The Automotive Component Manufacturers Association of India (ACMA) is the apex body representing the interest of the Indian Auto Component Industry. Its membership of over 750 manufacturers contributes more than 85 per cent of the auto component industry’s turnover in the organised sector. ACMA’s charter is to develop a globally competitive Indian Auto Component Industry and strengthen its role in national economic development as also promote business through international alliances. “We are looking at five million passenger vehicles by 2020 up from 3.5 million today. In the Automotive Mission Plan (AMP) that we have jointly scripted with the Government and all the OEMs, we are looking at going to USD 200 billion as passenger vehicles scale up to about 13 million ,” Rattan Kapur, President ACMA, told T Murrali of AutoParts Asia, in an exclusive interview. The excerpts:-
Q: Can you describe the current scenario of automotive industry in India?
A: The automotive industry is clearly a growth engine for our economy. The component industry alone contributes about 4% of our GDP. The industry’s current turnover is around USD 39 billion with USD 11 billion in exports. We export to more that 160 countries today, with Europe accounting for the maximum – 36% followed by North America at 23%.
The automotive industry is also a huge employment generator; the component industry has 1.5 million in direct employment and two and a half times that in indirect. Going forward, we are looking at 5 million passenger vehicles by 2020, up from 3.5 million of today. In the AMP that we have jointly scripted with the Government and all the OEMs, we are looking at the passenger vehicles to grow to about 13 million, which means there is a huge potential for more employment generation and absorption of people. We believe that by 2026, the entire automotive industry will create employment opportunities for additional 25 million people. The Government is very proactive as far as this industry goes.
Q: This is the time for conducive growth, so what are your plans to make the auto component industry scale up to reach USD 200 billion, according to the AMP, by 2026? How can you leapfrog to this from the present level?
A: The component industry will grow in tandem with the vehicle industry. As per AMP, by 2026, the PV industry will grow to 13 million, two-wheelers to 56 million, CVs to 3.9 million and tractors to 1.8 million, clearly every vertical in the vehicle industry is set to grow several fold thus creating huge opportunities for the component sector. That apart, component exports are expected to scale up from USD 11 billion today to USD 70-80 billion. All in all, we are set for accelerated growth, but of course there is no denying that there will be many challenges that will have to be overcome.
Q: Are there external drivers that influence this growth, or are there pain points or impediments?
A: India is no longer isolated from global trends, especially with our exports growing and Indian component industry setting footprints in other parts of the world. Infact, the automotive value-chain is fast becoming globally integrated.
As far as external factors go, we are closely monitoring the BREXIT – EU dynamics as well as the US with its trade policies becoming uncertain with the new adminstration, as mentioned earlier, our exposure to these markets is the maximum. That apart, India has signed several free trade agreements which have led to increased imports; several new FTAs and trade agreements are today on the drawing board, all these will play a significant role
in meeting our targets of AMP 2026 which is 70-80 billion. That apart, the automotive industry at home as also globally is going through a lot of technological changes with increased regulatory pressure for environment, safety, fuel efficiency etc. Trends such as e-mobility, autonomous driving, are also on the horizons. How fast we adapt to these changes and evolve will also determine our global competence.
Q: When it comes to the US, a major market for India, will there be any change or threat to your plans, considering the changed political situation there? If so, how do you plan to mitigate them?
A: It is somewhat early to comment on how the new political situation in the US will impact the auto industry and in-turn our exports, it is still a wait and watch situation.
Recently we took a delegation of 22 CEOs from ACMA to the US, to study the emerging trends as also to gauge what the industry there feels about India. We visited a number of OEMs and found that they are fascinated about India; Tesla is very keen to come here. Also, what is very interesting is that every car maker is coming to the Silicon Valley – that place is going to be a bigger hub than what Detroit is today – because there is a paradigm shift in the mind-set of people that pollution is something that has to be fought and eradicated. Electric vehicles, with zero pollution, are probably an answer and all of them are moving there because it is the hub for research on e-mobility.
I feel very strongly that in the next five years more than 50 percent of the vehicles produced in America will be electric. This is bound to have a rippling effect all over the world. India has already seen it – the Government wants local manufacturers to increase their R&D spends and focus on electric mobility.
Q: So the changes in the US will be positive for India but what will it be from the ground reality point of view?
A: The ground reality is that the US is enjoying one of the strongest economic growth phases today with the rate of unemployment at its minimum, the dollar is becoming stronger and the car industry has produced the maximum number of cars last year; they are at the peaking point of the cycle. The most important takeaway for us from the recent trip is there are no negative indications as far as India is concerned. We have to however wait and watch as the policies from the new administration unfold.
Q: They are recognising our quality but what is ACMA doing to enhance the quality of Indian products?
A: ACMA, through its ACMA centre of Technology has been carrying out shop floor interventions in the industry for the past one decade. We have helped over 700 companies become world-class in their manufacturing practices. Today we employ over 50 councellors who are running over 13 cluster programs with over 150 companies. That apart we are helping over 200 tier-2s and tier-3s enterprises through our ACMA-UNIDO program. We are witnessing a significant improvement in the industry as the PPM levels have been consistently dropping. I am very happy to mention that 5-6 of our membershave become ‘0’ PPM companies, this is indeed a great achievement.
Q: By doing all this, are we losing the cost advantage in the global arena?
A: No, in fact we are gaining because rejections are getting out of the system. The intangible benefits are much more than the tangible losses from direct costs. With increase in quality, OEMs are helping with additional business and volumes, so bottom lines have gone up for all in the value chain. We are also requesting OEMs to support us for R&D. I am pretty certain they will support us.
Q: Motorisation in India has been growing from about 18-20 per thousand of population 10 years ago to around 50 now, as aspirational levels have increased. What, according to you, have been the impetus, and impediments, for this growth?
A: Lack of skill training institutes is a major impediment. Skill upgradation is very important for the individual to grow. We have units in some states with full Government support but more has to be done. Government has also brought in a minimum wage across the states (Rs 13,000/pm for unskilled and Rs18,000/ for skilled). More States are likely to fall in line as the industry is poised for significant growth; all these certainly help.
Q: Automation is also on the cards. How do you see that happening?
A: Automation is a necessity. When the same job has to be done repeatedly, humans are bound to make mistakes. In such cases it becomes mandatory to go in for at least semi-automation. There is a huge spend by companies today on different automation levels and this trend is gathering steam.
Q: The players in the auto component industry have graduated from print-to-part to concept-to-part and a number of them have opened design centresoutside also. In what way do you think our players add value to customers outside India than our competitors, in China for example?
A: China has had Government support for a very long time vis-a-vis design. All the zones that were created in China and Thailand have proper R&D test centres, which are open for everybody in the industry to use. In our case such facilities are limited, completion of the NATRiP project will greatly help, however this will only be partial help. We need many more testing and validation centres for the component industries while companies may create basic test facilities themselves.
Q: In 2015, the global innovation index survey ranked India 66, China 25, Russia 43, South Africa 54 and Brazil 69. India was 76 three years ago and has gained 10 ranks now. If we want to improve this further what do you think has to be done?
A: We must have skilled people. Unfortunately skilled workers are few and many of them are poached upon by competitors or OEMs. You have to find a way to retain them by giving them the best of facilities with freedom to work and be creative. Senior management should allow professionals to do the job rather than taking decisions on how to run the company or make products.
Q: Will this open up lot of creativity?
A: Yes, adequate financial support and freedom to create will help. The entire ecosystem has to be energised.
Q: How is ACMA supporting its members to go beyond boundaries, like for example exports in a big way?
A: We are conducting a number of programmes for the Industry for developing exports. ACMA has been recognised as an Export Promotion Council by the Government of India which helps us extend Govt. export promotion measures for the Industry. Recently we had a reverse buyer-seller meet with the support of Ministry of Commerce & Industries, Govt. of India. We were able to sponsor the travel and stay for over 150 buyers from across the globe to participate in the dedicated exhibition for 200 ACMA members in Delhi.
We have also facilitated participation of ACMA members in several of the vibrant automotive markets such as the US, Germany, Australia, Iran, Dubai and South America. Apart from the US mission that we had in March, we also organised an ACMA technology show for select OEMs in France, Sweden and Germany. .
Q: Lastly, your short-term and long-term plans?
A: Targets have to be met – what the Government has laid down for us – taking the industry turnover from USD 40 billion to USD 200 billion in next 10 years.
This will require ACMA to hand-hold the industry for more technology absorption and creation, adequately skilling the people to be future ready and ensure a robust supply chain that the industry has a better bottom line that we can sustain in the long-run.