DNA Mumbai Anniversary: Meet movers and shakers who changed automotive industry in past 13 years
Industry has become more IT enabled moving towards more advanced features
Indian automotive industry, the fourth largest in the world, has come a long way over last one decade, growing about three times amid all the challenges and hiccups. The numbers collated from the industry say it all. The industry sold close to 30 million units of vehicles during last financial year, up from a modest figure of around 9.7 million unit sales in 2005-06. In terms of size, the industry grew at around 10% CAGR from about $21 billion to about $74 billion during this period. Consequently, the component business also grew from $8.5 billion to around $45 billion during the same period. Increasing demand from smaller towns and rural areas has not gone unnoticed as OEMs including the luxury car makers have realised its importance. Now around 35% of passenger vehicle demand comes from rural India in comparison to just 10% around a decade back. The cumulative effect of the growth in this ‘sunshine sector’ of the country’s economy has been that it now contributes over 7% of national Gross Domestic Product (GDP) and provide incremental employment to over 25 million people in the milieu, the analysts claim.
According to the industry observers, the industry also attracted many joint ventures during the last decade - both technical and financial across the segments which not only helped create a robust domestic market, but helped in turning India into an export hub for the world. “For example, one-third of global small car production today happens in India,” says Ashim Sharma, partner and group head, Nomura Research Institute Consulting. Similarly, in 2-wheelers segment, India has become the world’s largest market selling under 19 million units annually and gearless scooters playing an important role in it. Sharma says that like any robust sector, automotive sector too has seen a lot of developments over the years. “The important ones include demand volatility due to shift in preference over petrol as poor perception and government regulations made diesel a ‘dirty commodity’,” Sharma adds.
The product life cycle shortened, as original equipment manufacturers (OEMs) have begun coming out with new launches at shorter frequencies. Further, according to Sharma, the industry has also become more IT enabled moving the industry towards more advance features in the vehicles. “The retail financing for the vehicles especially in the passenger vehicle segment eased tremendously, giving further push to the sales,” Sharma continued.
The experts point out that the decade also witnessed the blurring of the industry as tech giants like Google, Apple and the likes challenged the legacy OEMs and the effects of it also now visible in the country as OEMs and technology companies are tying up with Indian startups to peruse the future challenges. The ride-hailing companies such as Uber and its Indian rival Ola are setting up their business big time in the country and bringing a tectonic shift in the way people traveled.
As per experts, used car segment witnessed tremendous growth as people’s attitude towards it have changed giving rise to multiple e-commerce in recent years. The change in outlook is now different considering the fact that till about a decade ago, in the absence of organized players, more than 60% of all used car sales were C2C (customer to customer) among friends and relatives and with a ‘Circle of Trust’. The remaining sales were managed by local unorganised dealers.
Sridhar V, Partner, Grant Thornton India LLP, says that some of the factors that helped the cause have been the improved infrastructure and rationalisation and simplification of taxation as with introduction of GST in July 2018. “Further, even under the erstwhile regime, numerous improvements had taken place - such as reduction in basic excise duty rates from 16% to 12%” says Sridhar. Analysts claim that improved investment in R&D and government push in certain segments including electric and hybrid vehicles through National Electric Mobility Mission Plan and FAME has helped, though ‘Make-in-India’ remains debatable. Implementation of Bharat stage IV happened last year. Now the industry is skipping one stage and jumping directly to BS VI by April 2020, taking country’s emission norms on par with the international standard.
Presenting some movers and shakers who changed the automotive industry in the past 13 years.
RC Bhargava: Trusted Leader
The face of MSL has been instrumental in taking it towards the leadership position in the car segment
Maruti’s Japanese partner Suzuki Motor Corporation (SMC) have immense trust in Bhargava’s leadership ability. When during an interview Osamu Suzuki, chairman of Suzuki Motor Corporation (SMC) was asked to comment on Bhargava, he said , “Without RC Bhargava, Suzuki Motor Corporation would not have succeeded in India as (it has) today”. Though the soft-spoken octogenarian does not involve himself actively in running MSL’s s daily operations anymore but he is still closely involved in important aspects including product development, cost reduction and any major strategy discussions, claim the insiders. A Mumbai based analyst said that Bhargava is like a “father figure” for MSL, who is there to give the right advice for taking an important decision.
Ratan Tata: Future Focused
The much hyped Nano, his pet project was unveiled a decade ago creating a buzz globally
Commenting on Tata, an industry tracker with an MNC consultancy firm said, “One of the important contributions of Tata has been that he has made personal investments in certain new age companies, which he believes can provide solutions for the future.”
Anand Mahindra: Astute decisions
M&M’s products, innovations, engineering have been pushing the industry towards further growth
Though the runaway success has eluded M&M in past over couple of years, the way it happened with XUV500, Bolero and Scorpio but it is attempting to jack up the performance with newer technologies, platforms and design as was showcased at the Delhi auto show. According to experts, while the entire automobile industry is now going gaga over electric vehicles, Mahindra had surprised everyone way back in 2010 when his M&M purchased Bengaluru-based Reva, an electric car company. “ Not many people had thought it to be a wise decision then, as the acquisition was ahead of its time. But now everybody is running behind EV.” said a senior executive at M&M. Autonomus driven tractors are the other thing Mahindra asked his company to work on.
Pawan Munjal: Winning formula
Hero MotorCorp has emerged victorious and spread its wings in the international market
However, to his credit, Munjal’s Hero MotorCorp managed to fight the battle out not only with rivals including Bajaj Auto but also its former partner Honda. The separation with Honda, also helped him spread wings in the international market. Munjal is among the highest salary drawing executives in India. “ The best part about him is that he identified and invested in newer technologies, which was not the trend earlier with the Indian two wheeler companies.” said an analyst with a leading management consultancy firm.
Rajiv Bajaj: Straight talker
Bajaj Auto has transformed into a bike company, away from past days of being a scooter company
Bajaj has asked his team to ramp up ‘commuter’ segment to put behind the loss in domestic market share, while eyeing newer frontiers on the international front. Another expertise that Bajaj has developed in recent years is to identify international brands that are not doing well but can be turned around if handled properly. KTM bikes are an example. The industry experts credit Bajaj for turning Bajaj Auto into a bike company, away from the days of being a scooter company of the past.
“He also stood on his ground to push for the launch of quadricycle, though it was opposed by rival players who claimed that quadricycle was a step back in emission and safety technology.” said a company insider.
Siddhartha Lal: Success Mantra
Analysts describe him as someone who has successfully revived the soul of Enfield brand
Lal’s success mantra is simple. Concentrate only on couple of businesses which you are good at. This is exactly what he did when he divested 13 of his businesses and put his focus behind Royal Enfield and trucks.
“In my mind, the basic question was this: do we want to be a mediocre player in 15 small businesses or just be good in one or two businesses,” Lal was quoted as saying. An analyst, philosophically points out that for him Lal is someone who “revived the soul of Enfield brand”.
To conclude, industry captains are of opinion that though the industry growth has been praise worthy, there are certain areas especially with related to policies that can have been handled in a much better way by the government. Unpredictability, arising out of such decision mar the investment in the sector. On the positive front, while developments in electric and autonomus vehicle technology are good signs, but it is still many years away from “mass movement”.