The automotive component industry has been asking the Government for the creation of a Technology Upgradation and Development Fund to make the industry globally competitive on the technology front. In an exclusive interview, Arvind Balaji, the new President of the Automotive Component Manufacturers Association of India (ACMA) and Joint Managing Director, Lucas TVS, told T Murrali of AutoParts Asia, that “technology will be a key driver in differentiating us from our competitors. We have to invest in the development of technology and new products. The component industry has not yet leveraged the academic infrastructure in the country through Industry-Academia linkages. The need of the hour is creation of an eco-system that will encourage innovation and R&D. The market wars of the future will be fought on intellectual property and technology”. Edited Excerpts:
Q: What are your immediate priorities as the President of ACMA?
Balaji: It is indeed an honour for me to be the President of ACMA. I thank all the stakeholders for their faith in me and for entrusting me with this responsibility. This is an especially interesting time in our industry as growth seems to be returning to the sector, though in spurts.
The component industry grew 11 percent registering a turnover of (USD 38.5 billion, while exports touched USD 1.2 billion in FY15. In the current year we would like to focus on:-
- New product development and IP creation capability – graduating from being a ‘build to print’ to one that is ‘art to part’;
- Improving quality capability of Tier-2 and Tier-3 suppliers through our cluster programmes;
- Contributing to the development of emission and safety standards and their adoption in the component sector;
- Building auto-electronics manufacturing capabilities; and
- Embracing digital technology in manufacturing to improve productivity and quality.
Q: How do you propose to implement them?
Balaji: ACMA engages with its members and implements its programmes through the various committees. These goals have been incorporated into the agenda of the respective committees.
The need of the hour is innovation. As India catches up with the new technology trends such as light weighting, electrification of powertrains, progressive safety and emission norms, the industry will have to evolve to meet the stakeholders’ expectations. The Indian auto component industry endeavours to be among the top five global suppliers. Technology will be a key driver in differentiating us from our competitors.
While the component sector today delivers reasonable levels of quality, we are not yet world-class. It is imperative to raise the bar. This can be done only when the entire ecosystem, especially the Tier-2 and Tier-3 players, starts delivering consistent quality of the highest standards. In order to help upgrade the Tier-2s and 3s, the Tier-1s will need to play a dominant role in handholding and upgrading them.
The ACMA Centre for Technology runs several cluster programmes aimed at upgrading the process, and quality-levels in the manufacturing units, including the SMEs. While around 450 plants have been helped to become world-class, we plan to scale-up the delivery from ACMA to cover a larger cross-section of the industry. Our engagement with UNIDO is designed to build capability in the Tier-2s and Tier-3s and this too is gaining momentum.
Several companies in the ACMA cluster programme on new product development are engaged in learning how they could embark on a journey of creating new products and IP. ACMA continues to work closely with some of the leading institutions of the world such as MIT and Fraunhofer to help develop a culture of innovation in the industry.
Auto-electronics is a key vertical yet to be explored by the auto component industry in India. We have commenced a study, which will delineate the opportunities for the industry and will focus on how an ecosystem can be created to harness them.
Q: You have taken over when AMP 2026 has just been unveiled. It has set several targets, including making the Indian automotive industry among the top three in the world. What is your view on these targets from the ACMA perspective?
Balaji: The Automotive Mission Plan 2016-26 (AMP 2026) is the collective vision of the Union Government and the Indian automotive industry. It outlines the growth trajectory of the vehicle and the auto-components industry for the next 10 years. AMP 2026 wants the auto component industry to increase turnover to USD 220 billion from the present USD 38.5 billion, and exports to USD 80 billion-USD 100 billion from USD 11.2 billion.
These targets are indeed ambitious, and to realise them, the industry and the government have to work in unison. We have to focus on improving the utilisation of existing capacities, improving the overall skill levels of the employees, upgrading the capabilities of Tier-2 and tier-3 companies and attracting further investments of about USD 80 billion. The government has to work towards strengthening India’s competitiveness as an investment destination for manufacturing, especially by improving ease of doing business and investing in infrastructure.
Q: AMP 2026 talks of increasing exports that warrants better quality and safety features. As the ACMA President what are the challenges you see in meeting these vital parameters?
Balaji: With the enhanced consciousness on safety the world over, there is no denying that quality of products warrants top-most attention. The tier-1s in India are definitely capable of meeting the stringent global quality standards. The challenge remains with the tier-2s and 3s, which we are trying to address. With the increase in vehicle recalls globally, the Indian component industry will have to understand better the liability that arises out of such recalls. As mentioned earlier, the component sector will have to create its own technology and products to be truly globally competitive.
There are challenges posed by trade agreements – bilateral and multilateral. Our government should enable us to leverage these in the best interest of the domestic automotive industry, creating access for our products in India-like markets. It should ensure that India does not become a dumping ground for cheap and substandard products.
In the immediate future, there will be big shift in technology to meet the demanding emission norms. The government should have policies that encourage development and localisation of these technologies to make the Indian automotive industry globally competitive.
Q: Job creation and contribution to GDP seem attractive in their intent but challenging without proper ecosystem. What will be your role in creating or strengthening the eco system?
A: The Automotive Skills Development Council (ASDC), a joint initiative of ACMA, SIAM, FADA and the National Skills Development Council (NSDC) is entrusted with the responsibility of creating 20 million skilled people in the next few years. ASDC has developed the National Occupational Standards (NOS) for skills required in the automotive industry. Over a lakh people have been trained in the last one year across the country. We expect this number to go up in the coming years as there will be more accredited institutes imparting automotive training.
ACMA is actively engaged in enhancing the quality and productivity levels of the industry through the ACMA Centre for Technology. ACMA also engages effectively with the government, both at the Centre and Sates, in the formulation of policy and regulatory framework conducive to the industry.
Q: There is a thinking that the excitement in the manufacturing industry is much less and is not attracting talent. What is your view on this?
Balaji: Yes indeed this is true to an extent, especially for engineers. The younger generation wishes to be employed with the glamorous sectors like IT and software. Preference for the vehicle industry comes next. Only the remainder is available for the component and other sectors of manufacturing. The component sector absorbs a significant number of ITI/ polytechnic-trained and other semi-skilled personnel also. While there is no scarcity of such people, their quality is a concern. ASDC, in due course, will be able to address this issue. As our industry focuses more on innovation and development of technologies, more engineers would be interested in it. This has been the case in other developed markets.
Q: In the developed markets, people from OEMs come to the component makers and develop customised solutions. Industry experts welcome it. Is this happening in India? Is this needed?
Balaji: There is no denying that the OEMs in India too have played a significant role in handholding and upgrading processes and skills in the component sector. However, the intensity of such engagements varies from case to case. We need such collaborations to go to still higher levels like engaging in co-development of new products and technologies through shared risks.
Q: What can be done to make the present labour laws more pragmatic?
Balaji: Broadly speaking, the labour laws need to be modified to give industry some flexibility. State governments like Rajasthan and Haryana have attempted to address this, but a lot remains to be done. The subject, unfortunately, is highly political and despite various representations by the larger industry bodies, there has been no resolution. ACMA is now preparing a detailed white paper on the subject from the perspective of the auto component sector that will bring out the issues for all stakeholders – the employer, the employee and the government – Centre and States. We do hope that our problems will be addressed, especially in States with significant presence of the automotive industry.
Q: FTAs with EU has been surfacing on and off. What kind of deterrent does the Indian automotive industry need to safeguard it from the possible onslaught?
Balaji: ACMA has always believed that FTAs should be encouraged, provided they result in the enhancement of trade for both the signatories. Unfortunately the FTAs and the PTAs signed so far have only resulted in increasing India’s imports and not exports.
India should focus on FTAs with India-like markets such as South Africa, Iran, Brazil, Egypt etc., which continue to be highly protected. The government also needs to provide continued R&D and infrastructural support to the domestic industry while exploring strategic trade agreements and making it easier to do business in India.
Many of the components required for new technologies continue to be imported. As technology levels in vehicles increase, the trade balance will get further skewed unless there are proper policies in place.
Q: While the present government is campaigning for Make in India, ACMA has been able to make manufacturing facilities to meet the demand of the OEMs in the country. The need of the hour is ‘creation and invention.’ In the latest Global Innovation Index survey, India is ranked 76, slipping from the 65th position in 2013. India seems to be the worst performer among the BRICS nations. Your comments.
Balaji: Today, the automotive and auto component industry accounts for around 40 per cent of Indian manufacturing. Therefore, the ‘Make in India’ campaign, which is a blueprint to develop the country’s manufacturing, resonates well with ACMA’s roadmap for a vibrant auto component manufacturing global-hub in India. There is no denying that to be globally competitive the industry needs to invest in creation of technology and new products. The market wars of the future will be fought on IP and technology. ACMA has been recommending to the Government for the last several years for the creation of a Technology Upgradation and Development Fund, which will make the industry competitive not just on cost but also on the technology front.
Q: What are the impediments in IP development and filing? How to overcome them?
Balaji: The reasons are many. This is not limited to the auto component sector. It is reflective of the overall R&D culture in the country. The auto component industry has been largely a build-to-print one. While the industry is ambitious to build its own products and technology, it does not know how to take the next step in that direction. Being largely a small and medium-sector industry, its capacity to take risks is limited. Further, the industry has not leveraged well the academic infrastructure in the country. The need of the hour is creation of an ecosystem that will encourage innovation and R&D.
Q: Can you list five key supports from the government that can spur growth of the automotive component industry?
Balaji: The auto-component sector is one of the 25 sectors identified by the government of India to push through its Make in India campaign. The campaign is definitely welcome and is creating a ‘brand India’ to our advantage. In my opinion the following key areas need government intervention:-
- Since the component sector is heavily dependent on the vehicle industry, factors need to be created to enhance vehicle production and consumption in the country. The sector has been stagnating. Though growth seems to be returning, it is a bit slow.
- The momentum of component exports needs to be sustained. Though the foreign trade policy has been favourable to component exports, we need to sign and leverage FTAs that will further encourage component exports, and not imports as is the current situation.
- The aftermarket needs a reform; currently the aftermarket in India is non-regulated and there are no mandated standards for products sold on the aftermarket. We need to mandate ASI standards for the aftermarket products and regulate cheap and spurious imports.
- We need to create an ecosystem that supports innovation and IP creation. Industry-academia linkages need to be built and strengthened.
Industrial climate and infrastructure needs improvement. Issues such as labour laws, ease of doing business, incentivising component manufacturers in tune with vehicle manufacturers, ensuring non-discrimination of manufacturing investments by domestic and international investors etc. need to be addressed.