Reason to be confident but not complacent
The Indian auto industry's forte compared to those in other Asian countries has been its entrepreneurs' intellectual zest which has given its an inspiring foundation to build, says Taarun Dalaya.
It is this particular kind of intellectual zest which has kept the Indian automotive industry less foreign-dominated which, since the late 1950s, despite looking deeply towards know-how from foreign lands was able to not only absorb it fully but even build on what it received. India’s story is unlike that of Thailand or China. An important difference is that China is all about a “number’s game or herd mentality”. In contrast, India, despite being the second most populous country in the world and hence a tempting and fulfilling market, possesses an automotive industry which has largely been driven by both its engineering prowess and the Indian capacity to absorb best practices and systems fully.
The seeds of the Indian automotive industry were sown after the Indian Tariff Commission mandated the establishment of an indigenous industry in 1953 and the banning of operations of overseas vehicle makers.The fact that, until recent years, the government did not see the automobile as a necessary product but a luxury item was indeed a setback to the industry and the country as well. Other countries realised much earlier than India that the automotive industry, especially the passenger car segment, would be one of the engines of growth of their economies.
But India had more pressing issues to take care of in its socialistic framework than pursue the development of this vehicle segment. The shape that the country’s auto industry has taken today is a tribute to industrialists like HK Firodia and JRD Tata who worked tirelessly to see that this sector contributed to the making of Nehru’s modern India. After the country was further opened up in the early 1990s, it would have been difficult to imagine that a decade or more later, Indian companies such as Tata Motors or TVS Motor would have global footprints. And not just vehicle makers but component makers like Bharat Forge or RSB Group as well.
What is driving the automotive industry is not merely proliferating the market with newer vehicles but an amazing twist and refinement in tastes of consumers who want their money’s worth and the best of what the developed world enjoys. Money’s worth in the Indian context means that consumers are extremely price-sensitive and yet demanding. These traits, and others, have posed as key challenges but inspirational factors for companies like Tata Motors and Bajaj Auto whose products have tried to meet the requirement for world-class products at affordable prices.
Bajaj’s slogan “distinctly ahead” is not just a brash statement but something that has found proof in a product like its Pulsar, which with its unique home-developed engine technology and other features, symbolises a proud Indian’s spirit. The Indica on the other hand is another example of determination to make it big by oneself and not by depending on borrowed technology. Yet, some of its key parts are made with foreign collaborations.
TVS MOTOR MOVES ON
TVS Motor, though currently struggling towards better profitability, is a fine instance of how a company parted amicably with a foreign partner, Suzuki, and resolved to go its own way and create its own space. Today TVS Motor with its operations in Indonesia fits into the category of a transnational company. Mahindra & Mahindra, through its path-breaking vehicle Scorpio, not only enriched the SUV segment with a product type known to be manufactured at the lowest cost ever from bottom up, but also offered families a mode of transport which would enable safer and more comfortable inter-city travel.
What is also commendable about such companies is that they have had to introduce products in a highly competitive and “unprotected” market scenario where there is already a well-entrenched presence of foreign MNCs or joint-ventures whose vehicles offer the most contemporary technologies and design. Competition being vicious and consumer tastes becoming more demanding, especially in terms of the variety of vehicle models being made available to buyers, Indian companies are also having to vie with foreign MNCs in introducing new models in shorter time periods. So while sensitivity to price continues to rule, how fast a company can introduce a vehicle to meet a particular taste or trend and which bears the most innovative technology and features have become factors that today determine how well a product will sell.
##### INNOVATIVE MODE
Indian vehicle makers will therefore have to live in a continuous innovative mode which will have to be combined with a very efficient and productive design, development and manufacturing system. Just having won brownie points for an Indica or a Pulsar will not do. The other emerging trend, which is not dictated by rapidly changing customer tastes but by peculiar market-specific or country-specific needs, is where Indian companies, most commendably, are taking the lead.
The Ace is a superb example of how a niche waiting to be grabbed was opportunistically taken by Tata Motors in the one-tonne cargo segment. The other niche or “bottom of the pyramid” kind of strategy which Tata has once again taken and may have also inspired others to follow is the pursuit of not what was earlier called a Rs 1-lakh car but what will be an aspiration to introduce a truly “people’s car”.
While Indian-owned automotive companies are doing what it takes to meet competition headlong and sustain or strengthen their market share, they are also taking bold steps in changing the management structures of their enterprises. In the vehicle segment a recent instance is how Bajaj Auto’s managing director Rajiv Bajaj has recast the company into five divisions each to be headed by well-qualified and high performing colleagues.
KEEPING WITH THE TIMES
A company cannot continue to be managed in a particular manner endlessly for years but has to be flexible and dynamic according to changing business scenarios and times. This is not just being realised within Indian-owned companies in the vehicle sector but is more visible in the largely family-owned entities in other segments such as the auto component sector. Nearly 80 percent of component companies are family-owned enterprises where management batons are being gradually acceded to sons, daughters, nephews, nieces and even to daughters-in-law.
These young business scions face multiple challenges be it generation gap related or even management-style related -- many of which are spurred by ideas picked up from overseas education programmes or internships at leading companies abroad. How they are mentored and prepared is a very vital and sensitive issue as they will be the future leaders of the automotive industry. Many of these young people are already in frontline, hands-on positions in their enterprises and performing admirably well.
The writing is clear on the wall that however good an enterprise may be in what and how it manufactures, it will first have to give the utmost importance to the people it employs in the varied facets of human resource management. Getting and retaining or nurturing talent which can walk the talk and also walk along the trajectory of a company’s growth is a critical challenge that the young entrepreneurial generation within Indian-owned companies will have to cope with and better in years to come.
##### SMALLER SEGMENTS
As is often misunderstood or perceived, the automotive industry is not just vehicles and components. There are vibrant smaller but equally important segments such as those of tyres and batteries which have their own indigenous success stories that make India proud in its 60th year of independence. The respectability that companies such as Amaron in batteries and Apollo and JK in tyres have gained cannot be ignored. The same drive, which Indian vehicle makers felt while developing products such as the Indica and Pulsar, has also been the fuelling factor for companies in such segments as well.
While Indian parts are now being supplied not just to aftermarkets overseas but to OEMs and Tier-1 companies worldwide, companies like Man Force still run into problems of localisation of parts and Hyundai turns to vendors in South Korea due to quality issues. Unlike a small country like Thailand where there are very few “Pure Thai” companies, the Indian auto industry has many Indian-owned companies largely in the small and medium component arena.
One of the most important challenges they face is to produce quality products consistently and deliver them reliably. The other of course being that of ownership of technology: either developed by oneself or bought from an external source. If these companies wish to survive in an environment where free trade agreements or world harmonisation of automotive standards will further diminish barriers to imports, they will need to focus particularly on these challenges and find paths to keep them ahead of emerging competition. The dire need first is to be aware of developments taking place, either market-driven or government-driven, in the country and outside it.
Two , companies should realistically assess where they stand among their peers and third they will have to aspire to be best-in-class even if they are manufacturing one product. It is perhaps this aspiration which will not only begin their journey on improvement in myriad aspects of their enterprise but will enable them to absorb hungrily all key ingredients of best practices in not only manufacturing but all other areas of their business.
Times are going to get tougher and the sooner companies take honest views about their future the better it is. What entrepreneurs can take recourse to if they decide to give their best are the inspiring stories of people who made a difference and lent their efforts to what is today a rich heritage.
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