As India evolves into a small car hub, the latest to jump on the bandwagon is German component maker Continental which is developing its Technical Centre India (TCI) in Bangalore as an engineering and research and development hub for the emerging markets of India, China, Brazil and Russia.
As part of its global affordable car strategy, it is designing and customising products for the ‘affordable car’. Trials on passenger cars are currently underway of prototypes developed at the centre to cater to the requirements of emerging markets in the areas of chassis and safety, powertrain and interiors. These products are expected to cost 40 to 50 percent lower than those in developed markets.
For the last year, products being developed include electric power steering, an entertainment hub integrating into a single unit, three electronic control units (ECUs) including a radio, a display cluster and AC Control units. This enables the driver to keep a tab on speed, AC controls and multimedia features all together. The product leverages a single housing and connector instead of three, resulting in huge savings. Other products in the prototype stage are engine management systems to reduce fuel consumption and emissions, and an entry level anti-lock braking system, among others.
Continental Automotive Components India’s captive TCI has already received orders for the new cost-competitive products from around 20 to 30 OEMs from the BRIC countries, of which 10 percent are Indian OEMs.
Production is slated to kick off sometime next year with trials to continue throughout 2012. While some electronics like printed circuit boards and layouts will be manufactured at Continental’s Bommasandra manufacturing facility in Bangalore, final assemblies are likely to be taken up either at the company’s Pune facility or its Manesar plant.
Joachim Nell, head of TCI and director - Affordable Cars Strategy, says that a decision on where to integrate the PCBs into housings has still to be taken. The Pune facility currently undertakes the final assembly of fuel pumps for the Tata Nano. “It will depend on where the customer is located,”
he adds.
The affordable car, according to Continental, is defined by its price and the displacement volume of the combustion engine and encompasses a 1.6-litre engine and is priced lower than 7,500 euros (Rs 4.95 lakh). In Europe, the affordable car would be priced at around 10,000 euros (Rs 6.6 lakh).
Meanwhile, the three main elements of the affordable car platform at TCI are increasing localisation processes to facilitate cost competitiveness, collation of the real requirements of the emerging markets that are varied from the developed economies as well as an integration process. Localisation is targeted not just towards production but adaptation of production to localised R&D by Indian engineers well-versed with the local market. Almost 95 percent of the component parts for the affordable car programme will be sourced from the local supply chain.
Moreover, the localisation chain will encompass the base development of the product to the final production stage involving the purchasing aspect, customer contacts as well as industrial engineering.
While the products being developed at TCI are not special to Continental, the component maker is developing them in India from scratch for the first time due to lower engineering costs – almost half the cost in China as well as lower than that in Brazil. At present, not too much development of electronics products is underway in Russia and is expected to evolve slowly in the future.
In China, Continental is targeting the new OEMs which have JVs with foreign companies. In India, some of the targeted OEs are Tata Motors and Mahindra & Mahindra, while in Brazil only foreign companies which hold the majority market share are on the radar. Mahindra is believed to be developing a car that qualifies in Continental’s affordable car criteria. A smaller number of product designs from TCI could be developed for Russia in the later stages as electronics in vehicles are still nascent in that region.
As part of Continental’s off shoring services, TCI also offers engineering services to its headquarters in Germany and locations in Asia. It operates on a hybrid concept, combining with engineering partners KPIT Cummins Infosystems, Siemens Information Systems and Wipro since 2006 for developing and supporting multiple automotive engineering projects for its global customers at Continental.
Hence, Continental plans to send the product designs from India to its tech centres in the emerging markets where they will be applicated and locally produced, with support from the India team.
At present, 600 engineers are working on the affordable car project at TCI, incurring an annual expense of Rs 150 crore. The centre has added 17,000 square feet of space that can accommodate an additional 400 people, growing 20 percent year on year.
Nell clarifies that no special measures are being undertaken for lightweighting products at TCI though materials like aluminium, steel and plastics are being widely used.
For Continental, its affordable car strategy will help it grow in the emerging markets and facilitate brand visibility for the customer, especially with promising double-digit growth envisaged in the automobile sector in India and China over the next couple of years. The affordable car is seen as a part of the mega trend in the automobile sector and handsome growth is expected in this segment going forward, particularly in India and China.
“We are well-positioned in the developed markets but not so in the emerging markets. So our intent is to design products for emerging markets,” clarifies Nell.
Moreover, trends in the automotive industry indicate growing consumer demand for electronics in the passenger car segment in these countries. Continental views this as a huge opportunity to tap as part of its affordable car programme.