ACMA-McKinsey report enlists measures to support Indian automotive industry

ACMA-McKinsey report details a few actions to consider to help the industry prepare for its next phase of growth.

Autocar Pro News Desk By Autocar Pro News Desk calendar 15 Oct 2019 Views icon4043 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
ACMA-McKinsey report enlists measures to support Indian automotive industry

To manage the slowdown and embrace discontinuities in India’s automotive component industry, it is critical that key stakeholders such as the government, industry bodies and OEMs co-create and collaborate on the way forward. The ACMA-McKinsey report details a few actions these stakeholders could consider to help the industry prepare for its next phase of growth.

Anchor actions for the government
The government could provide a solid foundation for auto component manufacturers to take these discontinuities in their stride. It could do so by:

Continuing to encourage EV manufacturing and adoption:

- Developing a practical EV roadmap for the industry, with clear milestones: The government is already promoting EVs through demand incentives such as FAME II. Further incentivising 'Make in India' for EV components could promote greater localisation. This could help capture value across the automotive component manufacturing value chain, instead of solely importing and assembling components.

- Encouraging adoption with a robust ecosystem: Emphasising the development of necessary infrastructure such as charging stations could promote greater EV adoption. The government could be the first to set up such an infrastructure, and private players and customers are likely to follow suit as the perceived benefits of EVs (cost, efficiency, environment-friendliness) start becoming more tangible.

- Appointing trade representatives at consulates to facilitate exports: This could be a vital bridge between Indian component manufacturers and OEMs in key export markets. Businesses can consult with these trade representatives for help with the setup, administration and marketing of their locally manufactured products.

- Incentivising companies that are seeking new sites to set up in India: The government could welcome companies relocating their operations in light of changing trade relations between large economies such as China and the US.

Anchor actions for industry bodies
Bodies that govern and support the automotive component industry in India could offer support by:

— Working with Export Promotion Councils (EPCs) to identify target markets for exports: The implementation of BS-VI will empower Indian auto component manufacturers to operate in global markets on an equal footing with other players. To help them find a conducive business environment in new markets, industry bodies could work with EPCs to leverage bilateral or multilateral trade relationships (like free trade agreements). Such a partnership could help develop a winning export strategy while targeting such markets.

— Facilitating a cooperative supply chain in high-potential export markets: Increasingly, companies across industries are seeing merit in developing a collaborative supply chain by partnering with peers. This reduces risks and costs and makes it easier to expand into newer markets.

Industry bodies in India could work with multiple automotive component manufacturers to enable cooperative supply chains, especially in the area of warehouse management. Such guidance could help these players enter and flourish in high-potential export markets.

— Setting up incubation centres in metropolitan zones to promote ACES-related innovation: The future of automotive innovation is expected to hinge on the ACES trends—Autonomous vehicles, Connectivity, Electric vehicles and Shared Mobility. To win in such a disruptive environment, it is critical for players in the automotive components industry to adapt and innovate across each of these technologies.

Industry bodies in India could help by facilitating the setting up of dedicated incubation centres in key metropolitan zones such as Delhi, Mumbai, Chennai and Bangalore. Such support could promote a startup culture while encouraging businesses to work on technologies that could lead to maximum disruption in the industry.

— Conducting training and knowledge sessions on the impact of digital interventions: Industry bodies could anchor initiatives to help businesses better prepare for digital transformations and evolve the mindset necessary for successful implementation. Such initiatives could include learning programs to create awareness of global best practices and to train talent.

Anchor actions for OEMs
OEMs in India could support automotive component manufacturers by:

— Investing in and collaborating with Tier 1 and Tier 2 suppliers: OEMs and automotive component manufacturers could jointly invest in R&D and frugal innovation, share any potential near-term risks that might come with such innovation and jointly test the feasibility of their products. This could be a valuable form of support during the current slowdown.

— Assisting in rightsizing and upskilling or reskilling talent for Tier 1 and Tier 2 component manufacturers: OEMs could create a joint program with their Tier 1 suppliers to share best practices. This could enable them to map value streams and identify overlaps. It would also help spot critical roles that require upskilling or reskilling in preparation for the future.

— Building knowledge partnerships to embed digital capabilities: When the BS-VI norms were first announced, OEMs and automotive component businesses worked together to understand the implications and collaboratively build capabilities. Replicating such knowledge partnerships in India could help businesses, especially in Tier 2 and Tier 3 cities, to understand how best to embed digital capabilities across the value chain and embrace the disruption that could soon impact the industry.

The auto industry in India is quite dynamic, especially with discontinuities constantly shaping and reshaping the landscape. Automotive component manufacturers could turn each of these discontinuities to their advantage by exploring the various avenues discussed here. This could keep them on the path to success in India and globally.

(This article was first published in the September 15, 2019 issue of Autocar  Professional)

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