The global automotive industry is on the verge of a big disruption. Digitisation, increasing automation, and new and emerging technologies would revolutionise the way people move. The Indian automotive industry has begun to feel the ripple effects of this global disruption. How prepared are automotive stakeholders and consumers?
With growing concerns towards sustainable development and mitigating climate change, there is a need to shift from the current unsustainable approach to a more sustainable effort.
Urban passenger mobility has undergone significant changes over the past few decades due to rapid industrialisation and the boom of the IT sector. Travel patterns have become increasingly complex and difficult to predict and manage. This has put increasing pressure on bigger cities and their transport and infrastructure.
Challenges in India
According to McKinsey & Co, four technology-driven trends — electrification, shared mobility, connectivity and autonomous driving — are leading the automotive industry to this disruption. These trends will shift markets and revenue pools, change mobility behaviour and build new avenues for competition and cooperation.
This would bring a shift in consumer behaviour and their buying pattern, although it would be interesting to watch how this trend changes geographically and across continents. Globally, revenue pools from conventional sources such as one-time vehicle sales and aftermarket sales could continue to grow at their current pace.
How prepared are we in India to look at sustainability as a larger issue and adopt newer and alternative sources of technology, namely, electrified vehicles?
The automotive market in India is going through a rapid metamorphosis, offering many choices to consumers beyond just internal combustion engine (petrol/diesel).
Electrification issues
Electrification of vehicles — a sustainable solution to counter the growing levels of vehicle pollution in metros — is of particular importance to India today. The automotive industry is already feeling the effects of electrification or e-mobility, both globally and in India. By 2030, electrification could lead to electrified vehicles holding a substantial share (up to 50 per cent of new vehicle sales in a breakthrough scenario) of the global automobile sector, according to McKinsey & Co.
If India sees a similar momentum, it will significantly impact manufacturers across the automotive value chain. This would mean that the customer would be “spoilt for choices in technologies”.
With the narrowing price gap between petrol and diesel, and the propensity to consume growing among urban families, no doubt the demand for cars is increasing. Today, consumers are well read, more informed about the new technologies which car manufacturers have to offer. Now the demand is shifting more based on convenience and sophistication, not to forget the awareness and inclination towards safety. Today, there are multiple options available in each segment and consumers are educated to make comparisons and decide for themselves.
While global EV sales remain low, examples from other countries indicate that various factors — a mix of push and pull — could determine the pace of EV penetration in India.
If we have to address the challenges our country is facing – the increasing fuel import costs and pollution — this can be managed with hybrids. We will have to work on it to see the challenges and find solutions to resolve them. The main challenge with electric vehicles is infrastructure, charging stations, charging time. Besides, the challenge of import dependence for battery would not support ‘Make in India’.
The move to e-mobility is inevitable. Here, the pertinent question is the time for the market to adopt. It brings with it challenges and opportunities for the automotive industry and the broader ecosystem to capitalise on new technologies; in the process, reap substantial economic benefits and reduce dependence on fossil fuels, thereby reducing carbon footprints. Concerted efforts by key stakeholders can help EVs and hybrids become a self-sustaining and profitable market in the near future.
As e-mobility penetrates worldwide, the cost structure of vehicles is likely to change. The market for ICE (Internal Combustion Engine) components like engine and transmission could shrink gradually while key components and systems related to EV motors and battery, charging technology, power electronics and EV software could see significant growth. With evolving technology across key components, companies have enough room to expand their play.
While the western world and the developed car markets are working hard on the next level of evolution — autonomous driving and IoT sparking the growth of connected cars — as a country we need to think what is sustainable for the nation. But the final word would be that of the consumers.
The writer is Vice-Chairman, Toyota Kirloskar Motor