ACMA's Vinnie Mehta: 'We will soon announce EV-related courses at our CoE at IIT, Sonepat.'

ACM'a Director General on how the supplier community is meeting the many challenges of a slowdown, the welcome change in government policy towards co-existence of technologies, EV-related courses and the new focus on digitalisation.

By Mayank Dhingra calendar 06 Sep 2019 Views icon23607 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
ACMA's Vinnie Mehta: 'We will soon announce EV-related courses at our CoE at IIT, Sonepat.'

Vinnie Mehta, Director General of the Automotive Component Manufacturers Association of India (ACMA), speaks to Autocar Professional's Mayank Dhingra on how the supplier community is meeting the many challenges of a slowdown, the welcome change in government policy towards co-existence of technologies, EV-related courses at the Centre of Excellence in Sonepat and the new focus on digitalisation. Excerpts from a recent interview.

Let's start with the ongoing slowdown in the automotive industry. Do you think that sales have really hit rock bottom?
hile we would like it to be behind us as soon as possible, the unfortunate truth is, as you know, is that month after month, we're hitting a new bottom. In terms of job losses, how many have been lost in the automotive components space so far. This is one of the very ugly ramifications of the slowdown.

My understanding is that, as an industry, the component sector would have lost over 100,000 jobs. And we also know that about 300-odd dealerships have shut down so far. So that number is somewhere around 250,000 to 300,000. Over and above that, I think SIAM is talking about 15,000 to 20,000 retrenchments at the OEMs. That's the kind of the job losses that have happened as of now but our worry is that if this downturn continues, the figure could be fairly significantly large — as large as 10 lakh or a million jobs over the next two quarters.

My biggest worry is that because we are seeing such a huge loss of manpower at this juncture, which essentially translates into loss of skill-set, when the growth returns, we will be faced with challenges because they would have lost their skills. And it's not easy to get them re-skilled because people would have found alternate venues of employment, sitting and waiting for us. That's the other challenge that one has to brace up to once the slowdown is over.

M&M's Dr Pawan Goenka recently remarked that if the festive season doesn't see any uptick, the situation could worsen for many companies, especially MSMEs in the components space. What is your view on that?
That is true because the production cut in the vehicle industry is anywhere between 20 to 25 percent. And that is putting huge pressure on everyone, and there is inventory build-up in the component industry as well. So, if things don't move, obviously the working capital will dry up, leading to consequential job losses. We are any which way seeing so many layoffs because the component sector is the largest employer when it comes to the automotive value chain. The slowdown needs to be arrested now at an alarming speed because it is probably a one-of-its-kind phenomenon that we are witnessing and never seen in the history of Indian automotive industry before.

What does it mean for the industry’s returns on the BS VI investments?
The entire automotive industry has invested very significantly, to the tune of Rs 70,000 to 80,000 crore, in upgrading from BS IV to BS VI alone. It really now is a big question mark as to how we will recover that investment, considering the kind of sales that we are witnessing.

The market is so fluid and so uncertain that I don't think that even if one had plans to invest in capex, who would lend the money when there is a huge liquidity crunch in the market, even though that is more for consumption purposes.

The components industry closed FY2019 with a 15 percent growth rate. What is the outlook for this year?
We think it would be very flattish, and we would be extremely lucky if it touches single-digits in positive. But our understanding is that it can be very flat growth this year, notwithstanding the fact that we need to see how things pan out in the festive season and in the last quarter of FY2020. If the festive season actually gains traction and if pre-buying happens in Q4, then it may not be as bad as it seems right now. But we are keeping our fingers crossed.

How do you respond to the recent remarks made by different government officials on EV adoption?
First of all, we must now appreciate that the government is making welcome statements, moving away from its earlier stance on EVs, which was a little too aggressive wherein it wanted all two-wheelers less than 150cc to become completely electric by 2025 and three-wheelers by 2023. Now, the statements issued by the Prime Minister and NITI Aayog itself show that they are open to a dialogue with the industry to chalk out a more comfortable roadmap. So there is a sea change in the perspective of the government, which is very welcome. The panic that was created is behind us, which is a very good sign. These statements are very necessary and reassuring at this juncture and now we need to revive the market.

Do you think electrification can hamper the component industry, given the considerably lesser number of parts in an EV?
On the basis of the study that we did last year, my understanding is that by 2030, close to 18 to 20 percent of the market would be electrified (EVs and xEVs), which could probably go to 30 percent if we look at a really stretched number there. So, even in a worst-case scenario, you have probably 70 percent of the market that is still conventional. And that's a very big market because, say, by 2030, car volumes are also expected to be somewhere around 10 million, and today, it's around 4 million. Seventy percent of the 10 million still doubles the market size to 7 million, which is a very big market to cater to.

So in that sense, these statements from the government are very reassuring and, as the Prime Minister himself said that India is a big enough market for all sorts of technologies to co-exist, I think that is really a big relief. The world of technology is very dynamic and the last word on technology is yet to be said.

Are suppliers upbeat about investing in EV parts development?
The majority of companies have a question mark. We conducted an event on localisation of xEVs and we had around 40 to 50 players who had put up the technologies that they had available for EVs. So, while it is very welcome, but again it's a chicken-and-egg situation because at the end of the day, you may have a technology but you also need a customer. In that respect, we first need to see what roadmap OEMs are following.

I think the Phased Manufacturing Programme (PMP) under the FAME II scheme has been very welcome, because the government is talking about 50 percent localisation for two-wheelers and three-wheelers and 40 percent localisation for mass-market cars including taxis and buses. So, that is the way to go because in that sense, again, it creates opportunities for component manufacturers, rather than keeping the electric mobility arena sort of import-driven.

We have 25 million conventional two-wheelers that fuel investments from the component industry, and roughly 4 million cars, but again, if that number gets dropped to a mere 1 percent, it is not motivating enough for anybody to press through. So, we need conditions where the EV market would also deepen enough.

Has ACMA started devising new curriculum for EVs in your training programs?
Yes, in fact, we would be very soon announcing EV-related courses at our Centre of Excellence at the IIT Campus at Sonepat, which was set up last year. At present, we have two functional labs there. The centre has a stateof-the-art mechatronics lab and a design lab, wherein we have invested heavily into equipment from Dassault Systemes. It is a lab with 16 terminals, where we can design new products for OEMs as well as reverse-engineer products for the aftermarket using  such tools as 3D scanners

What, according to you, is the standout feature of the Indian component industry that would see it take on technological disruptions successfully?
I would say the component industry is very versatile and flexible in terms of adapting to different cultures and different manufacturing processes. The industry has done well to adopt and adapt to changes till now and I'm sure we will do it in the future as well. It is just a question of how well you prepare yourself for the future.

Full interview in the September 1 issue of Autocar Professional

Also read: India’s component suppliers hit $ 57bn revenue in FY2019 but brace for a difficult FY2020

‘Investments are coming through and the roadmap for the next five years is almost frozen’: Biju Balendran

auther Autocar Pro News Desk calendar23 Jun 2024

Biju Balendran, Managing Director of MG Motor India, spoke with Autocar Professional about MG India’s new innings under ...

‘Western India offers a complete portfolio of automotive manufacturing:’ Vinnie Mehta

auther Autocar Pro News Desk calendar23 Jun 2024

The Western region continues to play a crucial role in the automotive component sector’s growth and offers manufacturing...

‘Most of the new EV brands have come to us to sell themselves’ says Bajaj Auto's Rakesh Sharma

auther Autocar Pro News Desk calendar23 Jun 2024

Rakesh Sharma, Executive Director, Bajaj Auto, talks to Autocar Professional on his company’s focus areas for the future...