Industry 4.0—enabling innovative processes, digital manufacturing and automation—has the potential to disrupt the industrial value chain and push automotive sector to rethink the way they do business. Moreover, stringent regulations are evolving so rapidly that the automotive sector might need to rethink about their operational aspects to comply with regulatory and other guidelines.
India is the fourth largest automotive market and the seventh largest automotive manufacturer (Fig. 1), according to India Brand Equity Foundation (IBEF) report, and is expected to emerge as the world’s third-largest auto market by 2021, according to IHS Auto Market. In the last seven years, the country has increased annual production of vehicles by one million, resulting in four million vehicles produced last year. However, considering rapid economic development, ongoing urbanisation, a burgeoning consuming class, and supportive regulations and policies, the five-million milestone is expected to be met within the next five years. The market is even expected to get stronger day-by -day, both with respect to domestic demand and exports backed by the presence of established domestic and international original equipment manufacturers (OEMs).
According to the IBEF report, automobile exports grew 20.78 per cent year-on-year during April-November 2018. It is expected to grow at a CAGR of 3.05 per cent during 2016-2026.
The Indian automotive industry (including component manufacturing) is expected to reach ₹ 16.16 to 18.18 trillion (US$ 251.4 to 282.8 billion) by 2026. The Indian automotive industry is also targeting to increase exports of vehicles five times during the period 2016 to 2026.
Unprecedented growth of the Indian automotive sector is mainly supported by four factors: favourable policy, growing demand, rising investment and marketing opportunities. The Automotive Mission Plan: 2016-26 indicates a clear vision of the government for this sector. The government aims to develop India as a global automotive manufacturing centre.
Moreover, India has significant cost advantages that result in savings of around 10 to 25 per cent on operations by Indian automotive manufacturers vis-à-vis those in Europe and Latin-America.
The cumulative FDI inflow in the automotive sector was around US$ 19.29 billion during the period April 2000 to June 2018. The Central government expects this sector to attract US$ 8 to 10 billion in local and foreign investments by 2023.
The Indian automotive market can be bucketed under the following broad categories (Fig. 2):
• Passenger vehicles
• Commercial vehicles
Two-wheelers and passenger vehicles dominate the domestic Indian auto market. Passenger car sales are further governed by small- and mid-size cars. Two-wheelers and passenger cars accounted for 81 and 13 per cent of over 24.97 million vehicles sold in FY18, respectively. Overall automotive exports reached 4.04 million vehicles in FY18. Two-wheelers made up 69.7 per cent of the total exported vehicles, followed by passenger vehicles at 18.5 per cent, three-wheelers at 9.4 per cent and commercial vehicles at 2.4 per cent.
Green mobility, the game changer
Continuous regulatory pressures to stop environmental hazards associated with internal combustion engines (ICEs) coupled with availability of advanced technologies for electric power trains and storage systems (batteries, etc) ensure better functionalities and enhanced demand for electric vehicles (EVs) worldwide.
According to Reportbuyer, the global EV market is growing at a CAGR of 21.27 per cent for the forecast period of 2017-2026. The market is driven by growing emissions of carbon-dioxide and greenhouse gases, availability of low-cost lithium-ion batteries and various government initiatives that are encouraging the use of EVs.
The Indian automotive sector is also shifting its focus to EVs and other sustainable options. India could be a leader in shared mobility by 2030, providing opportunities for EVs and autonomous vehicles. Innovation is likely to intensify among engine technology and alternative fuels. The government aims to build India into an R&D hub, and will set up incubation centres for startups working in the EV space.
According to a McKinsey report, global sales of pure battery EVs (excluding hybrids) grew by approximately 45 per cent in 2016. Thus, most of the car manufacturers have started going beyond ICE legacies while introducing new models.
Rise of electronics
The world is seeing electronics permeate all areas. The automotive industry is no different. Current penetration of electronics in the automotive market is low in India, due to limited scale—imports address around 65 to 70 per cent of OEM demand in the country. But by 2030, auto electronics content is expected to contribute nearly 45 per cent of the total automobile cost in India.
Rapidly evolving emissions and safety regulations as well as technological disruptions such as connectivity and e-mobility could underpin the demand for electronics at OEM and customer levels. For instance, it is expected that implementation of BS-VI standards will lead to a spike in demand for components like catalytic convertors, electronic fuel injection systems, oxygen sensors and intelligent battery sensors.
EVs need a higher number of motor controllers than their counterparts. Each EV consists of at least a charger and a battery management system on board, both using power electronics. Moreover, all EVs need electric suspension with more involvement of power electronic devices and components, including power management semiconductors and so on.
Key electronic components used in EVs include microcontrollers (MCUs), rectifiers, analogue gate drivers, EEPROM memories, protection devices, voltage regulators, power MOSFETs, IGBTs, and ICs for power management and battery monitoring systems.
Moreover, complete solutions for electric traction and energy recovery, power steering, automated manual transmission, cooling system, pumps and power management are also in demand. This, in turn, enhances the opportunity to increase the overall electronics content of the cars. Innovative automotive applications like intelligent power switches for anti-lock brake systems, micro-electromechanical systems (MEMS) inertial sensors for automotive airbags and telematics microprocessors also see demand.
The EV market will also help drive the growth of IGBTs, which have long been at home in the switch power supply market and comprise the largest segment of the market for EV power systems. Vehicle electrification involves voltage levels between 12 and 400 volts, and requires high-power IGBT modules for drive and traction applications.
Another area of application is wheel management. Wheels may become electrical, generating electricity, and hybrids may have thermoelectric on exhaust systems and turbines in them, both generating useful kilowatt-level power. Thus, wheel management will also require electronics.
Desire for longer driving between charging points, faster battery charging times, increasing demand for connectivity and infotainment, safety and security may drive the use of electronics beyond power or wheel management. For example, need for electrical active suspension leading to better ride and fuel economy will involve more electronic components and devices. Car entertainment systems with near-field communications (NFC) technology, car access and in-vehicle networks, and all features related to secure connected mobility will enhance electronics content.
Industry 4.0—enabling innovative processes, digital manufacturing and automation—has the potential to disrupt the industrial value chain and push automotive sector to rethink the way they do business. These shifts could also modify typical job profiles required by auto component manufacturers. For example, instead of a manual worker in the production line, companies might need an exception handler or an operator in an automated workflow. The role of a supply chain planner could evolve from merely planning the logistics of supply in a segmented approach to owning a fully-integrated supply chain, from order to delivery.
Moreover, stringent regulations are evolving so rapidly that the automotive sector might need to rethink about their operational aspects to comply with regulatory and other guidelines for the following:
Enforcement of BS-VI norms by 2020 push towards EVs, discussions on methanol, CNG and potentially even fuel cells.
Mandatory ABS on cars, buses and two-wheelers, cabin safety, and roll-over protection systems.
Sudeshna Das is director at ComConnect Consulting