How India’s Automotive Sector Can Become Future-Ready
How India’s Automotive Sector Can Become Future-Ready
<p style="text-align: center;"><strong><em>As the world moves towards a new normal, AI-enabled technologies and a <br />digitally savvy workforce will be vital in making industry players future-ready.</em></strong></p><p style="text-align: justify;">The last year was one of unprecedented headwinds for the automotive sector globally. In India, the situation in 2020 was worsened by the fact that the sector had already suffered a sales slowdown in 2019 before COVID-19 struck.</p><p style="text-align: justify;">Moreover, supply chain disruptions and the nationwide lockdown led to a changed equation between how people perceived mobility. As job losses, salary cuts and furloughs hit hard, the steep drop in discretionary spends in 2020 meant customers postponed the purchase of new vehicles. With people also minimising the use of public transport and shared rides, the trend was to repair current vehicles or opt for used or preowned cars. This presented an opportunity for second-hand car dealers to drive higher sales, at least in the short term.</p><p style="text-align: justify;"><strong>Shift towards Digital </strong></p><p style="text-align: justify;">It was against these challenging circumstances that automakers, OEMs and vehicle dealers discovered the significance of digital tools in sustaining BCPs (business continuity plans) during the lockdown and in keeping sales moving when lockdown restrictions were eased. Although the pandemic is no longer at its peak, automotive players realise that a new normal has emerged where digital tools and online marketing will continue playing a role.</p><p style="text-align: justify;">As the industry moves into 2021, certain trends are discernible. These include the disruptions due to technology, the changes in mobility infrastructure, the evolution of new jobs and the need for skills associated with digital, AI-enabled technologies. A 2019 report by PwC-SIAM – <em>Indian automotive sector: Creating future-ready organisations</em> – notes that in future, vehicles will be electric, automatic, connected, shared and updated annually to make the driving experience safer, easier, cheaper and more comfortable. </p><p style="text-align: justify;">The transition towards digital would occur across three levels: vehicles, supply chain and operations, and the business model. In the first instance, future-ready cars will be electric, connected and driverless, backed by smart sensors, real-time vehicle trackers, geofencing, remote diagnostics and driver analysis. In the second, operations and supply chains would be characterised by robotics, augmented reality, AI-enabled tools, automated warehouses and digitised trucking, etc. Finally, the business models will comprise mobility as a service.</p><p style="text-align: justify;">That the country is on the above path is apparent from the Indian Government’s roadmap of having only all-electric vehicles on the roads by 2030. An elaboration on the above trends will highlight how the country’s automotive industry is becoming future-ready. As ride-hailing services and self-driving vehicles are poised to transform mobility, a crucial element is the creation of allied infrastructure. These include AI-enabled traffic signals, EV charging infrastructure, optimising of parking spaces and the building of smart cities, along with other measures. Simultaneously, the deployment of AI, IoT, machine learning and robotics are accelerating as part of the steady shift towards Industry 4.0.</p><p style="text-align: justify;"><strong>Reskilling the Talent Pool</strong></p><p style="text-align: justify;">However, digital technology needs an automotive talent pool armed with new skillsets. Automotive companies in the country have largely been dependent on manual processes and skills. Consequently, job roles and requisite skills in the industry remained relatively unchanged for decades.</p><p style="text-align: justify;">Today, all this is set to change as even OEMs and other suppliers have realised the key role of new-age systems in supporting greater efficiencies and bottom-line benefits. Consider the case of a large OEM in Manesar, Haryana. A spokesperson disclosed that their Bangalore plant was at least 25-30% more efficient compared to the Manesar unit since it was far ahead in deploying automotive technology. Given this scenario, employees in the automotive sector must upskill/reskill in domains such as IoT, robotics, mechatronics, AI, ML, data analytics and 3D printing, among others.</p><p style="text-align: justify;">The above skills are necessary to operate AI-enabled tools as well as to coexist and complement the work done by robots. In the days ahead, the demand for a digitally-savvy workforce will keep rising with each passing year. As a result, present-day engineers, technicians, operators and shop-floor employees would all become redundant in the coming years if they do not upskill or reskill. Auto majors and OEM players have been highlighting the supply shortage in skilled human resources for the upcoming era of connected autonomous vehicles.</p><p style="text-align: justify;">A 2020 report by McKinsey & Company – <em>Shaping the New Normal: India’s auto component industry</em> – also supports the contention that the coronavirus has triggered a shift in consumer preferences as health and safety have taken precedence. Considering these constraints, the preference could move towards micro-mobility or small-format mobility. In India, small-format e-mobility is represented by two- and three-wheelers, which is expected to have penetration of between 10 and 20% by FY2022.</p><p style="text-align: justify;">With companies striving to stay competitive, optimisation will emerge as the name of the game. Since auto component manufacturers are being squeezed by persistent margin pressures, optimising product design could curb almost 25% of overall costs, particularly in the expensive BS-VI components manufacturing processes. Likewise, scrutiny of numerous hidden cost divisions could help cut costs by around 15 to 25%. Also, the use of analytics in optimising supply chains can curb the costs of inventory by 20 to 40%.</p><p style="text-align: justify;">Moving forward, automotive players will need to institutionalise the use of digital technologies while also investing in the best digitally-savvy talent in promoting the future-readiness of their operations.</p><p style="text-align: justify;"> </p>
KR Expert - Nikunj Sanghi
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