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Growing beyond manufacturing
Opportunities in India as an emerging auto
product development hub
ACMA Annual Convention 2012
5th September, 2012
India is fast emerging as the one of the largest global manufacturing
hubs for small cars and other vehicles




• India will emerge as the largest producer of small cars by 2013
• Further, India’s production of small commercial vehicles (<3.5 T) has
  grown at >25% in the past five years; faster than the global average

Source: LMC, IHS
Page 2                 ACMA Annual Conference: India as a product development hub
To achieve global industry leadership India needs to evolve as an
integrated development & manufacturing hub



                       Leadership position in the automotive world


           Manufacturing                 Product & Process                                     Innovation
                                           Development
         Vehicles and                 However, today there is                          Significant work
           components                 limited end-to-end                                  needs to be
           manufactured in            product development                                 done in this
           India are                  and process engineering                             area to improve
           increasingly               capability across the                               India’s
           meeting global             supply chain                                        innovation
           standards of                                                                   quotient
           Quality,
           Reliability and
           Durability
                           Cost and Quality (Strong Foundation)


Page 3                       ACMA Annual Conference 2012: India as a product development hub
Rising customer expectations and increasing volumes have driven
OEMs to evolve from localization to global platform development

                 Start-up              Respond to local market                       Global market ambition




          - Localize and adapt              - Develop India specific
                                                   products




          - Build local product         - Reduce time to market                                 - Develop global
         development capability         - Incorporate global standards                             platforms

           Pre 2002                               2002 to 2007                                 2007 to 2012
Source: EY Analysis
Page 4                            ACMA Annual Conference: India as a product development hub
OEMs and component manufacturers are responding to the
opportunity by investing in local product development capabilities

               Start-up               Respond to local market              Global market ambition
                                                                                   ~40 centers                  Upcoming /
                                                                            • Arvin Meritor        • Mahindra
                                                                                                                expanding
                                                                            • Continental            Research
                                                                            • Daimler India          Valley
                                                                              Comm Veh             • Paccar
                                                                            • Dana                 • Renault-
                                                                            • DuPont                 Nissan
                                                                            • Faurecia             • Sharda
                                                ~20 centers                 • Hyundai                Motor
                                                                                                   • SKF

            ~ 10 centers                 •Eaton            • John Deere     •Eaton        • John Deere
                                         •GM               • Visteon        •GM           • Visteon
     •   Bajaj         •   Maruti        •   Bajaj         •   Maruti        •   Bajaj         •   Maruti
     •   Bosch         •   Mercedes      •   Bosch         •   Mercedes      •   Bosch         •   Mercedes
     •   Caterpillar   •   Tata          •   Caterpillar   •   Tata          •   Caterpillar   •   Tata
     •   Cummins       •   TVS           •   Cummins       •   TVS           •   Cummins       •   TVS
     •   Delphi                          •   Delphi                          •   Delphi


              Pre 2002                         2002 to 2007                         2007 to 2012                  2012 -
    The number of engineers employed in product development centers in
   India is estimated to have grown from <1,000 in 2002 to >25,000 in 2012
Source: EY Analysis
Page 5                                  ACMA Annual Conference: India as a product development hub
Organizations, who have invested into R&D in India, are taking up
greater product development roles for local and global markets

                                                                                                          Illustrative List
                                                      OEMs                                              Suppliers
 Developed End-
 to-End product
   and process
     design                          Development of          Development of               Engine               Low cost
   capabilities                      Eeco, New Alto          Pulsar, Discover           components             condensers



  Development of
     Global
    Platforms                           XUV5OO                   Ace, Nano            Development for       Ownership of global
                                                                                       global markets         market products


    Developed
 Global Centers
 of Excellence in                 Global centre of      Development of 3               One of the global Global Centre of
                                 excellence for virtual   cylinder diesel                   product      Excellence for gear
      India                      testing and analysis         engine                   development hubs        pumps

Source: Primary research, Secondary research, EY Analysis
Page 6                                     ACMA Annual Conference: India as a product development hub
Our analysis of global suppliers identifies 2.5X returns by companies
who are investing a higher percentage in R&D

                                              R&D/sales* and EBITDA Margin*
                     EBITDA
                      < 9%
                     EBITDA
                    9% to 12%
                     EBITDA
                      > 12%


                                                                             Median 18.5%
  EBITDA Margin




                                                   Median 7.3%



                                                                 R&D/sales

* R&D/Sales and EBITDA numbers are averaged over duration of 4 years (2008-2011)
Source: Primary research, EY Analysis
Page 7                                        ACMA Annual Conference: India as a product development hub
Analysis of Indian suppliers during our research reveals three paths
   adopted in developing capabilities across the design value chain


                                           Design value chain (From Infancy                                  to maturing            )
                                                                                             Testing
                                                                                                                               Basic and
                                       Process                      Proto-      Problem          &         Product   Program
                                                         QFD                                                                    applied
                  State               Engineering                   typing     resolution    validatio     design     Mgmt
                                                                                                                               research
                                                                                                 n

                 Initial step                                           1                                     2
Depende          Current state
  nts
                 Future state


                 Initial step              1                                         2
Explorers        Current state
                 Future state


                 Initial step                  ACMA Annual1            2                         3
                                                          Conference: India as a product development hub

Visionaries Current state
                 Future state

   Source: Primary research, EY Analysis
   Page 8
Dependents:
Followed OEM pull towards better engineering capabilities to
support faster product development cycles
                                                                                           Ecosystem enablers:
                             Triggers                                                   OEM/Parent             Institution
              ► OEM   pull on suppliers
         1      to take up product
                                                                 2
                design / prototyping
                                                     Initial steps
                                                      ► Identified
                                                        specific projects
                             Approach:                  to support OEM
                                                        needs
4   Future state             Collaborate              ► Shared financial

    ► Product  and           with OEMs                  risk and
      system design                                     resources                        Policy             Testing facilities
                              and learn
      capabilities
    ► Process
                                                                                           LOW           MEDIUM       HIGH
      engineering
      capabilities
                                              Next steps
                           ► Defined  product design strategy
                           ► Enhanced testing and validation
                                                                     3
                           ► Developed few products
                           ► Increased spend on R&D to 1%
                                                                                                       Investment
                             of sales                                           •Initially shared resources as
                                                                                “Collaborative learning” approach
                                                                                •Increased after initial success
Source: Primary research, EY Analysis
Page 9                                    ACMA Annual Conference: India as a product development hub
Explorers:
Setup design cell to resolve design problems, understand product &
process development
                                                                                             Ecosystem enablers:
                             Triggers                                                     OEM/Parent             Institution
                ► Entry by Global players
          1     ► Increasing product
                                                                   2
                  launches
                ► Global expansion                     Initial steps
                  opportunity
                                                        ► Setup    Design
                                                          cell for process
                              Approach:                   engineering and
                                                          problem solving
4   Future state               Establish                ► Setup basic test

    ► Product  and           success and                  facilities
      system design &
                                                                                           Policy             Testing facilities
                              then invest
      test capabilities
    ► Process
                                                                                             LOW           MEDIUM       HIGH
      engineering
      capabilities
                                                Next steps
                           ► Increase  spend on R&D to
                             1-2% of sales                             3
                           ► Strengthened process engg
                           ► Testing and validation
                                                                                                         Investment
                             capabilities                                         •Initially low investment as “Explore and
                                                                                  watch” approach
                                                                                  •Increased after initial success
Source: Primary research, EY Analysis
Page 10                                     ACMA Annual Conference: India as a product development hub
Visionary Technocrats:
Envisioned an integrated design and manufacturing capability

                                                                                          Ecosystem enablers:
                             Triggers                                                  OEM/Parent             Institution
              ► Leadership vision and risk-
          1     taking propensity
                                                                2
              ► Use Indian engineering talent
              ► Global expansion opportunity        Initial steps
                                                     ► Invested    in
                                                       facilities,
                              Approach:                manpower for
                                                       understanding
4   Future state             Set vision &              design,
    ► Basic and                 pursue                 prototyping,
     applied                                           testing and                      Policy             Testing facilities
                              leadership
     research                                          validation
     (collaborative)
       ► Application of
                                                                                          LOW           MEDIUM       HIGH
         India developed                     Next steps
         tech. for global     ► End-to-end  product design
         applications         ► Program management of many
                                                                    3
                                projects
                              ► Risk sharing with OEMs on
                                                                                                      Investment
                                specific opportunities                         •Planned investment in facilities and
                                                                               manpower development
                                                                               •Advanced testing, research labs
Source: Primary research, EY Analysis
Page 11                                  ACMA Annual Conference: India as a product development hub
The product development ecosystem in India is in its infancy and is
evolving

                                                                             Industry
                                                                                      -      Institutio
                                                                                      - “Effort
                                                                                                          n  Tie-Up
           Policy                teps,                                                           at buildin
                                                                                                              g Industr
                   t has taken s ired”                                               institute r
                                                                                                 elationsh               y–
        gov  ernmen vision is requ                                                            mainly by
                                                                                                              ip, is driv
                                                                                                                          en
- “The nger term                                                                  - “Institu                the indus
   but a lo                    y the                                                         te capab
                                                                                                        ility on ap y”
                                                                                                                        tr
                  need s to pla on                                                        research                    plied
         e rnment ringing focus                                                   - “Engin            is still ev
 - “Gov role in b                                                                           eers requ              olving”
                            D”
    anchor tomotive R&                                                                                   ire 3 yea
                                                                                                                     rs of
             au                                                                                     On-Job t
    India’s                                                                                                      raining”
                                                 Product Development
                                                     Ecosystem
                                                                                                                ve
- “The                                                                                “Few OEM-Suppliers ha
       test                                                                                                started
  improv ing infrastruc                                                                                          e
         ed               tu                                                             adopting a collaborativ
 compa , but is still n re has                                                             product development
        rable to         ot
                 global                                                                                      a few
    Testin              standa
                              rds”                                                  approach, but limited to
            g Inf        rastru                                                                 vehicle systems”
                               cture
                                                                                               boration
                                                                          OEM – Supplier colla
Source: Primary research, EY Analysis
Page 12                                 ACMA Annual Conference: India as a product development hub
An expectation mismatch exists between OEMs and suppliers
on the approach to develop suppliers’ product development                                                                          Product Development Ecosystem




capabilities
                                                                                                             Government policies




     Suppliers’ Expectations                                                           OEMs’ Expectations

    Explore joint development                                                     Suppliers should build
     opportunities with suppliers                                                   capabilities in basic areas
    Share resources and                                                            – Problem solving
     financial risks                                  Expectation
                                                                                    – Design understanding
    India specific product                            Mismatch                     – Program management
     development can be best                                                       Invest in testing facilities
     done in India                                                                 Collaborate with other
    Honour commitments during                                                      suppliers to provide a
     design/development phase                                                       system solution
                                                                                   Provide proven products



 To take advantage of affordable R&D and develop India as an integrated
hub, OEM’s and suppliers need to increase collaboration for mutual benefit
Source: Primary research, EY Analysis
Page 13                                 ACMA Annual Conference: India as a product development hub
Government policies in other automotive hubs have facilitated
 and anchored a long term R&D roadmap
                                                                                                                                         Product Development Ecosystem




                                                                                                                   Government policies




                             China                                                                   Korea

                                                                                                 Ulsan - Auto Parts
                                                                                                 Innovation Center
     Government defines                       Policies ensure that FDI                          Government funded
    strategic direction for                     is accompanied by                               efforts to strengthen
          future R&D                            technology transfer                             local R&D capability
                                                                 Germany
   Policy led to automotive innovation
                                                                           Universities/Research Institutes
clusters in Bavaria, Baden-Wurttemberg
                     rs




                                                                                               Inputs
                                  Ins
                  lie



                                     titu
               pp
             Su




                                       tes




                                                                        Areas of basic research for country
                         OEMs

  Indian policy needs to anchor a long term product development roadmap
 Source: Secondary research, EY Analysis
 Page 14                                    ACMA Annual Conference: India as a product development hub
Industry–institute tie-up is an essential part of the ecosystem,
wherein Institutes provide basic and applied research input
                                                                                                                                 Product Development Ecosystem




                                                                                                           Government policies




   “Industry-Institute relationship is                                         “Industry is ahead of the level of
   more mature in Germany and UK,                                             manpower provided by institutes;
   where development, prototyping                                             Indian engineers need 3 years of
   happens. It is mandatory for                                               on-job training as compared to 3
   institutes to do applied research ”                                        months in Germany”

                                                             Industry –
                                                              Institute
                                                            Interaction

   “While few institutions have started                                        “Pre-competitive or basic
   focusing on applied research,                                              research is happening in India
   institutional R&D is piecemeal and                                         wherein Industry and institutes
   applied research is largely missing”                                       interact for common minimum
                                                                              programs”

      Institutes need to be mandated and incentivized for applied research
Source: Primary research, Secondary research
Page 15                                    ACMA Annual Conference: India as a product development hub
Testing and validation infrastructure is critical to product
development in India
                                                                                                                                      Product Development Ecosystem




                                                                                                                Government policies




    India’s automotive R&D testing infrastructure
                                                                                         • There has been an effort
                                                                                           towards improvement of
                                                                                           testing and validation
                                                                                           infrastructure in India

             Rohtak        Delhi/ NCR

                                                                                         • The testing infrastructure
            Jaipur        Lucknow        Rae Bareilly
                                                                                           is insufficient for India’s
                                                                         Silchar
                                                                                           product development
                        Indore
                                                                                           ambitions
                      Ahmednagar
 Mumbai
          Pune    Baramati
                                 Hyderabad       Legend*                                 • Visionary OEMs and
                                                        GOI Facilities                     suppliers have not waited
              Bangalore
                                                        OEM/Supplier captive testing
                                                        facilities                         for infrastructure to come
                                    Chennai
                                                 * Height of column is directly            up, they have invested in
                     Coimbatore                  proportional to number of testing
                                                 centers                                   own advanced testing
                                                                                           facilities
Source: Primary research, Secondary research
Page 16                                    ACMA Annual Conference: India as a product development hub
Roadmap for Automotive Product Innovation and Development
(RAPID) for the Ecosystem


OEM-Supplier collaboration                                             Industry-Institute Tie-up
   Greater collaboration through                                         Pro-active role of institutes with
    resource and financial risk sharing                                    industry for research, skill
   Collaboration is essential to India                                    management
    achieving global industry                                             Progress towards applied research
    leadership as an integrated                                           Update curriculum to improve
    development and manufacturing                                          knowledge and skills of engineers
    hub
                                               ECOSYSTEM

   Set roadmap for future technology                                     Enhance Government and private
    leadership in specific areas e.g.,                                     testing facilities to global standards
    Powertrain, Electric mobility etc.                                    Benchmark with test facilities
   Encourage innovation clusters                                          required by suppliers and OEMs in
   Mandate and incentivize research                                       other product development hubs
    by academic institutions
Policy                                                                 Testing Infrastructure
Source: EY Analysis
Page 17                         ACMA Annual Conference: India as a product development hub
Roadmap for Automotive Product Innovation and Development
(RAPID) for Suppliers


                               Dependents                            Explorers                            Visionaries
                         Identify areas of need            Setup design cell                      Setup PD vision
Initial                   with OEM on a specific             – Problem resolution                    – Product strategy
steps                     component/ product
                          design                             – Process engineering                   – Technology strategy
                                                             – Component design                      – Investment plan
                         Basic testing facilities          Setup team of high                     Setup PD centre
                         Advanced facilities                performing individuals                 Build advanced test
                          shared with OEMs                  Test facilities for                     facilities
Essentials                                                   problem solving and
                         Access to                                                                 Hire experts for product
                          technology/design skills           new product testing                     design
                                                   Knowledge and Skill Management
                                           Tie-up with institutes for training and research
                         Investment would                  Initial Investment in                  Investment is higher as
Investment                depend on nature of                R&D is not substantial                  manpower and facilities
                          product/cost of                    as basic facilities                     need to evolve quickly
                          technology
Source: EY Analysis
Page 18                                 ACMA Annual Conference: India as a product development hub
India can become a global industry leader, to do so it needs to
evolve as an integrated development & manufacturing hub



       Leadership     Provide direction, determine evolution path and invest for
A        vision       the future

                      OEM-Supplier collaboration a key enabler to
B Collaboration
                      build/enhance Indian model of affordable R&D solution

                      Suppliers and OEMs will need to inculcate and absorb an
C         Culture
                      organization-wide design and innovation culture

                      Invest for the future, to achieve higher levels of
D Profitability
                      profitability and customer satisfaction

                      Ecosystem is a key enabler; need to enhance deployment
E Ecosystem
                      monitoring, applied research, testing facilities


Source: EY Analysis
Page 19                     ACMA Annual Conference: India as a product development hub
The team interacted with various stakeholders from the industry
and we take this opportunity to thank all participants for their inputs

                  OEMs                     Component Manufacturers                                  Institutions
                                                                                      Automotive Research Association of
              Bajaj Auto Ltd.                       Bharat Forge Ltd.
                                                                                                 India (ARAI)
  Daimler India Commercial Vehicles
                                                        Bosch Ltd.                                 Fraunhofer India
           Pvt. Ltd. (DICV)
  Mahindra & Mahindra – Automotive                                                     National Automotive Testing and
                                                   Cummins India Ltd.
              Division                                                                R&D Infrastructure Project (NATRiP)
                                                                                      Indian Institute of Technology, Delhi
          Maruti Suzuki India Ltd.                  Gabriel India Ltd.
                                                                                                       (IITD)
             Tata Motors Ltd.                      Hi Tech Gears Ltd.
     Tractors and Farm Equipment
                                                     Lucas-TVS Ltd.
            Limited (TAFE)
                                                       Minda Group
                                                   Hi Tech Gears Ltd.
                                                       Rane Group
                                                  RICO Auto Industries
                                              Sharda Motor Industries Ltd.
                                              Shiram Pistons & Rings Ltd.
                                           Sona Koyo Steering Systems Ltd.
                                                       Subros Ltd.
                                              Varroc Engineering Pvt. Ltd.

Page 20                               ACMA Annual Conference: India as a product development hub
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E&y acma presentation_5th_septembr_2012

  • 1. Growing beyond manufacturing Opportunities in India as an emerging auto product development hub ACMA Annual Convention 2012 5th September, 2012
  • 2. India is fast emerging as the one of the largest global manufacturing hubs for small cars and other vehicles • India will emerge as the largest producer of small cars by 2013 • Further, India’s production of small commercial vehicles (<3.5 T) has grown at >25% in the past five years; faster than the global average Source: LMC, IHS Page 2 ACMA Annual Conference: India as a product development hub
  • 3. To achieve global industry leadership India needs to evolve as an integrated development & manufacturing hub Leadership position in the automotive world Manufacturing Product & Process Innovation Development Vehicles and However, today there is Significant work components limited end-to-end needs to be manufactured in product development done in this India are and process engineering area to improve increasingly capability across the India’s meeting global supply chain innovation standards of quotient Quality, Reliability and Durability Cost and Quality (Strong Foundation) Page 3 ACMA Annual Conference 2012: India as a product development hub
  • 4. Rising customer expectations and increasing volumes have driven OEMs to evolve from localization to global platform development Start-up Respond to local market Global market ambition - Localize and adapt - Develop India specific products - Build local product - Reduce time to market - Develop global development capability - Incorporate global standards platforms Pre 2002 2002 to 2007 2007 to 2012 Source: EY Analysis Page 4 ACMA Annual Conference: India as a product development hub
  • 5. OEMs and component manufacturers are responding to the opportunity by investing in local product development capabilities Start-up Respond to local market Global market ambition ~40 centers Upcoming / • Arvin Meritor • Mahindra expanding • Continental Research • Daimler India Valley Comm Veh • Paccar • Dana • Renault- • DuPont Nissan • Faurecia • Sharda ~20 centers • Hyundai Motor • SKF ~ 10 centers •Eaton • John Deere •Eaton • John Deere •GM • Visteon •GM • Visteon • Bajaj • Maruti • Bajaj • Maruti • Bajaj • Maruti • Bosch • Mercedes • Bosch • Mercedes • Bosch • Mercedes • Caterpillar • Tata • Caterpillar • Tata • Caterpillar • Tata • Cummins • TVS • Cummins • TVS • Cummins • TVS • Delphi • Delphi • Delphi Pre 2002 2002 to 2007 2007 to 2012 2012 - The number of engineers employed in product development centers in India is estimated to have grown from <1,000 in 2002 to >25,000 in 2012 Source: EY Analysis Page 5 ACMA Annual Conference: India as a product development hub
  • 6. Organizations, who have invested into R&D in India, are taking up greater product development roles for local and global markets Illustrative List OEMs Suppliers Developed End- to-End product and process design Development of Development of Engine Low cost capabilities Eeco, New Alto Pulsar, Discover components condensers Development of Global Platforms XUV5OO Ace, Nano Development for Ownership of global global markets market products Developed Global Centers of Excellence in Global centre of Development of 3 One of the global Global Centre of excellence for virtual cylinder diesel product Excellence for gear India testing and analysis engine development hubs pumps Source: Primary research, Secondary research, EY Analysis Page 6 ACMA Annual Conference: India as a product development hub
  • 7. Our analysis of global suppliers identifies 2.5X returns by companies who are investing a higher percentage in R&D R&D/sales* and EBITDA Margin* EBITDA < 9% EBITDA 9% to 12% EBITDA > 12% Median 18.5% EBITDA Margin Median 7.3% R&D/sales * R&D/Sales and EBITDA numbers are averaged over duration of 4 years (2008-2011) Source: Primary research, EY Analysis Page 7 ACMA Annual Conference: India as a product development hub
  • 8. Analysis of Indian suppliers during our research reveals three paths adopted in developing capabilities across the design value chain Design value chain (From Infancy to maturing ) Testing Basic and Process Proto- Problem & Product Program QFD applied State Engineering typing resolution validatio design Mgmt research n Initial step 1 2 Depende Current state nts Future state Initial step 1 2 Explorers Current state Future state Initial step ACMA Annual1 2 3 Conference: India as a product development hub Visionaries Current state Future state Source: Primary research, EY Analysis Page 8
  • 9. Dependents: Followed OEM pull towards better engineering capabilities to support faster product development cycles Ecosystem enablers: Triggers OEM/Parent Institution ► OEM pull on suppliers 1 to take up product 2 design / prototyping Initial steps ► Identified specific projects Approach: to support OEM needs 4 Future state Collaborate ► Shared financial ► Product and with OEMs risk and system design resources Policy Testing facilities and learn capabilities ► Process LOW MEDIUM HIGH engineering capabilities Next steps ► Defined product design strategy ► Enhanced testing and validation 3 ► Developed few products ► Increased spend on R&D to 1% Investment of sales •Initially shared resources as “Collaborative learning” approach •Increased after initial success Source: Primary research, EY Analysis Page 9 ACMA Annual Conference: India as a product development hub
  • 10. Explorers: Setup design cell to resolve design problems, understand product & process development Ecosystem enablers: Triggers OEM/Parent Institution ► Entry by Global players 1 ► Increasing product 2 launches ► Global expansion Initial steps opportunity ► Setup Design cell for process Approach: engineering and problem solving 4 Future state Establish ► Setup basic test ► Product and success and facilities system design & Policy Testing facilities then invest test capabilities ► Process LOW MEDIUM HIGH engineering capabilities Next steps ► Increase spend on R&D to 1-2% of sales 3 ► Strengthened process engg ► Testing and validation Investment capabilities •Initially low investment as “Explore and watch” approach •Increased after initial success Source: Primary research, EY Analysis Page 10 ACMA Annual Conference: India as a product development hub
  • 11. Visionary Technocrats: Envisioned an integrated design and manufacturing capability Ecosystem enablers: Triggers OEM/Parent Institution ► Leadership vision and risk- 1 taking propensity 2 ► Use Indian engineering talent ► Global expansion opportunity Initial steps ► Invested in facilities, Approach: manpower for understanding 4 Future state Set vision & design, ► Basic and pursue prototyping, applied testing and Policy Testing facilities leadership research validation (collaborative) ► Application of LOW MEDIUM HIGH India developed Next steps tech. for global ► End-to-end product design applications ► Program management of many 3 projects ► Risk sharing with OEMs on Investment specific opportunities •Planned investment in facilities and manpower development •Advanced testing, research labs Source: Primary research, EY Analysis Page 11 ACMA Annual Conference: India as a product development hub
  • 12. The product development ecosystem in India is in its infancy and is evolving Industry - Institutio - “Effort n Tie-Up Policy teps, at buildin g Industr t has taken s ired” institute r elationsh y– gov ernmen vision is requ mainly by ip, is driv en - “The nger term - “Institu the indus but a lo y the te capab ility on ap y” tr need s to pla on research plied e rnment ringing focus - “Engin is still ev - “Gov role in b eers requ olving” D” anchor tomotive R& ire 3 yea rs of au On-Job t India’s raining” Product Development Ecosystem ve - “The “Few OEM-Suppliers ha test started improv ing infrastruc e ed tu adopting a collaborativ compa , but is still n re has product development rable to ot global a few Testin standa rds” approach, but limited to g Inf rastru vehicle systems” cture boration OEM – Supplier colla Source: Primary research, EY Analysis Page 12 ACMA Annual Conference: India as a product development hub
  • 13. An expectation mismatch exists between OEMs and suppliers on the approach to develop suppliers’ product development Product Development Ecosystem capabilities Government policies Suppliers’ Expectations OEMs’ Expectations  Explore joint development  Suppliers should build opportunities with suppliers capabilities in basic areas  Share resources and – Problem solving financial risks Expectation – Design understanding  India specific product Mismatch – Program management development can be best  Invest in testing facilities done in India  Collaborate with other  Honour commitments during suppliers to provide a design/development phase system solution  Provide proven products To take advantage of affordable R&D and develop India as an integrated hub, OEM’s and suppliers need to increase collaboration for mutual benefit Source: Primary research, EY Analysis Page 13 ACMA Annual Conference: India as a product development hub
  • 14. Government policies in other automotive hubs have facilitated and anchored a long term R&D roadmap Product Development Ecosystem Government policies China Korea Ulsan - Auto Parts Innovation Center Government defines Policies ensure that FDI Government funded strategic direction for is accompanied by efforts to strengthen future R&D technology transfer local R&D capability Germany Policy led to automotive innovation Universities/Research Institutes clusters in Bavaria, Baden-Wurttemberg rs Inputs Ins lie titu pp Su tes Areas of basic research for country OEMs Indian policy needs to anchor a long term product development roadmap Source: Secondary research, EY Analysis Page 14 ACMA Annual Conference: India as a product development hub
  • 15. Industry–institute tie-up is an essential part of the ecosystem, wherein Institutes provide basic and applied research input Product Development Ecosystem Government policies “Industry-Institute relationship is “Industry is ahead of the level of more mature in Germany and UK, manpower provided by institutes; where development, prototyping Indian engineers need 3 years of happens. It is mandatory for on-job training as compared to 3 institutes to do applied research ” months in Germany” Industry – Institute Interaction “While few institutions have started “Pre-competitive or basic focusing on applied research, research is happening in India institutional R&D is piecemeal and wherein Industry and institutes applied research is largely missing” interact for common minimum programs” Institutes need to be mandated and incentivized for applied research Source: Primary research, Secondary research Page 15 ACMA Annual Conference: India as a product development hub
  • 16. Testing and validation infrastructure is critical to product development in India Product Development Ecosystem Government policies India’s automotive R&D testing infrastructure • There has been an effort towards improvement of testing and validation infrastructure in India Rohtak Delhi/ NCR • The testing infrastructure Jaipur Lucknow Rae Bareilly is insufficient for India’s Silchar product development Indore ambitions Ahmednagar Mumbai Pune Baramati Hyderabad Legend* • Visionary OEMs and GOI Facilities suppliers have not waited Bangalore OEM/Supplier captive testing facilities for infrastructure to come Chennai * Height of column is directly up, they have invested in Coimbatore proportional to number of testing centers own advanced testing facilities Source: Primary research, Secondary research Page 16 ACMA Annual Conference: India as a product development hub
  • 17. Roadmap for Automotive Product Innovation and Development (RAPID) for the Ecosystem OEM-Supplier collaboration Industry-Institute Tie-up  Greater collaboration through  Pro-active role of institutes with resource and financial risk sharing industry for research, skill  Collaboration is essential to India management achieving global industry  Progress towards applied research leadership as an integrated  Update curriculum to improve development and manufacturing knowledge and skills of engineers hub ECOSYSTEM  Set roadmap for future technology  Enhance Government and private leadership in specific areas e.g., testing facilities to global standards Powertrain, Electric mobility etc.  Benchmark with test facilities  Encourage innovation clusters required by suppliers and OEMs in  Mandate and incentivize research other product development hubs by academic institutions Policy Testing Infrastructure Source: EY Analysis Page 17 ACMA Annual Conference: India as a product development hub
  • 18. Roadmap for Automotive Product Innovation and Development (RAPID) for Suppliers Dependents Explorers Visionaries  Identify areas of need  Setup design cell  Setup PD vision Initial with OEM on a specific – Problem resolution – Product strategy steps component/ product design – Process engineering – Technology strategy – Component design – Investment plan  Basic testing facilities  Setup team of high  Setup PD centre  Advanced facilities performing individuals  Build advanced test shared with OEMs  Test facilities for facilities Essentials problem solving and  Access to  Hire experts for product technology/design skills new product testing design Knowledge and Skill Management Tie-up with institutes for training and research  Investment would  Initial Investment in  Investment is higher as Investment depend on nature of R&D is not substantial manpower and facilities product/cost of as basic facilities need to evolve quickly technology Source: EY Analysis Page 18 ACMA Annual Conference: India as a product development hub
  • 19. India can become a global industry leader, to do so it needs to evolve as an integrated development & manufacturing hub Leadership Provide direction, determine evolution path and invest for A vision the future OEM-Supplier collaboration a key enabler to B Collaboration build/enhance Indian model of affordable R&D solution Suppliers and OEMs will need to inculcate and absorb an C Culture organization-wide design and innovation culture Invest for the future, to achieve higher levels of D Profitability profitability and customer satisfaction Ecosystem is a key enabler; need to enhance deployment E Ecosystem monitoring, applied research, testing facilities Source: EY Analysis Page 19 ACMA Annual Conference: India as a product development hub
  • 20. The team interacted with various stakeholders from the industry and we take this opportunity to thank all participants for their inputs OEMs Component Manufacturers Institutions Automotive Research Association of Bajaj Auto Ltd. Bharat Forge Ltd. India (ARAI) Daimler India Commercial Vehicles Bosch Ltd. Fraunhofer India Pvt. Ltd. (DICV) Mahindra & Mahindra – Automotive National Automotive Testing and Cummins India Ltd. Division R&D Infrastructure Project (NATRiP) Indian Institute of Technology, Delhi Maruti Suzuki India Ltd. Gabriel India Ltd. (IITD) Tata Motors Ltd. Hi Tech Gears Ltd. Tractors and Farm Equipment Lucas-TVS Ltd. Limited (TAFE) Minda Group Hi Tech Gears Ltd. Rane Group RICO Auto Industries Sharda Motor Industries Ltd. Shiram Pistons & Rings Ltd. Sona Koyo Steering Systems Ltd. Subros Ltd. Varroc Engineering Pvt. Ltd. Page 20 ACMA Annual Conference: India as a product development hub