The Indian automotive industry is going through a dramatic transformation. Political stability, new regulations, increasing competition and rising consumer expectations are bound to reshape the way automobile and components manufacturers go about their business in India.
By Baishakhi Dutta
At present, the Indian automotive industry is one of the largest in the world, accounting for 7.1 per cent of the country’s gross domestic product (GDP). The two-wheeler segment accounts for around 80 per cent of this market share. And the growing interest among automobile companies to explore markets in rural India promises to boost the growth in this sector.
India: The new R&D destination
India is gradually transforming into a global R&D hub for the automotive and auto-components sectors, as most automobile giants are setting up their R&D centres in the country.
India offers several key advantages to these global auto majors, like lower R&D costs, availability of skilled manpower and a potentially large domestic market that justifies the investments made. Having established itself as a small car hub, India is now becoming the preferred choice for R&D activities. Auto giants, including small car makers and luxury car manufacturers like Mercedes-Benz, have set up R&D centres in the country over the past few years.
The increasing use of electronics in the auto sector globally, fuelled by trends such as mobility, connectivity, fuel efficiency, electric cars and autonomous driving, has broadened the scope for innovations on Indian soil. The Indian automotive components sector is already driving innovation and has started increasing its investments in the R&D domain.
Changing market dynamics
According to a recent IBEF (Indian Brand Equity Foundation) report, India is also a major automobile exporter, and is aiming for strong growth in exports in the near future. Overall, automobile exports grew 15.81 per cent, year-on-year, between April 2017 and February 2018. In addition, due to several initiatives by the government of India and the major automobile players, India is expected to rank amongst the world leaders in the two-wheeler and four-wheeler markets by 2020.
According to the Society of Indian Automobile Manufacturers (SIAM), India sold 17.7 million two-wheelers in 2016 (over 48,000 units every day), against China’s sales of 16.8 million two-wheelers.
While many global OEMs are increasing their focus on designs for the Indian market, most of the new launches here have also achieved success globally. In order to keep up with growing demand, several global automobile makers have started investing heavily in various segments of the industry during the last few years. The Indian automobile industry has attracted foreign direct investments (FDI) worth US$ 18.4 billion between April 2000 and December 2017, according to data released by the Department of Industrial Policy and Promotion (DIPP).
At present, China is the world leader in the automobile space, with Korea trying to overtake Japan for second place. India is also catching up fast, in tune with this fast-changing market. And in response to climate change and a government directive, the Indian industry is beginning to explore the manufacture of electric and hybrid vehicles to promote clean and green energy.
Interestingly, the top four automobile makers in India account for 90 per cent of the market, making it a unique market space. The two-wheeler segment, especially motorcycles, is expected to grow even bigger in India in the near future.
The latest buzz
Recognising the massive business opportunity, automotive components and solutions providers are also betting big on the Indian market. For instance, auto components major, ROHM, has recently introduced panel chipset solutions in the Indian market to bring better safety functions to next-generation automotives, including two-wheelers.
The increased use of LCD panels for the instrumentation cluster in next-generation vehicles—for navigation, electronic mirrors, and other systems—with larger, higher resolution displays, implies an increase in the number of driver and controller channels. This makes system configuration and operation verification more difficult, favouring chipset solutions. In applications such as electronic mirrors, malfunctions can lead to serious accidents and functional safety is required.
ROHM’s newly launched chipset has been designed to drive and control automotive LCDs, including larger high resolution monitors used for navigation and the instrument cluster. The expanded line-up is compatible with functional safety measures for speedometers, side mirrors and other vehicle systems. ROHM’s global revenue from this panel chipset solution is projected to hit US$ 100 million (from a current revenue of US$ 60 million) by 2021, with a CAGR of 13 per cent.
“The Indian automotive industry is one of the prime drivers of the Indian economy. This industry’s R&D is an integral part of enabling manufacturing and innovations in India. ROHM has introduced the latest technology in panel safety, which has enjoyed immense success in Europe and Japan,” says Daisuke Nakamura, MD, ROHM Semiconductor India.
He further comments that there are ample opportunities for the company in the expanding automotive market and, hence, it is aiming at a CAGR of 42 per cent in the next three years, exclusively in India. Though the auto components company is currently witnessing tremendous revenues from the two-wheeler domain, it plans to expand into the four-wheeler space too.
Britto Edward Victor, head, design center, ROHM Semiconductor India states that in India, the company is working towards enabling innovations in the Indian two-wheeler market. The organisation is now working with key Indian two-wheeler OEMs to customise solutions for the Indian market.
The future looks promising
The Indian automobile industry is supported by various factors such as the availability of skilled labour at a low cost, robust R&D centres and low-cost steel production. The Indian automotive market is estimated to grow at around 10-15 per cent to reach US$ 16.5 billion by 2021 from around US$ 7 billion in 2016. It has the potential to generate up to US$ 300 billion annual revenue by 2026, create 65 million additional jobs and contribute over 12 per cent to India’s GDP.
The long-term outlook remains positive for strong fundamental reasons such as high GDP growth, availability of adequate finance, higher per capita income, decreasing unemployment, favourable demographics, and rising consumer expectations.