Consumer Discretionary

Challenges And Chances Of Cooperation Between Indian And German Engineering Service Providers

<p style="text-align: justify;"><span data-preserver-spaces="true">The multi-faceted transition in the automotive space in Germany brings several chances and challenges to all players. The OEMs as prime movers are facing increasing competition, particularly in the EV sector from Chinese companies. In the foreseeable future, these major players need to offer both traditional ICE-powered vehicles alongside EVs and other alternative drive trains, thus expanding the product range and complexity. With the move towards increasing levels of self-driving autonomy. The current situation has the makings of a &ldquo;perfect storm&rdquo; for the OEMs and the total supply chain.&nbsp;</span></p><p style="text-align: justify;"><span data-preserver-spaces="true">The pressure on the OEMs to deliver to cost and on time in an increasingly competitive environment creates opportunities for both German and Indian engineering service providers to deliver at various levels and degrees of complexity. This situation offers chances for small and medium-sized Indian and German engineering service providers to form cooperation or joint ventures.&nbsp;</span></p><p style="text-align: justify;"><span data-preserver-spaces="true">German OEMs and tier-one suppliers have used and are using Indian engineering service providers primarily for low-complexity work requiring a minimum of interaction. The need to look for higher complexity and value work from Indian ESP to meet cost underlines a further challenge. The number of well-trained engineers in Germany is decreasing following the demographic curve. Indian universities on the other hand are producing an ample supply of well-trained engineers. The barrier between supply demand and the need for the OEMs to keep costs within well-defined limits are the language and culture barriers. Contrary to common belief English is not accepted by many companies as a language for communication within research, development, and engineering operations.&nbsp;</span></p><p style="text-align: justify;"><span data-preserver-spaces="true">Cooperation between Indian and German ESPs can play a major role in overcoming these barriers and offering the customers (OEM of Tier 1 or 2 suppliers) a seamless and German-speaking interface to the source of supply.&nbsp;</span></p><p style="text-align: justify;"><span data-preserver-spaces="true">The advantage of a point of contact in direct proximity to the customer in Germany offers beyond this the possibility to outsource tasks with greater complexity to the Indian supplier.&nbsp;</span></p><p style="text-align: justify;"><span data-preserver-spaces="true">The ability of Indian ESPs to establish a front office(s) in direct proximity to the customer in Germany is only within the reach of large Indian ESP companies, who with a corresponding portfolio of contracts can offset the cost. For small and medium-sized companies a cooperation or joint venture can present an advantage and possibility to access higher-value contracts.&nbsp;</span></p><p style="text-align: justify;"><span data-preserver-spaces="true">The ideal situation for an Indian ESP is to already have a connection to an OEM in Germany supplying more straightforward but low-value tasks such as FE-Meshing, is to search for a potential medium-sized German ESP who is in turn also linked to the OEM.&nbsp;</span></p><p style="text-align: justify;"><span data-preserver-spaces="true">Once initial alignment between the Indian and German ESPs has been established to present and announce the partnership to the OEM presenting the working model and planned structure of the RASIC. Although initially, the first point of contact with the OEM will be the purchasing operation, it is important to carry the message and information of the partnership and the opportunity represented to the Centers of Competence (CoC) and the project teams. Should the purchasing operation offer participation on &ldquo;Supplier Days&rdquo; this is an ideal way to establish connection, network, and present the expanded range of offerings. Once established the next step for the Indo-German partnership should be diversification. Based on the accomplished work for the initial OEM to embark on an acquisition drive to find new clients, thus broadening the foundation and stabilizing the operation.</span></p><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;"><em>This article was contributed by our expert <a href="">Peter Hopfinger</a>&nbsp;</em></p><p style="text-align: justify;">&nbsp;</p><h3 style="text-align: justify;"><span style="font-size: 18pt;"><strong>Frequently Asked Questions Answered by Peter Hopfinger</strong></span></h3><h2 style="text-align: justify;"><span data-preserver-spaces="true"><span style="font-size: 12pt;">1. <strong>How will the exchange of technological expertise be facilitated between Indian and German engineering entities?</strong></span></span></h2><p style="text-align: justify;"><span data-preserver-spaces="true">Before work begins an alignment process will be started as part of the two-way due diligence process between Indian and German ESPs. Once the areas of expertise are identified RFQ from the client can be answered. Part of the answer is a RASIC chart outlining who is responsible a which stage.</span></p><h2 style="text-align: justify;"><span data-preserver-spaces="true"><br /><span style="font-size: 12pt;">2. In which specific engineering domains do Indian and German service providers tend to cooperate the most?</span></span></h2><p style="text-align: justify;"><span data-preserver-spaces="true">There is no specific domain implied, much depends on the requirements of the client. Many OEMs have a challenge to meet development and other budgets. A higher value BCC content can be part of the solution but requires assurance that quality and timing targets are met. Similar processes are possible in production engineering and after-market. Once started and successful, a &lsquo;pull effect&rsquo; can be created with the client specifically requesting BCC content for specific tasks.</span></p><h2 style="text-align: justify;"><span data-preserver-spaces="true"><br /><span style="font-size: 12pt;">3. In aligning with a German automotive ESP, what complementary capabilities or expertise should the Indian ESP </span></span><span data-preserver-spaces="true"><span style="font-size: 12pt;">seek to enhance its service offerings?</span></span></h2><p style="text-align: justify;"><span data-preserver-spaces="true">Ideally, it should be Indian ESPs who are already working for the German OEM on lower-value content but have the required ISO and TISAX certifications. As and when demand increases a process to qualify other Indian ESP is possible. Many OEMs have purchasing offices in India, that could support such a process.</span></p><h2 style="text-align: justify;"><span data-preserver-spaces="true"><br /><span style="font-size: 12pt;">4. How can the Indian automotive ESP plan to establish initial alignment with the selected German ESP before presenting the partnership to the OEM? How does the proposed collaboration structure benefit the OEM?</span></span></h2><p style="text-align: justify;"><span data-preserver-spaces="true">The alignment process can be through networking, social media (LinkedIn), trade fairs, the Indo-German Chamber of Commerce, or in some cases the OEM India Purchasing operation which may in some cases make a suggestion. The OEM will profit by lowering development costs but at the same time having access and control through the German OEM acting as a front office. The communication to the OEM can be 100% in German language. In the ideal functioning situation be as though the OEM was working with a German OEM. There are two possibilities to reply to an RFQ from the OEM 1. The German ESP quotes with the Indian ESP as defined and accepted subcontractor or 2. Both German and Indian ESP quote separately according to the agreed RASIC.</span></p><h2 style="text-align: justify;"><span data-preserver-spaces="true"><br /><span style="font-size: 12pt;">5. Is it going to be a longstanding partnership?</span><br /></span></h2><p style="text-align: justify;"><span data-preserver-spaces="true">Most RFQs from OEMs are long-term framework contracts that can be extended if required. Thus such collaboration between German and Indian ESP will be between 3 and 5 years with an option to extend. In a successful collaboration/ joint venture a joint acquisition process can be put in place to increase and diversify according to requirements and demand from OEMs and Tier1/2 suppliers.</span></p><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;">&nbsp;</p>
KR Expert - Peter Hopfinger

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