Introduction
Some global and Indian auto industry growth trends
Key Technological trends globally and their implications for India
TREND 1: Global auto majors outsourcing Auto Components to low cost manufacturing bases
TREND 2: Increasing use of Auto Electronics/Embedded systems in automobiles
TREND 3: Outsourcing of Services in the Automotive sector to low cost bases
TREND 4: The Increasing popularity of Telematics in vehicles
TREND 5: Zero emission technology
Conclusion
Peter Drucker refers to it as "The Industry of Industries". It is the backbone of Petroleum, Steel and the Manufacturing sectors. It creates employment for thousands and gives birth to many entrepreneurs. It satisfies one of the most basic needs of a human being – Mobility. It is none other than the Automobile Industry! The Indian market for automobiles has exploded in the past few years. It is evident in the high growth rates in sales of automobiles in the past few years. Coupled with this is the fact that the outsourcing potential for auto components and services is huge and points to continued growth in various sectors due to this industry.
India is emerging as a global source for auto parts due to its labor cost advantage and superior designing capabilities. It is also emerging as a global source for services due to again cost, demonstrable success of the IT sector and engineering design capabilities. The Industry is important and has spawned a whole host of new jobs in the Indian job market. It is likely to lead to further job creation in a number of linked sectors including auto, auto components, IT, engineering design etc.
Some global and Indian auto industry growth trends:
1) The Indian automobile sector contributes 4% to the GDP and 5% of the total industrial output in India.
2) The world automobile market grew 4.9% in 2004; most of the growth was witnessed in the Asian and East European region. In the Asian region India witnessed the highest growth at 30% followed by China with 14.1%.
3) The Indian auto component industry has been witnessing buoyant growth in output from $4.4 billion in 2001-02 to $8.7 billion in 2004-05 and in exports from $578 ml. to $1.4 bl. in the same period.
4) Due to competitive pressures in the slow growing or stagnant automobile markets in the US and Europe, companies there feel a greater need to source auto components from low cost countries like India. According to a Mckinsey study, the Indian Auto component Industry can aspire to achieve at least $ 20-25 billion worth of global outsourcing business, which in turn implies a CAGR of 35-38% over the next 10 years with current export turnover being $1.4 billion. In addition, the domestic demand for components is expected to touch $20 billion by 2015 from the current $8.7 billion.
5) The global auto giants and auto ancillary companies are continuously eyeing to enter Indian markets to outsource automobiles and auto parts. On the other hand, the domestic players have established their products in terms of better quality and designing capabilities. Over a period of time the Indian automotive component companies have acquired an international reputation of being a supplier of high quality products at a competitive cost. It has gained significant share in the global outsourcing for auto components.
(Source:
http://www.financialexpress.com/fe_full_story.php?content_id=104982)
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Key Technological trends globally and their implications for India
TREND 1: Global auto majors outsourcing Auto Components to low cost manufacturing bases
- In view of competitive pressures in the slow or stagnant automobile markets in the US and Europe, there is increased proclivity to outsource auto components from low cost countries like India and China.
Global auto majors are under pressure as sales in the US and Europe is flattening, and there is competitive pressure on costs and faster new development cycles. There is therefore a need to source components from low cost countries. At the same time auto ancillary companies in some of these low cost countries have improved their quality to global standards and in addition they also provide design and development facilities.
The Indian situation so far, further implications for India and for jobs here:
Auto Ancillaries were being outsourced from India for a long time and this trend is only looking upward according to recent reports from ACMA. This has been attributed to the growing sales of automobiles in India and the increasing trend of outsourcing by global auto manufacturing companies. India is gradually emerging as a global source for auto parts due to its labor costs and more importantly due to its superior designing capabilities.
The Indian auto components sector having more than 480 players has gone through structural changes and has transformed itself from a fragmented industry into an organized sector and a competitive industry. Over a period of time the Indian automotive component companies have acquired an international reputation of being a supplier of high quality products at a competitive cost. It has gained significant share in the global outsourcing for auto components. Though the Chinese companies are highly competitive, they are very few in numbers. Further, huge demand in the domestic market will keep the Chinese companies busy in the local market.
Companies like Bharat Forge are leading the way in the forging sector and have acquired a status of Full Service Supplier of engine and chassis components and export auto components from India. Their products include crank shafts, connecting rods, rocker arms, transmission arms, hubs etc. The difference now from a few years back is that now Bharat Forge also has a CAD/CAM/CAE center that caters to customers needs from concept design to validation and testing. Seizing the opportunity of a slowing American and European auto market it has succeeded in acquiring several foreign companies the latest being Swedish firm Imatra Kilsa AB making it the second largest forging company in the world. This is a true multinational with a manufacturing presence in 4 countries apart from India.
Similarly the TVS group, with a turnover of over $1 billion, is the largest manufacturer of automotive components in India. Sundaram fasteners is a group company of the TVS group and is a specialist in the making of High Tensile Fasteners, Radiator Caps, Powder metal parts and Cold extruded parts which are also exported to Germany, UK, Italy, Switzerland, Belgium, USA and the ASEAN. In fact GM is one of its largest customers among others like New Holland, Caterpillar, Rolls Royce etc. It has extended operations overseas by setting up a factory in China for the manufacture of high tensile fasteners.
Auto majors Ford, GM, Cummins, Johnson Controls, Nissan, Toyota and BMW have already outsourced Design work to India through either their Captive or third party service providers. The trend is not just to keep stamping out auto components to be exported but to provide design and development capabilities to lower costs and ease manufacturing roadblocks. Therefore jobs in the design of automotive components are fast finding favor among Indian ancillary manufacturers. Job opportunities also exist in CAD/CAM/CAE sector for the design of automotive fasteners and other ancillaries like steering components, suspension parts, auto transmissions etc.
The reason for Indian companies to have an edge over those from other low cost manufacturing bases is that the kind of jobs that are being outsourced these days are increasingly more complex and oriented towards design and development. There has been a maturing of the Indian market in the eyes of the western companies and the fact that automotive companies worldwide have faith in the design capabilities of Indian designers.
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TREND 2: Increasing use of Auto Electronics/Embedded systems in automobiles and the trends of auto majors outsourcing these systems and research thereon either to their subsidiaries or 3rd party service providers in low cost bases - The cutting edge research, design, development and manufacturing talent that India provides is acting as the lure for global manufacturers.
Although the automobile sector is growing rapidly now in the Asian markets, in the west the internal combustion engine (ICE) is facing increasing competition from cars powered by alternative sources of power. However the ICE is fighting back with a host of new innovations which are geared towards making the motor car more eco-friendly by reducing emissions while at the same time not compromising on power or drivability. This has been achieved by the continuing advances in auto electronics.
The overbearing importance of electronics in a motor car hits you when you hear that the greatest breakthroughs in engine technology are when the MPFI chip is upgraded from an 8 bit unit to a 16 bit unit. Apart for engine management systems, today’s most exciting automotive electronics innovations are happening in the areas of environmental controls, powertrain, safety systems and navigation.
Research and development in sensors is increasing because they have started to play a significant role in numerous aspects in the above mentioned areas. A few examples would be advances in sensor technology have moved climate control beyond just heating and cooling. Some vehicles have odor detection sensors, shutting off the fresh air vent when certain fumes are present, keeping the enclosed space of the vehicle neutral. Rain sensors on the windshield detect changes in the amount of rain, speeding up or slowing down the wipers without input from the driver. Sun sensors detect the strength of the sun coming into the car, automatically changing the speed of air conditioning to keep the cooling even.
The Indian situation so far, further implications for India and for jobs here:
Research, design and development of electronics components has also gained a foothold in the Indian market. Automotive electronic components are also being developed in a big way in India. Indian subsidiaries of companies like Robert Bosch/MICO, Visteon, and Delphi etc are working on a variety of high tech projects. MICO Bosch for example is laying heavy emphasis on Diesel systems which contribute to making vehicles cleaner and more economical. Therefore engineers with experience in design and development of embedded devices and software are sought. Apart from this there is ongoing work being carried out in the car multimedia sector developing in-car entertainment systems, information systems and Telematics.
Companies like Visteon meanwhile has 4 subsidiaries and a technical and services center working on Climate control systems, Interiors & Exteriors, alternators and starter motors and Research and Development in automotive electronics. Delphi, regardless of the troubles it is facing in the US with its Bankruptcy filing has already said that work at its Indian subsidiary will go on as usual.
Jobs in the near future in companies such as these are bound to be in the Embedded and telematics domain apart from Climate control systems and a host of other fields in automotive electronics.
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TREND 3: Outsourcing of Services in the Automotive sector to low cost bases- Automotive majors have opened their eyes to Indian outsourcing firms that provide a breadth of capabilities including computer aided design, development, simulation, prototyping, testing, product design, process engineering, plant automation, Program Lifecycle Management and Asset management services etc.
The Outsourcing of services would cover all manner of computer aided design, development, simulation, prototyping, testing, product design, process engineering, plant automation, Program Lifecycle management and Asset management services etc. Due to greater automation in the industry as well as the fact that car manufacturing development process is almost completely done using advanced computing technologies virtually. The Global auto majors have woken up to the fact that the huge Indian IT industry is a force that can be harnessed to speed up development and save costs.
The Indian situation so far, further implications for India and for jobs here:
Worldwide the auto industry spends an average of 3-5% of annual revenues on R&D and engineering design forms a significant part. Now, the total revenue by the top 10 auto manufacturers was pegged at roughly $ 850 Billion which brings the annual design spend to $12 billion, out of this the outsourced component would be $4.8 billion, even then the Indian share in this could be significant (estimated to be $1 Billion over the next 2years).
(Source: http://www.dqindia.com/dqtop20/2005/artdisp.asp?artid=72810&secid=1521)
Sourced Services
These are the jobs that have increasingly been coming to India, in order to benefit from the tried, tested and proven IT skills that Indian companies provide. Outsourced Engineering Services is one such sector where Indian companies are coming out ahead of its competitors. India has evolved from a vendor that provided basic data conversion as a service a few years ago to a host of complex activities like 2D and 3D CAD/CAM/CAE, Advanced simulation, prototyping, testing, PLM (Product Lifecycle Management), product design, process engineering, plant automation and asset management services.
Let us take the instance of a company like Harita Infoserve, it is a TVS group company which has made rapid strides in the extremely technology intensive field of Automotive Product Design Solutions. With an impressive client list that includes GM, Johnson Controls, Dura Automotive, Hitachi, Tata Motors, Delphi, and Ashok Leyland among a host of others. It has been working on high end projects involving CAD (Computer Aided Design), CAE (Computer Aided Engineering), Embedded Systems and Manufacturing Engineering.
CAD Engineers at Harita are working on projects in Industrial Design, Part and product design, Reverse engineering, Value engineering, PLM and CAD Solution and Engineering Resourcing.
In CAE, Structural Analysis, Dynamic and static analysis, Thermal Analysis, CFD (Computational Fluid Dynamics) Analysis. The team working on embedded systems works on Software Verification and validation, Software Design, Embedded system design, Telematics. And Manufacturing Engineering engineers work with Tool Design, Fixtures and SPM, Functional Prototyping and Simulation.
Companies such as TCS, Wipro and Infosys benefit from the broad range of the engineering skills within their workforce and hence are highly attractive to western companies looking to outsource their design work, apart from the extensive expertise that these companies offer there is also a major incentive of lower costs and reduced time frames of development. These companies are also working on a host of high tech applications that are bound to find their way into the cars of the future.
Engineers at TCS are hard at work on technologies like Airbag controller upgrades and testing, Cruise control for automobiles, Custom service controllers, Locomotive control and Safe braking system etc. At Wipro, development is currently going on in Hands Free Telephony for cars, Body electronics, Development of electrical Power assist steering ECU, Technology Consultancy and Design Architecture definition for Vehicle’s Instrument Clusters and Body Electronics and Bluetooth in automotive Etc. Meanwhile Infosys has gone ahead and joined the “Automotive Open Systems Architecture" (AUTOSAR) development partnership. AUTOSAR is a Global partnership with an objective to establish an open standard for automotive electrical and electronics architecture. Having already worked with global clients on a range of automotive technologies it has acquired a range of skills and offers services in sectors like Product Design and development, embedded systems and PLM etc.
The trend in jobs is towards advanced 2D and 3D simulation, embedded systems, tool design and Functional prototyping. Indian companies are no longer the services companies that they used to be earlier, satisfied in just converting engineering drawings into the digital domain, a task that required very little grey matter, they have evolved into a destination that western companies look at not just to lower the cost, Indian engineers are hired by the worlds top companies to provide solutions to complex automotive issues like designing auto components and testing, for developing automotive standards that others can follow.
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TREND 4: The Increasing popularity of Telematics in vehicles
One of the fastest emerging areas in a modern motorcar today has been telematics. The use of telematics promises to turn a vehicle into a meeting point of technologies from Communication, Information and Entertainment.
Telematics is a technology discipline that integrates telecommunications and informatics. Telematics in general, implies combining the possibilities inherent in wireless voice and data communications with the availability of internet and global positioning systems (GPS) technology. So as to provide ubiquitous data access to deliver location-specific secure information and productivity enhancing services. It is a relatively new electronics technology that integrates communication and information processes by using computer networks and is expanding rapidly.
An example of the use of Telematics in a car is that of a safety option for new vehicles is HFI, or the hands-free interface. HFI allows drivers to use in-vehicle systems while keeping their hands on the wheel and their eyes on the road.
Navigation is another safety feature that is quickly becoming the gold standard for new cars. And like Telematics itself, navigation technology is evolving to meet consumers’ needs. But safety and security are only the beginnings of what Telematics has to offer. Entertainment is emerging as the run-away winner in the competition for a top place on consumers’ wish lists. Satellite radio services, as well as MP3 players have stormed the market, and Telematics gives iPodsters the chance to plug in to a TCU-integrated consumer convenience port and hear all their favorite tunes through the car’s sound system.
The Indian situation so far, further implications for India and for jobs here:
It is clear that one area that is going to experience tremendous growth is in the area of telematics. According to an interview with Prof. S Sadagopalan, Founder Director, IIIT-B the telematics sector is poised to experience tremendous growth in the next five years. In fact in the next 5 years he expects there to be a million jobs in the telematics sector alone. He feels that India is currently in a unique position to leverage its skills in the automotive and IT fields to come up with innovative Telematics solutions. He feels that unlike the west where they have put in millions of dollars in the development of telematics solutions and are having compatibility issues among their systems. India on the other hand due to the fact that we are starting afresh have a “legacy-free" environment to start off with.
(Source: http://in.rediff.com/money/2004/aug/24tele.htm )
Telematics is finding application areas in tracking fleets of vehicles. “Electronics and vehicle telematics in particular, is a growth area in the automotive industry and the launch of TMT marks TACO’s entry into this area," said D S Gupta, managing director of TACO (Tata AutoComp Systems). MobiApps, a leading provider of hybrid terrestrial and satellite technologies for commercial communications is joining hands with TACO to build applications to roll out what has been named as VTS or Vehicle Tracking Systems.
(Source: http://www.tata.com/tata_autocomp/releases/20050419.htm)
One such attempt at the practical uses of telematics in India, is being made in Chennai at the Koyembedu Bus Terminal involving government, vehicle manufacturing companies, information technology companies and academia to be launched by the end of this year in Chennai.
Hundreds of public and private buses arriving at Koyembedu Bus Terminal considered to be one of the largest in Asia will be equipped with GPS and the electronic navigational system to be installed at the terminal will be directing each bus to position in a particular bay, as currently being done in airports.
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TREND 5: Zero emission technology- The future of the automobile is in reducing emissions and dependence on fossil fuels.
Alternative fuel vehicles, Hybrid vehicles and Electric vehicles: Fossil fuels have two major drawbacks: One is that they produce harmful emissions and second is that their costs are rising. The tougher emission control norms have prompted car manufacturers to look into the emissions that their vehicles produce and explore various alternative technologies that might propel automobiles in the future.
The objective is to reduce the harmful pollutants and particulate matter emitted by vehicles which is a direct result of using Petrol and Diesel as fuels. There is a whole range of technologies, not all of them currently successful, that promise to propel the cars we drive in the near future. Some of the important ones are:
Alternative fuel Vehicles:
Alternative fuels are the ones that can be used in a normal Internal Combustion Engine with a little or no modification
LPG – Liquefied petroleum Gas, can be fitted to a normal Petrol car using a kit (Widely available).
CNG– Compressed natural gas, can be fitted to a normal Petrol car using a kit (Widely available).
Ethanol – Bio Fuel made out of fermentation of grain and other starchy bio sources. Can be used directly in cars.
Hydrogen – This is a fuel that is still in the developmental stages of usage but shows the greatest promise for the future.
BioDiesel – it is a renewable fuel that is produced domestically from new or recycled vegetable oils or animal fat. Benefit is that it can be used in normal diesel motors with little or no modifications.
Hybrid Vehicles:
Hybrid cars are automobiles powered by both a conventional gasoline/diesel and an electric motor. Several configurations of hybrid engines are currently being considered with not all of them being successful; here are two of the most common ones:
Parallel Hybrid – where the vehicle can be driven either by the petrol/diesel motor alone, the electric motor alone or a combination of both the electric and Petrol/diesel motors.
Series Hybrid – Where the vehicle is primarily driven by the Petrol/Diesel motor and it is supplemented by the electric motor.
Electric Vehicles:
Electric vehicles are run solely on electric power which can be sourced from a battery present in a car, this battery needs to be charged to power the car, more recently (though only in an early experimental stage) Fuel Cells, which generate electricity, have emerged as the technology that could provide a cheap, non-polluting and a renewable source of propulsion.
Back to the future
The above 3 methods of propulsion in a vehicle apart from being different from each other also represent a timeline in the evolution of the methods of propulsion. Alternative fuels (except hydrogen) are a reality now, they can be used in a vehicle with very little or in some cases with no modification at all. They all promise to reduce vehicular emissions by a significant amount and decongest the air to a certain extent however they are not a permanent solution to the issue of air pollution.
Hybrid vehicles are on the roads in several states in the US, cars like the Honda Insight, Toyota Prius and the Ford Escape are all examples of a successful implementation of the hybrid vehicle formula. However these vehicles are not entirely a replacement to the cars driven by ICE at the moment and they have their drawbacks. There is a lot of research going on in these fields at the moment and the technology has the potential of delivering a lot more once the kinks in the system are smoothened out. These vehicles give us the opportunity of driving into a gas station like a normal car and drive around with a lot less guilt that otherwise comes from polluting the environment.
However, the Hybrid vehicle can be called as a bridge between the present and the future, which is clearly electric. Hybrids, for all of the reduced emission and lower fuel bills are still dependant on Petrol/Diesel to power them as a primary source and they do produce emissions. That is not good enough for the future.
Electric cars have emerged as the future of propulsion in vehicles for many. Electric vehicles use electric motors to drive the wheels, electricity is required to drive the motors, this charge can be provided either from batteries that are charged at a charging point (like a wall socket) or electricity can be generated onboard the vehicle. Electric motors used to run these applications like vehicles are power hungry and demand power. Unfortunately battery technology has not advanced to a level where they can store substantial amounts of charge in a reasonable amount of space. Therefore the generation of electricity is a attractive option. A fuel cell is a device that generates electricity using hydrogen. The problem here is that it has proven very difficult to transport and store hydrogen, which is highly inflammable, and utilize it efficiently to generate electricity.
There are a lot of hurdles in the way of making it a viable alternative to replace conventional motors powered by fossil fuels. Therefore most of the research is being carried out in the field of alternative means of propulsion and specifically in ways to generate electricity using a variety of sources like hydrogen, solar etc stored in batteries and delivered using advanced electronics.
Almost all major automobile companies are involved in the research of efficient Fuels cells and alternate methods of propulsion. They have to be interested considering the ever tightening emission control norms. Manufacturers like Toyota, Honda, Ford and GM already have hybrid models on the roads and are in some way involved in the research for electric vehicles powered by any number of sources like hydrogen.
The Indian situation so far, further implications for India and for jobs here:
Tighter environmental norms in India have helped but it also helps to have ones own development in alternative fuels, this is the premise under which TERI (The Energy and Resources Institute) was started. It conducts research activities in the fields of energy, environment and sustainable development. The TERI school of advanced studies is a research university and offers doctoral and masters programs in a host of subjects like Bio-resources, Biotechnology, environmental studies etc. (Source:
http://www.teriin.org/)
Bio Fuels in India
In India there is a major move towards the promotion of Bio fuels as an alternative means of powering vehicles. The Jatropha plant is a perennial shrub which grows in tropical and subtropical countries and the oil from its seed can be used as a bio fuel in a diesel automobiles. Since India has a lot of wasteland, it can be used to grow this plant for fuel with very little input (Source http://news.indiainfo.com/2005/10/16/1610kalam-education-economic-growth.html ). in fact global oil major BP, Auto giant Toyota and TERI have kicked off discussions to launch a mega bio-fuel project covering 16,000 hectares in jatropha farming in Andhra Pradesh. (Source - http://www.teriin.org/press/102005.htm#bpto).
Research institutes like Nibkar Agricultural Research Institute (NARI) are working on research and development of Bio-Fuels like ethanol from plants (Source: http://nariphaltan.virtualave.net/itm00007.htm)
The Delhi College of Engineering also conducts research in the field of Bio fuels in India. The college has also developed a Biodiesel reactor of 100 Liters capacity and with that production capacity of Biodiesel in the college is being augmented. They are also running a pilot project on the use of ethanol in vehicles in the college.
Electric Vehicles
There is a lot of work going on in the electric vehicle department and there are several manufacturers in the field, however unlike in the west most of the manufacturers are working on either 3 wheelers or buses with the sole exception of the REVA which is a electric car that has been developed by Sipani Auto. Manufacturers like Scooters India, Mahindra Eco mobiles, Bajaj auto are working on 3 wheelers while Eicher & Ashok Leyland and BHEL are working on electric buses. This focus of research on 3 wheelers and buses makes sense since in a developing country like India since very often it is these automobiles that generate most of the pollution.
Hydrogen as a Fuel – India
Companies that are working on Hydrogen and fuel cell cars in India are the REVA Electric car company which developed India’s first fuel cell prototype car and the Indian Oil Corporation of India (IOCL). The IOCL R&D Centre has drawn up a concrete roadmap to take the country towards a Hydrogen-fuelled economy. In fact it has already set up a Hydrogen CNG (H-CNG) dispensing station at its R&D center at Faridabad near Delhi. IOCL’s R&D team in coordination with vehicle manufacturers plan to take up lab scale developments of H-CNG and later a small fleet of commercial vehicles and 3 wheelers.
(Source: http://www.iocl.com/displaynews.aspx?file_name=rel255)
Additional Resources for international institutes offering research and education programs.
(Source: http://www.eere.energy.gov/hydrogenandfuelcells/resources/db/higheredcatalogs/ )
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Conclusion
The Indian auto industry is going to continue to play a significant role in the industrial output in India while increasing India’s share in the global automotive pie.
What is clear from the above is that the world has a significantly different perspective on the Indian ancillary market because of the strides made by Indian players in the auto ancillary manufacturing and design and development of the same. At the same time Indian ancillary manufacturers have a better grip of the world market due to their increased integration in the global auto supply chain.
The situation is not very different in the auto services outsourcing area, with the world waking up to the broad design and development capabilities of Indian engineering talent provided by the large Indian IT firms. In fact smaller niche firms providing these services have also been set up by the larger auto ancillary manufacturers.
In the auto components design and development sector, where on the one hand we have Indian subsidiaries of global majors, and on the other we have local domestic firms also investing in Research, Design and Development of electronic components and embedded systems for vehicles.
Until now it was the IT sector that was in focus and was billed as India’s globally competitive industry, however from the trends that we have seen recently the auto sector is also fast gaining prominence. Unlike the IT sector, the jobs emerging out of this growth will be in a broad range of disciplines, not necessarily only technology intensive or service sector jobs. It is the addition of another capability in the ever growing bouquet of Indian talent.,,
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