In India’s sixtieth year of Independence if one were to look back and contrast it with where the Indian automotive industry is today in terms of its maturity and promising future, we would realise that one key factor which has played a very decisive role in its growth is the intellectual fire of its entrepreneurs. Every entrepreneur needs to be enterprising and that is a given. However, every entrepreneur may not necessarily have an intellectual fire burning in his or her belly but in the case of India most entrepreneurs in the earlier years of the industry have possessed that fire and many now as well.
It is this particular kind of intellectual zest which has kept the Indian automotive industry less foreign-dominated which, since the late 1950s, despite looking deeply towards know-how from foreign lands was able to not only absorb know-how fully but even build on what it received. India’s story is unlike that of Thailand or China. An important difference between China and India is that the former is all about a “number’s game or herd mentality” whereas India, despite being the second most populous country in the world and hence a tempting and fulfilling market, possesses an automotive industry which has largely been driven by both its engineering prowess and the Indian capacity to absorb best practices and systems fully.
The seeds of the Indian automotive industry were sown after the Indian Tariff Commission mandated the establishment of an indigenous industry in 1953 and the banning of operations of overseas vehicle makers. The fact that, until recent years, the government did not see the automobile as a necessary product but a luxury item was indeed a setback to the industry and the country as well. Other countries realised much earlier than India that the automotive industry, especially the passenger car segment, would be one of the engines of growth of their economies. But India had more pressing issues to take care of in its socialistic framework than pursue the development of this vehicle segment.
The shape that the country’s automotive industry has taken today is a tribute to industrialists like H.K. Firodia and J.R.D. Tata who tirelessly worked to see that this sector contributed to the making of Nehru’s modern India.
After the country was further opened up in the early 1990s through radical economic reforms and the influx of overseas companies in the automotive sector, it would have been difficult to imagine that a decade or more later Indian companies such as Tata Motors or TVS Motors would have global footprints. And not just vehicle makers but auto component manufacturers like Bharat Forge or RSB Group as well. Today this is a proud reality.
What is now driving the automotive industry in the country is not merely the wish of companies to proliferate the market with newer vehicles, and hence a more pronounced presence, but an amazing twist and refinement in tastes of Indian consumers who want their money’s worth and the best of what the developed world enjoys.
Money’s worth in the Indian context means that the country’s consumers are extremely price sensitive. But yet they are very demanding. These traits, and others, have posed as key challenges but inspirational factors for companies like Tata Motors and Bajaj Auto whose products have tried to meet the requirement for world-class products at affordable prices. Bajaj’s slogan “distinctly ahead” is not just a brash statement but something that has found proof in a product like its Pulsar motorcycle, which with its unique home-developed engine technology and other user-enhancing features, symbolises a proud Indian’s spirit. The Tata Indica on the other hand is another example of determination to make it big by oneself and not by depending on borrowed technology. Yet one has to admit that some of its key components are manufactured with foreign collaborations.
TVS Motors, though currently struggling towards better profitability, is a fine instance of how a company parted amicably with a foreign partner, Suzuki, and resolved to go its own way and create its own space. Today TVS Motors with its operations in Indonesia fits into the category of a transnational company.
Mahindra and Mahindra, through its path-breaking vehicle Scorpio, not only enriched the SUV segment with a product type known to be manufactured at the lowest cost ever from bottom up, but also offered families a mode of transport which would enable safer and more comfortable inter-city travel.
What is also commendable about such companies is that they have had to introduce products in a highly competitive and “unprotected” market scenario where there is already a well-entrenched presence of foreign MNCs or joint-ventures whose vehicles offer the most contemporary technologies and design. Competition being vicious and consumer tastes becoming more demanding, especially in terms of the variety of vehicle models being made available to buyers, Indian companies are also having to vie with foreign MNCs in introducing new models in shorter time periods.
So while sensitivity to price continues to rule, how fast a company can introduce a vehicle to meet a particular taste or trend and which bears the newest and most innovative technology and features have become factors that today determine how well a product will sell.
Indian vehicle makers will therefore have to live in a continuous innovative mode which will have to be combined with a very efficient and productive design, development and manufacturing system. Just having won brownie points for an Indica or a Pulsar will not do.
The other emerging trend which is not dictated by rapidly changing customer tastes but by peculiar market-specific or country-specific needs is where Indian companies, most commendably, are taking the lead. The Tata Ace is a superb example of how a niche waiting to be grabbed was opportunistically taken by Tata Motors in the one-tonne cargo segment. The other niche or “bottom of the pyramid” kind of strategy which Tata has once again taken and may have also inspired others to follow is the pursuit of not what was earlier called a Rs. 1 lakh car but what will be an aspiration to introduce a truly “people’s car”.
While Indian-owned automotive companies are doing what it takes to meet competition headlong and sustain or strengthen their market share, they are also taking bold steps in changing the management structures of their automotive enterprises. In the vehicle segment a recent instance is how Bajaj Auto’s managing director Rajiv Bajaj has recast the company into five divisions each to be headed by well-qualified, high performing and loyal colleagues. A company cannot continue to be managed in a particular manner endlessly for years but has to be flexible and dynamic according to changing business scenarios and times. This is not just being realised within Indian-owned companies in the vehicle sector but is more visible in the largely family-owned companies in other segments such as the auto component sector.
Nearly 80 per cent of auto component companies are family-owned enterprises where management batons are being gradually acceded to young sons, daughters, nephews, nieces and even to daughters-in-laws. These young business scions face multiple challenges be it generation gap related or even management-style related -- many of which are spurred by ideas picked up from overseas education programmes or internships at leading companies abroad. How they are mentored and prepared is a very vital and sensitive issue as they will be the future leaders of the automotive industry. Many of these young people are already in frontline, hands-on positions in their enterprises and most are performing admirably well.
The writing is clear on the wall that however good an enterprise may be in what it manufactures and how it manufactures, it will first have to give the utmost importance to the people it employs in the varied facets of human resource management. Getting and retaining or nurturing talent which can walk the talk and also walk along the trajectory of a company’s growth is a critical challenge that the young entrepreneurial generation within Indian-owned companies will have to cope with and better in years to come.
As is often misunderstood or perceived, the automotive industry is not just vehicles and auto components. There are vibrant smaller but equally important segments such as those of tyres and batteries which have their own indigenous success stories that make India proud in its sixtieth year of independence. The respectability that companies such as Amron in batteries and Apollo and JK in tyres have gained cannot be ignored. The same drive that Indian vehicle makers felt while developing products such as the Indica and Pulsar has also been the fuelling factor for companies in such segments as well.
There are therefore many reasons for the country to hold its head high. However there is much to be done still. While Indian auto components are now being supplied not just to aftermarkets overseas but to OEMs and Tier-1 companies worldwide, we still get to read reports of companies like Man Force Truck running into problems of localisation of components and Hyundai Motors turning to its principal’s vendors in South Korea because of issues of quality.
Unlike a small country like Thailand where there are very few of what can be called “Pure Thai” companies, the Indian automotive industry possesses a huge number of Indian-owned companies largely in the auto component sector and belonging to the small and medium scale.
One of the most important challenges that they face is how to produce quality products consistently and deliver them reliably. The other of course being that of ownership of technology – either developed by oneself or bought from an external source. If these companies wish to survive in an environment where free trade agreements or the world harmonisation of automotive standards will further diminish barriers to imports, they will need to focus particularly on these challenges and find paths which will keep them ahead of emerging competition. Life is in constant flux and this axiom is also applicable to the manufacturing sector and its enterprises. The customers that a company was able to hold in its basket for several years may not continue to be there for many competitive reasons and this is unashamedly being made clear by most vehicle makers, Indian-owned included. At the end of the day what matters is consistent quality, reliable delivery and lower costs.
The dire need first is to be aware of developments taking place, either market-driven or government-driven, in the country and outside it. Second, companies should realistically and honestly assess where they stand among their peers and third they will have to aspire to be best-in-class even if they are manufacturing one product. It is perhaps this aspiration which will not only begin their journey on improvement in myriad aspects of their enterprise but will enable them to absorb hungrily all key ingredients of best practices in not only manufacturing but all other areas of their business.
Over the years several automotive companies have been acquired, merged with others or have had to close down. This trend is definitely going to continue and even accelerate. If people think it will indefinitely continue to be business as usual then they are mistaken. Times are going to only get tougher and the sooner companies take honest views about their future the better it would be from what could eventually be embarrassing moments for many. However, what entrepreneurs can take recourse to if they decide to remain and give it their best are the inspiring stories of many people in the automotive industry who made a difference and lent their efforts to what is today a rich heritage.
(Published as lead article in India's 60th Independence Day special edition of Autocar Professional magazine.)
1 comment:
Good for people to know.
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