Free Essays for Competitive Exams-Auto Industry – India in Changing World Order

Auto Industry – India in Changing World Order

Change is the only universal constant.  This is also quite evident in the global automotive industry and can be seen with regards to the products, consumer choice, markets, technology and the competitive paradigms that govern this sector.  The changing world order in the automotive space can be categorized around a few important broad themes – “emergence of new markets and opportunities”, “enhanced concerns over sustainable growth”, “the competitive paradigms of the future”.

            The recent past has witnessed the emergence and reinforcement of new automotive markets and centers of global automotive growth.  The automotive growth in the past few years has been driven largely by emerging markets;China and India in particular.  This not only due to the higher rate of economic growth seen in these economies but also coincides with their demographic profiles and lower existing vehicle penetration levels.  These very factors lead most analysts to predict the shift in automotive equilibrium to the east.  This opens up tremendous opportunities for Global OEMs and also for the local automotive industry in these countries.  The competitive environment in these new fast growing economies will therefore further intensify requiring the companies to remain on a path of continuous improvement.

            While continued high rate of growth of the Indian automotive sector is great news for our economy, however, such high levels of growth will also throw up the challenges associated with fast depletion of traditional energy sources, rising energy costs, ever increasing oil import bill and the impact of mobility on the environment. Studies by International Energy Agency (IEA) indicate that three fourth of the projected increase in oil demand (from 2006-2020) will be from the transportation sector and that China and India will account for forty five percent of this increased demand.  This coupled by the fact that India’s dependence on fossil fuel imports is likely to increase sharply in the future, makes it essential to take steps immediately for mitigating this trend.  While traditional measures such as increasing the fuel efficiency of vehicles, encouraging modal shift to public mass transportation, better infrastructure and urban planning, use of technology will certainly help improve the situation.  However, these interventions can at best only provide incremental improvements as the strong sectoral dependence on oil will still remain.  Further, with the large future demand for mobility these measures alone will not be enough.  As such transformational change is required to disrupt the present status quo by addressing the fundamental issue of reducing sectoral dependence on oil.

            The concerns around environmental impact of transportation are encouraging Governments and Industry alike to make huge investments in future, cleaner technologies.  The future sustainable competitive advantage in the industry will therefore be around environmentally sustainable products, high end technologies and innovation.  Cost advantage can at best supplement competitive positioning.  Challenges of today cannot be met with yesterday’s tools. Therefore, it is essential that Indian companies position their future strategies around these changing realities.

            Faster adoption of full range of electric vehicles, including hybrids, is the right future direction for the country and the automotive industry for meeting the challenges of the future.  For this the Government had in 2011 approved the National Mission for Electric Mobility (NMEM) which has National energy security and growth of domestic manufacturing capabilities in full range of electric vehicle technologies as its two inter-related key end objectives.  National Electric Mobility Mission Plan (NEMMP) 2020 was approved on 29 August, 2012.

            The NEMMP 2020, which is the mission document for NMEM, lays the vision, sets the targets and provides the roadmap for achieving significant penetration of efficient and environmentally friendly electric vehicle (including hybrids) technologies in India by 2020, thereby helping to achieve the NMEM objectives. NEMMP-2020 implementation will involve finanlistion and roll out of comprehensive array of interventions schemes and projects involving all stakeholders, both in and out of the Government.

            The NEMMP 2020 targets have been arrived at through an in-depth primary data based study conducted jointly by the Government and the Industry which indicates that high latent demand for environmentally friendly electric vehicle technologies exists in the country.  It is believed that 6-7 million units of new vehicle sales of full range of electric vehicles, along with resultant liquid fuel savings of 2.2-2.5 million tonnes can be achieved in 2020.  However, strong upfront and continued support by Government would be essential to realize this demand especially through demand support measures that facilitate faster consumer acceptance of these expensive newer technologies.  In addition, Government will also need to facilitate automotive R&D and put in place charging infrastructure.  It is estimated that for this the Government will need to provide support to the tune of Rs. 13000 – Rs. 14000 crore over the next 5-6 years.  The industry will also need to match this with investments for developing the products and creating the manufacturing eco-system.  Projections also indicate that the savings from the decrease in liquid fossil fuel consumption as a result of shift to electric mobility alone more than will offset the support provided thereby making this a highly economically viable proposition.

            As such, the NMEM promises to be amongst the most significant interventions of the Government for the automotive sector that has the potential to change the automotive paradigm of the future through lessening the dependence of the sector to single source of primary energy and paving the way for the ultimate objective of renewable energy generation powering the transportation sector of the future.  This intervention will also help encourage the Indian Industry to shift to newer, cleaner technologies so that it builds its future competitive advantage around environmentally sustainable products, high end technologies, innovation and knowledge.

            One of the key factors that have been instrumental in shaping the successes seen in the Indian automotive industry so far has been the exemplary Industry – Government partnership, clarity and joint ownership of the future vision through Automotive Mission Plan (AMP) 2006-16.  The NEMMP 2020 also provides a shared vision and a common future roadmap for the National Mission for Electric Mobility for all the stakeholders, on the lines of the AMP 2006-16.  The strength of this collaborative working should be further leveraged by actively involving all Government Ministries, departments related to automotive sector, the industry and the automotive research agencies.