January 2021

January 2021


The femur of the Indian automobile industry was broken due to the pandemic. It will take every stakeholder, right from the customer to the policymaker to put it back in place. Not an easy task, but when shouldered by many, the weight gets significantly reduced. 2021 in my opinion, will be the year when a few brave automakers will take this step of transitioning into digital networks, setting the path for others to follow. The five predictions in my article, will not work in isolation. They are totally intertwined. Their coexistence is crucial towards the co-creation of a more sustainable and inclusive mobility system in India.

Well, we are finally in 2021 and “prediction” may not be the best of words to use in these times in the title of any article. Imagine if we were to revisit all the predictions for 2020 done in December 2019!!

So, let’s call them “trends” instead of predictions.

The Indian automobile industry, by its very size and impact, is one of the economy’s key pillars when it comes to progress, growth, and sustainability. Consider a few numbers — it constitutes 7% of national GDP, 49% of manufacturing GDP, 8% of exports, 15% of GST revenue, and 8% of R&D spending. The industry is a benchmark when it comes to employment, skills, investments, and development of a unique eco-system that includes indirect employment, townships, education, social development, and inclusiveness. The Auto Mission Plan of 2030 has a target of direct and indirect employment of 100 million people. That is surely no mean goal, even if the industry takes another ten years to achieve the same given disruptions like the COVID-19 crisis.

Mobility is a universal barometer of economic progress in any country. The higher the level of mobility, the quicker the economic development. It is a simple equation. Allow people and goods to move across the country reliably, quickly, safely, and economically, and you will see education, skills, health, food, enterprise, and employment all grow in tandem, almost uninterrupted. Access to multi-modal transport solutions on road, water, rail, and air is critical as well as penetration of each mode of mobility per 1000 people.

India is currently the 5th largest automobile market in the world. We are first in two-wheelers, second in buses, third in heavy trucks and, fourth in passenger four-wheelers. Impressive? Not really, given that we are 1.37 billion strong. So, it works out to just 126 two-wheelers per 1000 people, 23 four-wheelers, and a measly 1.3 buses!

Hence this industry has immense potential to grow much more on all fronts. Therefore, if it gets impacted by an unplanned disruption like the current pandemic, it actually sends shockwaves across all sectors and segments of the economy. For the industry to get back on its feet is crucial for India to recover and move forward. And the industry can do that only if the overall consumer sentiment is positive, enabling millions to experience both public and private transport.

The last two financial years have not been good for the industry as the consumer sentiment has taken a downturn since mid-2018 for a mix of factors. From September that year, the numbers started sliding right through 2019. As the industry was limping along, came the pandemic in February 2020 [to India, that is] and broke the femur bone!

As of now, the market has shrunk by around 20% over 2019, which was a bad year. The just-concluded festive season has thrown up some positive numbers for a few automakers. However, with critical segments like two-wheelers, heavy trucks, buses, and three-wheelers still depressed, recovery in the true sense [to 2018 levels] will take another 12 months, as I foresee.

The last nine months of the pandemic have made the Indian automobile industry both introspect hard as well as try out new processes and methods which might not have happened if the femur were not broken. Going by human nature, when you limp, you just carry on in the hope that the limp is temporary, and you shall walk and jog again. When the femur is gone, you just cannot move; therefore, you have to think hard about how best to heal and get up.

The industry is adopting more automation and robotics on the shop floor. Supply chain protocols are being re-written for design, production, and pipeline management. Design and prototyping are adopting digital, remote management, and 3D printing. Electric mobility is in the limelight. Downstream processes like vehicle delivery and servicing are relooking at traditional processes. The consumer is also behaving in a new manner in terms of digital research and engagement. There are many interesting trends to observe, some completely new and others, modifications of older habits.

I choose 5 out of the many as the key trends for the Indian automobile industry.

By industry, I imply both the upstream and downstream operations.

I dislike the term “Artificial Intelligence.” It somehow is not representative of the all-pervading role it will play in our lives tomorrow. What was an ‘experiment’ and ‘trend’ over the last couple of years has come to the forefront due to the pandemic. What was expected to play a limited role in manufacturing and production planning has now become intrinsic to every operation and stage of the vehicle ownership and experience cycle.

From my perspective, it is about “Augmented Intelligence,” where systems and processes allow further enhancement of processing and analysis capabilities of the human mind. There is nothing artificial about it. It is basically an extension of the mind that will enable us to observe, process, predict, and plan better. The moment the entire exercise becomes independent of human intervention, you have instances like the Facebook AI system mistakenly banning ads for struggling businesses just before the Black Friday sales.

Augmented Intelligence will be “conversational”
Chatbots will give way to Virtual Assistants, ranging from customer assistance to agent assistance to employee assistance. The entire process will be more humane, allowing for iterations and adaptations based on language, culture, and individual customer habits [and quirks too].

While working hand in hand with automation, robotics, and 3D printing at the manufacturing plant, AI will work at every step on the pipeline – right from studying prospect behavior, predicting needs, designing solutions, planning production, delivering just-in-time to predicting servicing interventions, and even planning the trade-in.

2021 will see the automakers deploy AI full-scale at each stage of the interface. This will have its own share of disruptions in operations, organization structure, and roles, but guess that is the cost one will have to pay to gear up for a post-pandemic life.

Public transport bore the biggest brunt of the lockdowns. Both people and goods movement had come to a standstill for close to two months. Fleet operators incurred huge losses. Those amongst us who could afford went ahead and got ourselves second-hand or new modes of personal transport as all forms of public transport were no more seen as “safe.”

However, in a country where close to 400 million travel on foot, the adoption of public transport holds enormous potential. Concurrently, cities need to adopt more public transport modes to gradually decongest as well as reduce air pollution vehicular emissions while reducing our import bills on fossil fuels. This is why there has been a strong, though directionless focus on electric vehicles.

Public transport will rebound in an electric avatar. This will be one big development happening through 2021, both for people as well as for goods. Specific states like Delhi NCR, Telangana, and Karnataka have taken bold moves on this front. All others will follow.

Buses of all shapes and sizes will be in electric forms. Also, they will incorporate new designed-in standards of hygiene, safety, and connectivity. Imagine the sheer expansion of scope and scale of the business if bus penetration rises from 1.3 per 1000 persons to 13 in the next ten years!

Electric micro, mini, and light commercial vehicles are the best way forward, with all automakers in this space hyper-active for the first-mover advantage. New names in electric mobility are also launching three-wheeler CVs.

Anxieties on charging infrastructure and operating range are ably addressed through a cluster-charging infrastructure of fleet operators and logistics companies. The concept of swappable batteries will work equally well in this scenario where there is control on vehicle operation, maintenance, and charging.

If India gains significant traction in the adoption of electric mobility, public transport is the best bet. And 2021 can indeed be the watershed year for that.

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Seems far-fetched for a country where vehicle penetrations levels are still very low? Not at all. My reading is that while the Indian market will start growing again in the next 12 months, the rate of growth will not be as planned in the Auto Mission Plan 2030 for the following reasons:

  • Public transport will become more mainstream in the form of a robust bus and last-mile connector network.
  • Those amongst us who will take to any form of mobility for the first time will opt for either public transport or new forms of personal transport like electric bicycles [an entirely new segment for India].
  • In the cities, with further evolution of public transport and shared solutions, in terms of safety, hygiene and reliability, the younger generation will decide against locking up resources in vehicle ownership, even if loan interest rates go down.
  • With a significant share of white-collar jobs becoming remote, the need for personal mobility will reduce.
  • Even ‘ownership’ formats will change with leasing being actively offered by most automakers in the mass/volume segments.
    Hence, while personal vehicle penetration will undoubtedly increase, it will not increase as traditionally projected on the assumption that Indians, middle-class and above, will want to ‘own’ a vehicle as a symbol of achievement and status. Even if the swing falls in the range of 15-20% a year, it is significant enough for the industry to ponder.
Brands will finally have to walk the talk of providing differentiated experiences to the consumer rather than just focusing on selling and servicing. The target will be the “consumer” and no longer the “owner.”

The focus will be on creating experience packages than extended warranty packages. The focus will be on repeat experiences rather than resale value. Brands like Maruti Suzuki and Hyundai have embarked on leasing programs. Solution providers like Zoomcar and KeyLeasing allow consumers to experience premium and luxury brands without actually having to own them. This is the other spectrum of true democratization of mobility for those who can afford it. And 2021 can be a terrific time to kick-start this.

More than a century ago, the internal combustion engine pushed the electric vehicle out of favor, using all tricks in the trade, lobbying hard, and playing on fears of reliability and range with the consumers then. Now it seems to have turned full circle, with petrol and diesel engines being the villains of the world, especially the latter. Electric mobility is being touted as the emancipator of all that is messed up with the air, which is perfectly fine as long the battle of options for clean mobility is open and fair to actively consider solutions like ethanol, methanol, biofuels, and hydrogen.

Some energy experts swear that hydrogen is an option that might bite the lithium battery where it hurts. Regarded expensive and difficult to store right now, both automakers and oil companies are working on hydrogen as a viable alternative. The Hydrogen Association of India has a clear roadmap for offering this as a clean mobility solution that is more efficient and sustainable than electric, which suffers from questions on the source of electricity and the use of thermoplastics to house the cells.

2021 will see increased discussions on hydrogen as another clean mobility solution in India with its strong lobby of scientists, activists, and engineers pushing policymakers into offering the same level of incentives as for electric vehicles.

Report after report gives the verdict that the Indian automobile customer has evolved in research and ownership behavior. The medium is digital —for knowledge, reviews, word-of-mouth, shortlisting, booking test drives/rides, scheduling servicing, etc.

The only aspect of vehicle ownership that is still not digital and virtual is the financing process —full of paperwork and physical interactions. Fintech is helping change all that. Some banks are already promising a process that needs a minimal physical interface, at the choice of the customer. Once this rolls out as a standard operating procedure across the banking and finance community, the need for a physical structure called a “showroom” gets further diminished. Maruti Suzuki recently announced that digital sales gained rapid adoption in these times of distancing.

The brick and mortar vehicle network is a thing of the past. Its relevance lies only in the service center and a brand experience zone, if at all. Automakers looking at expanding their reach through physical infrastructure will be putting money on the wrong horse. It needs to be placed on more AI-enabled experiences and virtual infrastructure in tandem with consumer desires. And this applies equally well to both urban and rural customers. The lines are totally blurred between the “India” and “Bharat” that marketers have always loved dividing the market into.

2021 will be the year when a few brave automakers will take this step of transitioning into digital networks, setting the path for others to follow.

None of these five key trends, in my opinion, work in isolation. They are totally intertwined. Their coexistence is crucial towards the co-creation of a more sustainable and inclusive mobility system in India. Even after 70+ years of independence, mobility is exclusive, expensive, and not accessible to all. Policymakers still consider a two-wheeler, leave alone a car, as a luxury product, and it attracts the highest GST rate.

The renowned anthropologist Margaret Mead had once commented that the first sign of civilization in a culture was a healed femur bone. If you break the femur in the animal kingdom, you are left to die as there is no one to help you repair and recover. A broken femur that has healed is evidence that others stayed with the affected person, bound up the wound, put the bone in a splint, carried the person to safety, and then helped recover. “Helping someone else through difficulty is where civilization starts,” Mead said.

The femur of the Indian automobile industry was broken due to the pandemic. It will take every stakeholder, right from the customer to the policymaker to put it back in place. Not an easy task, but when shouldered by many, the weight gets significantly reduced.