Australian companies looking to capitalise on Indian economic summer

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With a growing appetite for technology, quality and performance, India’s auto sector has been cited as an area of opportunity for Australian companies. It’s also very tricky regarding what it expects, Professor Peter Hodgson told Brent Balinski.

There are opportunities for Australian businesses in India, but there are also several mismatches that might frustrate you, believes Professor Peter Hodgson.

The automotive industry is a case in point.

The market is the world’s third biggest by size, it is the seventh-biggest producer and expanding fast, and the sector is increasingly spending on R&D (and looking overseas for help).

At the same time, there are sensitivities around cost, and these need to be carefully considered.

The Deakin University Interim Deputy Vice-Chancellor Research has visited the country dozens and dozens of times – most recently last month – most recently as an expert on advanced manufacturing trends in the automotive industry.

“They want to have new materials at lower cost, which is sort of an oxymoron,” he told Manufacturers’ Monthly.

Incremental improvements, substituting heavy metals for light metals here and there, for example, may not be an effective solution for Indian customers. A clean sheet approach with new materials is often the way to go. As always, cost is a sensitivity.

“This is in theory – we haven’t done it in practice,” he said.

“But we’re just trying to highlight to car makers that the current incremental approach of substituting heavy metals for light metals has a limit in terms of what you can achieve – it also has a cost penalty as well.”

Hodgson lectured in Delhi, Chennai and Bangalore, presenting on advanced materials and research collaboration opportunities, between May 30 and June 17.

He notes several tensions when trying to keep customers there happy. These include between light weighting – an area where a study last year identified opportunities for Australian companies – and cost. This is also in conflict sometimes with increased demands around safety.

Better design for safety is on the minds of Indian auto makers, with seven locally-made (for local market) vehicles failing Global New Car Assessment Programme crash tests in May.

Such tests will now be the norm from October next year.

“They’re usually competing things: often that means having more material in the car for crash resistance and stuff like that,” added the materials specialist.

Australian opportunities

Last year Austrade and KPMG released a report on the burgeoning Indian market and what it could offer Australian suppliers.

The sector, representing 45 per cent of India’s manufacturing GDP, offered potential in six main areas, according to Opportunity assessment of automotive R&D market in India: lightweighting; alternative fuels; optimisation of powertrain, chassis and other parts; vehicle electrification; vehicle electronics; and safety technologies.

The country’s auto R&D spend has grown to 2 – 3 per cent of revenue from 1 per cent a decade ago. Australia’s way with “affordable excellence” made it a good match for partnering with Indian firms increasingly looking outside their organisation for R&D help.

The market is after “turnkey solutions” observed Hodgson.

“So the only way, in some ways, would be to set up a joint venture in India, I think, and that’s my personal view,” he said, adding that there was a sort of “valley of death” in the mix to complicate things further with sensitivities around cost.

“It’s a tricky one. In some ways in the early stages you don’t want to settle on a joint venture, you just want to supply some products to get them get tested out, from the Australian operations. But then they’re very expensive [for the Indian client].”

Image: News Limited
Image: News Limited

Having technology and investment transferred from Australian companies into India was welcome, as was having money flowing out.

“They realise there’s got to be a profit to make it worthwhile coming in,” said Hodgson.

The new China?

With a growing economy (with a lot of room to grow) lifting millions out of poverty and into the market for high-quality imported goods, many have highlighted India’s similarities with China. There must be, therefore, opportunities for our exporters of products and IP.

That may be the case, but things are rarely so straightforward. There are also big differences in demand from the two countries’ auto industries.

“So the difference between India and China is there are a lot more high-end cars made in China, BMW, Audi etc., whereas in India it’s sort of a generation below and there are more commodity vehicles for the mass markets – small, basic cars,” offered Hodgson.

Hodgson’s university was the first Australian university to set up an office in India, in 1996, and one of the first international universities to do so.

Not too long after, Hodgson began as head of Deakin’s school, Engineering and Technology at the university, following 15 years focussed on steel research at BHP.

He has been a prolific visitor to India since, establishing the Deakin India Research Initiative in 2009, and receiving a felicitation from the Confederacy of Indian Industry in 2012.

As Australian auto businesses have been forced to do, he was led to look abroad out of necessity. It was a shock at first, but a pleasant one, and he spoke with excitement about the experience.

“For my research to be translated into industry is fairly [difficult] it’s not possible in Australia now – so I have to look to China and India for my two translational countries,” he said.

“I felt when I first started going there the real energy and dynamics for change, and you feel that you can actually make a contribution.”

“It’s just such a different country compared to anything I’ve seen beforehand, and that difference just appealed to me – with modern hotels and airports etc. you could be anywhere in the world, but when you’re in India, you’re in India.”