as a confidence booster to the industry, which after its completion seems to have fulfilled its objective.
Proceeding to the topic of long-term prospects of the industry, he said that India is bound to grow at a fast rate in a span of about 10 years, so much so that he believes the Indian market will grow at a much faster rate than the Chinese market. The phase that China went through during 2000 to 2010 is what India will go through in the years to come, he added. A record participation at the Auto Expo too is an indicator of the confidence that the industry players have in the potential of the Indian market, he noted.
Discussing the slow movement of Indian suppliers in the area of R&D, Lakshman added that in the last 10 years Indian suppliers have established the fact that from a manufacturing point of view, we can match global quality standards. He added that about a decade back, of the exports, about 20 % were for the OEMs, while the rest 80 % was for the aftermarket. Today, owing to the proven quality, these figures have reversed completely.
In terms of R&D, the Indian suppliers haven't done much yet but the community now acknowledges this fact. Many companies have already realised that unless they start investing in technology development, global business growth cannot be made sustainable. Another factor to be considered is support from government for encouraging R&D. He mentioned that countries such as Japan and South Korea too witnessed a growth in technology development after implementation of supportive policies from the government. Product technology will mostly be carried out by Tier I suppliers and as a trickle down, Tier II and Tier III suppliers will focus on process technology such as hydroforming or cold forging. The next 10 years should see Indian suppliers making a significant progress in creation of technology.
Lakshman also stressed on the importance of further improving the industry-academia interaction to catalyse knowledge driven innovation. He added that things have significantly improved in the past five-odd years and the focus has been not only to interact with engineering institutions but also with management schools. A wholesome approach towards the academia, favourable government policies and a development in the outlook of the Indian supplier community is what will drive the growth of Indian companies in years to come, concluded Lakshman.
Text: Arpit Mahendra