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E&y acma presentation_5th_septembr_2012

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E&y acma presentation_5th_septembr_2012

  1. 1. Growing beyond manufacturingOpportunities in India as an emerging autoproduct development hubACMA Annual Convention 20125th September, 2012
  2. 2. India is fast emerging as the one of the largest global manufacturinghubs 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 averageSource: LMC, IHSPage 2 ACMA Annual Conference: India as a product development hub
  3. 3. To achieve global industry leadership India needs to evolve as anintegrated 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. 4. Rising customer expectations and increasing volumes have drivenOEMs 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 2012Source: EY AnalysisPage 4 ACMA Annual Conference: India as a product development hub
  5. 5. OEMs and component manufacturers are responding to theopportunity 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 2012Source: EY AnalysisPage 5 ACMA Annual Conference: India as a product development hub
  6. 6. Organizations, who have invested into R&D in India, are taking upgreater 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 pumpsSource: Primary research, Secondary research, EY AnalysisPage 6 ACMA Annual Conference: India as a product development hub
  7. 7. Our analysis of global suppliers identifies 2.5X returns by companieswho 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 AnalysisPage 7 ACMA Annual Conference: India as a product development hub
  8. 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 2Depende Current state nts Future state Initial step 1 2Explorers Current state Future state Initial step ACMA Annual1 2 3 Conference: India as a product development hubVisionaries Current state Future state Source: Primary research, EY Analysis Page 8
  9. 9. Dependents:Followed OEM pull towards better engineering capabilities tosupport 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 needs4 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 successSource: Primary research, EY AnalysisPage 9 ACMA Annual Conference: India as a product development hub
  10. 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 solving4 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 successSource: Primary research, EY AnalysisPage 10 ACMA Annual Conference: India as a product development hub
  11. 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 understanding4 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 labsSource: Primary research, EY AnalysisPage 11 ACMA Annual Conference: India as a product development hub
  12. 12. The product development ecosystem in India is in its infancy and isevolving 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 collaSource: Primary research, EY AnalysisPage 12 ACMA Annual Conference: India as a product development hub
  13. 13. An expectation mismatch exists between OEMs and supplierson the approach to develop suppliers’ product development Product Development Ecosystemcapabilities 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 integratedhub, OEM’s and suppliers need to increase collaboration for mutual benefitSource: Primary research, EY AnalysisPage 13 ACMA Annual Conference: India as a product development hub
  14. 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 Institutesclusters 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. 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 researchSource: Primary research, Secondary researchPage 15 ACMA Annual Conference: India as a product development hub
  16. 16. Testing and validation infrastructure is critical to productdevelopment 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 facilitiesSource: Primary research, Secondary researchPage 16 ACMA Annual Conference: India as a product development hub
  17. 17. Roadmap for Automotive Product Innovation and Development(RAPID) for the EcosystemOEM-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 institutionsPolicy Testing InfrastructureSource: EY AnalysisPage 17 ACMA Annual Conference: India as a product development hub
  18. 18. Roadmap for Automotive Product Innovation and Development(RAPID) for Suppliers Dependents Explorers Visionaries  Identify areas of need  Setup design cell  Setup PD visionInitial with OEM on a specific – Problem resolution – Product strategysteps 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 facilitiesEssentials 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 asInvestment depend on nature of R&D is not substantial manpower and facilities product/cost of as basic facilities need to evolve quickly technologySource: EY AnalysisPage 18 ACMA Annual Conference: India as a product development hub
  19. 19. India can become a global industry leader, to do so it needs toevolve as an integrated development & manufacturing hub Leadership Provide direction, determine evolution path and invest forA vision the future OEM-Supplier collaboration a key enabler toB Collaboration build/enhance Indian model of affordable R&D solution Suppliers and OEMs will need to inculcate and absorb anC Culture organization-wide design and innovation culture Invest for the future, to achieve higher levels ofD Profitability profitability and customer satisfaction Ecosystem is a key enabler; need to enhance deploymentE Ecosystem monitoring, applied research, testing facilitiesSource: EY AnalysisPage 19 ACMA Annual Conference: India as a product development hub
  20. 20. The team interacted with various stakeholders from the industryand 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
  21. 21. Thank you