In this free-wheeling interview with MMI’s Editor-in-Chief Soumi Mitra, Rajiv Gandhi, Senior Executive Director, Productions & Member of Executive Board, Maruti Suzuki India Ltd (MSIL), offers his expert take on the impact of Covid-19 on the Auto sector, the expected changes in the EV plan, supply chain dependencies, and shares the experience of producing ventilators and the challenges encountered amid the lockdown…
Mitra: It is slated that the first-time car buyers in India which are 40 percent at present would go up by 10-15 percent Post Covid-19 as people would focus on owning personal transport due to hygiene consciousness and social distancing. At the same time, job losses and salary cuts would dampen the purchasing sentiment. How do you perceive the growth of the Indian Auto sector in this backdrop? Will there be more consumption of small cars in comparison to sedans and SUVs?
Gandhi: The Covid-19 fallout is unprecedented. With more than half of the world’s population forced into lockdown and countries struggling to get a grip on the fast-evolving health crisis, the economic implications of the pandemic have started emerging in the form of muted growth projections and unemployment levels unheard of. No one could have imagined that we will be at a standstill due to a pandemic. This was the risk never thought of and never prepared for, and hence, has left us all unguarded with manufacturing activity across the world and in India at a standstill. Until we, which means India and the world, are at a stable state with declining cases and a cure in sight, we need to take this uncertainty as the only reality. The economy is a delicate balance of demand and supply. For people to come out and buy, they should have safety and financial security at the back of their minds. Having said that, at Maruti Suzuki we have started operations at our plants and opened our showrooms and workshops in a graded manner as per approvals from the state Government guidance.
On the supply side, we may face issues on the availability of factors of production and we will be adjusting our operations to the ‘new normal’.
Though it’s too early to predict an increase in demand for automobiles, but looking at some learnings from other nations and adherence of social distancing will keep people away from car pools and public modes of transport including aggregators. Hence, there may be an increase in demand for affordable cars. The number of first-time buyers may go up. But demand is not just driven by need; there are crucial factors such as affordability, general sentiments income of the buyers.
Positive things in this situation have been prompt actions by the government. There seems to be an effort to restart, run, and sustain businesses with special schemes, waivers, tax rebates, etc. There is a string of exemptions and relaxations provided to boost exports as well.
I am sure, with incentives and stimulus packages being rolled out from the Government, we will see a positive sentiment soon. We need to wait and see how businesses leverage these opportunities and how these stimuli boost the demand.
Additionally, one important factor that can drive automobile sales at this point would be the availability of loans and affordable rate of interest. This will also give thrust to first-time buyers.
Mitra: The Electric Vehicle (EV) plan envisages 30 percent EVs on India’s roads by 2030. With an existing vehicular population of more than 210 million and swelling, it’s hard to see how this transformation will happen in about a decade. What are your thoughts on it?
Gandhi: Vehicle Electrification is one of the key approaches being followed globally for meeting national objectives of Carbon emission and fuel consumption reduction. Eighty-five percent of crude oil is imported in India accounting for 20 percent of total import bill. With growing mobility, India’s crude consumption is likely to increase year on year, thus requiring a comprehensive approach to reduce the fuel consumption and oil import bill.
It is estimated that India will have 70 million Car parc. by 2030 at 8 percent CAGR. If we consider 20-30 percent annual EV penetration by 2030, ICE Vehicles will be 83 percent and EVs will have 17 percent share of total parc. Therefore, a comprehensive approach, with simultaneous focus on electrification of ICE powertrains, and promotion of alternate fuels (CNG, Ethanol, and Methanol) along with battery electric vehicles (BEVs) is required to have a significant impact on reductions in oil imports. The same has been conveyed by us under the ‘Mission Green Million’.
BEVs currently have a challenge related to high acquisition cost and infrastructure, thereby impacting the customer pull from the market. However, other electrified powertrains such as hybrids, and alternate fuel vehicles may have easier adoption, as they offer good fuel efficiency at a relatively lesser cost, and may not require any external charging infrastructure. To further enhance the adoption of fuel saving technologies, we need to localize HEV and EV technology to reduce cost through ‘Make in India’ and generate consumer pull for natural adoption.
The Government is primarily supporting BEVs right now, whereas equivalent support to other xEV technologies (strong hybrid and plug in hybrid) is missing. Moreover, the Auto industry has worked for three decades to establish ICE-based upstream and downstream ecosystem in India, because of which we have been able to achieve very affordable cost levels as compared to the global benchmarks. Going forward, similar level of efforts from the Government and the industry will be required for BEV adoption to increase. Government support is required in making long-term policies, which can propel the development of an ecosystem, R&D and supplier base, similar to the ICE vehicles, and provide fiscal and non-fiscal incentives to generate consumer demand for adoption. Right measures in this direction will help India to produce electrified vehicles and components not only for India, but for the world.
Maruti Suzuki is looking at all aspects of an xEV ecosystem in the Indian context. Learning and capability building from demonstration projects, real-life prototype evaluation, localization of critical child parts to end-of-life processing are some of the critical aspects we have been focusing on.
Last year, Maruti Suzuki initiated a nation-wide field testing of over 40 prototype EVs. The extensive real-life usage of the vehicles in multiple terrains and climatic conditions has helped the company to get valuable insights and gather critical inputs based on actual consumer usage. It will help it to develop a reliable and suitable EV for the Indian market.
Mitra: MSIL, along with AgVa Healthcare, is also gearing up to meet the target of manufacturing 10,000 ventilators by this month’s end. What were your challenges in terms of the supply chain to source the components from different vendors in the lockdown period? Is there any supply chain emergency plan in place to meet the requirements of the industry?
Gandhi: The production of ventilators was a challenging task. Hence, we partnered with the setup which was already into this business.
We did not have any knowledge of the product and were unaware of the supply chain. Most importantly, we were up looking to scale up the production from a mere four units per day to 400 per day, for which we leveraged our expertise in assembly operations. We had to break the tasks into operations, sequencing, work distribution, and a lot of standardization. These were the controllable factors. The biggest challenge was to establish the supply chain for the ramp-up of the production. We had to work extensively to create a pool of vendors who can supply the increased quantity of the parts. Imported supplies were limited; many local vendors were in the red zone or not operating. A lot of fabricated parts were needed as well. So, we hunted for the local sources or standard manufacturers having stocks. We also engaged our component manufacturers to provide electronic parts, sensors, and fabricated products.
Leveraging our existing supply chain helped us in providing the technical partner with the requisite components. This was a great learning experience for the team.
Mitra: Do you foresee the impact of post-pandemic in following the Just-in-Time production model? What are your plans for working with your suppliers and vendors to re-ascertain supply chain dependencies?
Gandhi: Definitely, the availability of factors of production seems to be a challenge currently. This pandemic has highlighted very clearly the points where we need to work extensively to be self-sufficient. Necessary corrections in our infrastructure both physical and digital are highly crucial. There is a need to develop local sourcing units and adopt alternative strategies for reducing dependency on single sources of import. These will bolster the Government’s call to Make in India and develop the country into a market with a strong export network as well.
The Just-In-Time model is making sure the right material is available in the right quantity at the right place. Due to this pandemic, logistics and supply chain have been hard hit. However, we have digitally enabled systems in place to ensure we have strong communication with our vendors to ensure material availability. This is a challenging time for vendors as well. We all have to ensure each other’s safety and yet ensure the businesses survive. I believe once we have a cure or vaccine in sight, things will rapidly improve.
Mitra: Hon’ble Prime Minister Shri Narendra Modi has announced the ‘Atmanirbhar Bharat Abhiyan’ which primarily focuses on self-reliance. How does MSIL plan to reduce its dependencies on imports of components, especially from China, post Covid-19?
Gandhi: This reminds me of a quote – ‘An obstacle is often a stepping stone’. The ongoing pandemic situation has added to the complexity of the term ‘disruption’. Almost every manufacturer has experienced supply chain disruptions due to Covid-19.
Our company’s direct import content is very less, especially from China, but some of our component suppliers source a few child parts like LCDs, Sensors, and PCBs, etc. from the country. During the initial phase of the pandemic, when its outbreak was limited primarily to China, the supply chain of these child parts was severely impacted. We took this problem as an opportunity and worked with our vendor partners to set up alternate channels of sourcing to ensure business continuity.
Our commitment towards this goal already reflects in our Vision statement – ‘To be a leader in the Indian Automobile industry creating customer delight and shareholder wealth, a pride of India’. Customer delight is achieved when a customer gets extra value for his money. And we believe that it is difficult to create that extra value with high import content.
Hence, We have always worked towards reducing our dependency on imports by focusing on Local Vendor development. Localization not only helps in reducing the cost of the product, but it also hedges us from global uncertainties.
The Manufacturing sector needs to be self-reliant in many ways. We are still dependent on many countries to source critical parts, specifically electronic components. We need to encourage local manufacturers, foster collaborations to make in India to be self-reliant and emerge as a strong global manufacturing hub. The Future of businesses will rely on two important concepts — Digitalization and Localization.
A lot of initiatives are being taken by the Government of India in this direction. What is needed is supporting each other to make our country self-sufficient.
Mitra: What are your views on the increase in the deployment of advanced automation, manufacturing technologies, robotics, and digitization such as Artificial Intelligence, AR, VR, machine learning, etc., in the Auto sector post Covid-19?
Gandhi: The process of transformation towards Industry 4.0 has already begun with Indian manufacturers showing eager-ness to adapt to this change to be globally competitive.
Industry 4.0 is gradually making our manufacturing smart. Decisions that used to be driven, either by experience or gut and were extensively dependent on instinct can now be made accurately based on actual parameters obtained from the data collected from these technologies. It’s a transition from gut to logic.
The game-changing tools around data analytics, artificial intelligence (AI), advanced robotics, augmented reality and others promise great benefits when they are combined with the connective power of the Internet of Things (IoT). Data-driven decision making is finding its way into the manufacturing processes. It is a journey that can drive growth to levels not achievable under conventional business models and strategies, and I am sure that this is going to be an exciting and challenging journey.
Each industrial revolution has touched and changed the way people work in manufacturing. The degree of difficulty of jobs has seen a transition. With the advent of automation, we have been able to delegate physically taxing jobs to our machines and mechanisms and create new opportunities for our workforce.
Automation has changed the way we work. At Maruti, we are using automation based on 3D’s – Dirty, Dangerous, and Difficult. For the past five years, our focus has been to eliminate jobs that involve bending, heavy load picking, awkward body postures wherein approachability is tough, exposure to heat, sparks, or other such risks. Automation has been a boon. The talent and creativity of our people have been the biggest contributor in this area. Indian manufacturing has done a lot of progress in the field of low-cost automation. The journey of automating the processes will continue after the pandemic as well.