Come 2020 and India will be the third largest car market after China and the US, thanks to the country?s rising potential for designing low-cost cars that are fast gaining popularity in the domestic, as well as global markets, says Stephen R D?Arcy, global head (automotive practices), PricewaterhouseCoopers in an interview with FE?s Yogima Seth. Excerpts:
With all major global auto players venturing into India, what potential do you see in the Indian automobile industry over the next few years?
India has a very bright future and is one of the most important markets across the globe with its huge growth potential. It is estimated that there will be 4-5 million cars in the next seven to eight years, compared to 1.5 million cars today but this would come on the back of increased investment in infrastructure, growth in exports and alignment of government tax policies in a manner to encourage manufacturers to set up operations in the country. Since the penetration levels in India are very low, to the tune of eight cars per 1,000 people, against 50 cars per 1,000 in China and nearly 600 cars per 1,000 people in the US, and income levels are going up, a lot many people now have the potential to own a small car and India has an expertise in this segment.
Though there are 18-19 car manufacturers in India, a majority of them are struggling to establish themselves on a sustainable basis. What do you think can be the focus area for these global players?
The western companies need to have a complete customer-centric approach. There is a need to understand the kind of products that Indians want and accordingly, come out with low-cost small cars to cater to the domestic market. Further, all these global players who have ventured into India need to set up a strong distribution system and establish easy access to spare parts, either on their own or in alliance with Indian companies. These companies can even enter into alliance with Indian manufacturers for designing new models, since Indian companies have a high level of expertise and these kinds of ventures could be more effective.
What kind of opportunities do you see for Indian component suppliers overseas?
Indian suppliers need to learn how to work with purchasing system of the western companies and ensure that delivery schedules are protectable. There has to be greater transparency and risk management involved at their end. The component manufacturers need to capitalise better on their ability to design and engineer parts to be competitive with their counterparts in China.
Is the demand for small cars a temporary phenomenon? What opportunities do we see for the export of made-in-India cars in the US and Europe?
There has been a shift from bigger cars to smaller cars in different parts of the world and the change is a long-term sustainable change in customer preference as fuel prices continue to go upward. Further, the emergence of a large number of new customers in economies like Brazil, Indonesia and others, coupled with the rising concern over green houses gases, will mean that the demand for small cars will continue to be there in the foreseeable future. India has an advantage over China with domestic companies being more advanced in designing low-cost vehicles and has better expertise in conducting business with developed worlds.
What is the potential of hybrid vehicles in India?
Hybrid vehicles could only be successful when they present better economic propositions for consumers. Since the amount of saving in fuel bill, vis-?-vis a owning a hybrid vehicle, is not enough to justify the cost of these vehicles, governments can offer subsidies to companies working on hybrid technologies and can also fund the research and development for battery technology so that these vehicles become price competitive. With all this, it will take at least another five years to see a shift from gasoline to electric-run vehicles.