Getting into India: opportunities exist for Aussie auto companies, says new report

Automotive might be disappearing here, but Australian skills in the sector are valued in India, and opportunities are growing. Austrade’s Nicola Watkinson told Brent Balinski a few things about why the times, and our way with “affordable excellence”, are right.

The number of Australian cars produced annually has trended downward since the 1970s, and is set to be nothing by 2018.

India’s auto production, on the other hand, has never been stronger and it’s predicted to become the fourth-biggest producer by volume this year.

This coincides with the country’s overall economic growth featuring among the strongest in the world, and Prime Minister Narendra Modi’s bold plan (announced September) to put manufacturing front and centre in economic policy.

“I think it’s a really interesting point in the manufacturing sector in India at the moment, and that is creating specific opportunities for the Australian sector,” Austrade’s Nicola Watkinson, Senior Trade and Investment Commissioner, South Asia, told Manufacturers’ Monthly.

“There has been over the last couple of years a downturn in the manufacturing sector in India.

“And indeed when I came to the post just on two years ago it was the first time India had seen a drop in its domestic automotive sales for passenger vehicles.”

Automotive, worth 22 per cent of all of manufacturing in India, has traditionally been tight-fisted with its R&D spending. Times are changing, though. A decade ago it spent about 1 per cent of revenues, though this has grown to 2 – 3 per cent (still comparatively low globally).

Competition from foreign companies such as Honda means that the big players in India – such as Tata and Mahindra – and their OEMs are trying harder to win back market share in the $90 billion sector.

Influential trends include more product launches, greater consumer expectations and a greater demand for affordable luxury, according to a KPMG report, Opportunity Assessment of Automotive R&D Market In India, released this month.

Indian car makers are also increasingly looking outside of their organisations, according to the report, with Australian companies well-placed to step up and “bridge the in-house capability gap” where needed.

“At once we have both a need and a willingness to pay in India with these kinds of technology solutions,” said Watkinson.

“And secondly because our analysis shows that Australia is very well regarded in these areas of process improvement, design, technology and engineering and we can actually help our automotive to come into the market and take advantage of that.”

According to KPMG’s research, there is strong potential in six areas: light weighting; alternative fuels; optimisation of power train, chassis and other parts; vehicle electrification; vehicle electronics; and safety technologies.

Indian OEM and automobile firms have traditionally looked to Europe and US companies for outside help, but Australian companies are increasingly stepping up to assist.

And there’s reason to believe that the country could add to some early-stage success stories, believes Watkinson.

Citing examples of successful collaboration including Walkinshaw Group (with JA Motor Sports), Premcar (with L&T Technology Service) and Orbital (with UCAL Fuel Systems), Austrade says Aussie expertise is well regarded.

There are also other advantages in dealing in the Indian market.

Firstly, the culture of “frugal innovation” – or “affordable excellence”, if you will, offered Watkinson – in Indian manufacturing matched nicely with Australian companies.

“The paradigm is 70 per cent of the value for 30 per cent of the price,” she said. It should not be confused being “cheap and nasty”, but a no-frills approach that eschews some of the elegance but offers high functionality.

Secondly, the Australian model is well regarded as one that will work with a client and provide a total solution, rather than a “black box” offering.

“That’s what’s traditionally being offered by markets like Europe,” said Watkinson.

“They like the fact that Australians are willing to come along and partner with them and work with them to customise solutions to their particular market requirements and actually develop something, rather than just buy something from one of the German Tier 1 or Tier 2s that is basically then just given to them fully developed.”
For more on linking Australian automotive innovation with Indian businesses, see here.

 

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