India is poised to soar, higher than many fast-growing large economies over the next decade. At the same time, automotive original equipment manufacturers (OEMs) and component manufacturers in the country aspire to achieve global eminence. The future of the auto OEM and auto component industry is being shaped by multiple trends, policies and discontinuities. What opportunities do these trends create for the auto component industry? And how can the industry prepare itself to capture a share of these opportunities?
This report outlines the growth potential and aspirations of the industry, the trends that are impacting it, the specific opportunities these create, and how auto component manufacturers could change themselves and ask for support from the ecosystem to capture these opportunities.
What You Will Learn
A PROMISING FUTURE
Growth indicators paint a picture of optimism for India—it might emerge as the world’s fifth-largest economy by 2019,1 and become a USD 4.7 tn economy in 2023. Anticipation of a growing consumer class, enhanced ease of doing business, expanding infrastructure—such favourable factors could propel the country forward, and with it, India’s automobile industry.
The Indian automotive OEM industry is already in a strong position. Globally, it is at the forefront of many segments—leading in two-wheelers, segment A cars, and tractors. The industry aspires to nearly triple vehicle sales by 2026, from 26 mn to 65 mn to 76 mn vehicles, across segments. These could be definitive tailwinds for the Indian automotive components industry, which has ambitions of its own by 2026—to double the contribution to manufacturing GDP with a four-fold growth in size and a six-fold growth in exports.
While industry turnover has more than tripled (in Rupee terms) in the past decade, India’s contribution to global turnover is approximately 3 percent. Clearly, there is substantial scope for growth in an industry being shaped by a variety of trends.
HERE AND NOW: TRENDS SHAPING THE AUTOMOTIVE INDUSTRY
As auto component manufacturers prepare for a future where they ramp up performance in India and globally, they need to account for numerous trends along four key dimensions that are shaping the industry:
- Constantly shifting market dynamics due to changing manufacturing locales, customer demands, operating models and priorities
- The changing needs of OEMs, who are likely to want different, more agile and rapid component inputs as demand, timelines and processes keep shifting
- Technological improvements and discontinuities that are already starting to change revenue pools, trigger new competition and invite new forms of cooperation
- An evolving regulatory and trade environment forming the backdrop for it all
THE OPPORTUNITIES AHEAD
The interplay of trends across these themes could fashion 10 exciting opportunities for auto component manufacturers:
- Pursue export opportunities aggressively.
- Enhance import substitution.
- Offer premium features at “Indian costs” more rapidly than before.
- Focus on component categories that could contribute more to vehicle costs in the future.
- Expand aftermarket offerings to capture value from existing vehicle parc and aftermarket exports.
- Offer “rising star” components which could take off in the long run due to an increase in electric vehicle (EV) sales.
- Offer new or modified features that could be in demand with an increase in shared mobility penetration.
- Develop data-enabled services and solutions.
- Form partnerships and ecosystems to create and capture value.
- Expand portfolio to serve adjacent industries.
Identifying which opportunities fit best, and working strategically to seize them, could create a successful future for auto component manufacturers.
THE CHANGE WITHIN
Capturing the immense potential of these opportunities is conditional—auto component manufacturers would need to embrace change, with companywide dedication across four overarching areas:
- Strategize to win—create a significant and deliberate shift in how they think about people, product, channel, resources, etc.
- Revamp leadership and talent—acquire emerging skills, build local teams, and map talent to value.
- Reset culture and mindset—from an RFQ responder to a business developer, from do-it-yourself to being partnership led.
- Achieve operational excellence—across supply chain, quality, cost, delivery and service (QCDS), pricing and costing, data infrastructure.
COUNTING ON STAKEHOLDER SUPPORT FOR SUCCESS
Every group of stakeholders—industry body, the government, OEMs—has a critical role in supporting auto component manufacturers to achieve their full potential. The industry body could help to scale up International Procurement Offices (IPOs), develop skilling curriculums and guidelines, and co-create import substitution strategy among other things. The government could consider building Centres of Excellence on quality, evaluate setting up upskilling programs at vocational institutes and explore setting up performance cells among other policy initiatives. Lastly, auto OEMs could invest and collaborate in joint R&D and other innovation, work closely with the industry body and suppliers for import substitution and exports, extend best practices on audit and supplier development to suppliers, and assist in upskilling programs. This support could help create a future in which the industry thrives, and India does, too.
Tremendous opportunities await on the back of India’s expected strong economic progress in the years ahead. These opportunities are, however, conditional to auto component manufacturers embarking on several changes. Making the most of these opportunities could help auto component manufacturers leap forward to achieve global eminence.
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