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Pawan Goenka’s 5 provocative questions to the Indian auto industry

New Delhi: Pawan Goenka, Managing Director, Mahindra & Mahindra, raised five provocative and pertinent questions to the Indian automotive industry that needs to be addressed to position it globally.

The industry stalwart was speaking at the 60th ACMA annual convention where he termed the Coronavirus pandemic as a god-sent opportunity for Indian manufacturing and particularly for the Indian auto component industry.

The auto industry is heavily dependent on imports, especially in areas of electronics and key technology related to safety emissions and electric vehicles. India’s share of the global auto component export market is just about 1.3% though India is the fifth-largest auto producer.

The managing director, while himself answering the five rhetoric questions, paves the way for the Indian auto industry to position itself in the global market.

1. Can we and should we delink from imports completely?

Goenka answered, “Neither we can nor we should. We will have to continue to import the things that some other countries can do better than us. And that is fine. We don’t have to do everything ourselves. Trade is important for the global and domestic economy.”

However, he suggested that the industry should defer from any knee-jerk reaction of asking for a ban on import or any such action that can have potential repercussions on the industry and retribution by other countries.

Pointing out the three main reasons for imports that are: cost-benefit, capacity constraints in India, technology, and capability gap, he suggested that the Government of India needs to work together with industry stakeholders to remove the disabilities.

Now is the time to invest in EV technology and become a leading source for EV components and software in the shared mobility space.

According to him, the problem is not that another country has a better technological capability.

“I personally don’t mind this as we cannot have the technological expertise in everything. But what worries me is that there is very little technological innovation happening in India. What is the true R&D spending of the Indian component industry, and how does it compare with Germany, Korea or Japan?”

2. Do we have a ‘Right’ to get a sizeable share of GVC?

There is a global value chain (GVC) in auto components export and participation in GVC is an ample opportunity. Global component export is worth about USD1.7 trillion. In that, the contribution of Germany is 15%, China 11%, South Korea 6%, and of only 1.3%. “Why?”, asks Goenka.

Despite the fact that most of the multinational auto component makers are present in India, these companies have set up large-scale mother plants in various parts of the world but not in India and use these plants to supply globally.

The industry needs to invest in technology, technology innovation and capacity to make India an attractive location for such mother plants of the multinationals.

For that, India needs to build a narrative for component export just like technology for Germany, quality for Japan, value for money for Korea, and scale and cost for China.

India’s narrative needs to be clearly spelt out to push mega international suppliers such as Bosch, Continental and Magna to integrate India into their global value chain of technology, Goenka said.

“You have to identify where you need a technology partner and where you need to develop in-house technology at globally competitive quality, cost and scale”, he suggested.

3. Can we become the global hub for shared mobility EVs?

The industry veteran asserted that now is the time to invest in EV technology and become a leading source for EV components and software in the shared mobility space.

India needs to build a narrative for component export just like technology for Germany, quality for Japan, value for money for Korea, and scale and cost for China.

India has achieved this feat in IT software and this can be replicated in the EV component sector as well albeit with significant investment from auto companies in technology.

“Everyone is waiting for volumes. In China, capacity was built before demand and demand followed. So the OEMs need to start investing in technology to woo customers,” Goenka said.

4. How and when do we become truly global?

In order to become truly global, the Indian auto industry needs to have a two-pronged strategy: continued focus on technology and innovation, and exploring inorganic growth and the aspiration to get to that level, Goenka said.

The Top 50 global suppliers are mainly from Germany, Japan, France, the US and China. The list features only one supplier from India, i.e. Motherson Sumi. However, there are some other success stories like Bharat Forge.

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