BackGear up for tectonic shifts
Ahead of the Auto Expo 2016, Hero MotoCorp's Pawan Munjal on changes in India's automobile scene
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As we head into the Auto Expo 2016, I wish that it was possible to create a template for the auto industry’s future. Over the past few years and only accelerating further, we have seen game-changers and Black Swan events appear out of nowhere, throwing conventional wisdom out of the window.
A few years ago, no one could have foreseen an Uber or an Ola, who don’t own a single vehicle, cause urban commuters to rethink whether they should own personal vehicles in the first place. For that matter, who would have believed, just a few years ago, that in a city like Delhi or Mumbai, taxi drivers with apps would be earning more in a month than what some of the young MBAs do!
With tectonic shifts such as these, perhaps the only safe assumption we can make is that the road will be zigzag, with multiple forks, and not a boring straight one!
The auto customer today is the king, or queen, as the case may be. The customer today demands more—not just in terms of features, safety and fuel efficiency, but the overall solution, in which the traditional vehicle is becoming an increasingly smaller part. However, she is also willing to reward the providers for this additional value. This is already on its way to become the new industry norm. The intense competition and the start-ups challenging the historical “high entry barriers" will ensure that the automotive players stay on their toes to stay competitive.
Innovation, differentiation and cost leadership will be the key determining factors for auto manufacturers to remain viable.
Newer formats for automotive distribution are likely to emerge, and social media and e-commerce will play catalytic roles. For our existing channel partners, this would pose a challenge but also an opportunity to win new customers.
As we look at the auto industry, the reputation of a world-renowned carmaker is in shreds due to an emissions scandal.
Here in India, quite understandably, there is increasing judicial activism on environmental issues with the Supreme Court banning the registration of diesel cars of certain types. The National Green Tribunal is also getting impatient with auto makers for not taking the necessary initiatives in containing damage to the environment.
The Bharat Stage-VI norms for cars, originally scheduled for implementation in 2022 as per the draft notification, are now being proposed to be advanced to 2020, bypassing the BS-V stage. The next stage of emission norms for two-wheelers in India are also being proposed to be advanced by a few years—all these with the assumption that the petroleum ministry will be able to supply commercial fuel by 2020.
Simultaneously, there is also a serious debate going on across the world on alternative fuel.
In my view, as an industry, we should be proactive in bringing out environment-friendly, technologically advanced products, and not wait for the courts and the regulatory bodies to push us.
While these are challenges, I see immense opportunities for us in this scenario. If we start working towards developing products, say five to 10 years ahead of their time, we will always remain ahead of the curve.
For example, our own Hero-patented innovation i3S technology has been a move in the direction of a greener and cleaner future. i3S (Idle Stop and Start System) is a green technology that automatically shuts the engine when idling and turns it on when needed, thus avoiding wasteful burning of fuel in congested cities and giving higher mileage.
For us in the industry, greater efficiency will come at a cost, and if some struggle more than others, so be it. What is important to keep in mind is that it’s never too late to begin, because I believe personal transportation will remain the preferred mode of moving about in small towns, villages and Tier III cities, as public transportation remains locked in an unequal struggle with population growth.
I envisage a few more ultra-efficient hybrid vehicles making a mark across different vehicle categories. I also foresee more city administrations coming out openly in support of electric vehicles.
However, policymakers must ensure that they take a balanced, holistic approach as we go green. E-rickshaws, for example, may look environmentally clean on the surface, but actually, the lead-acid battery disposal will become a huge issue, as it has all over the world. And I’m not sure how it will be tackled if there is a proliferation of unregulated vehicles.
In terms of the demand scenario, over the short to medium term, demand for vehicles is likely to pick up as I expect rural economy to recover from two back-to-back droughts, also thanks to the gradual impact of weather forecasting and modern agriculture practices.
And the real demand momentum in rural India will come from the surge in census towns, or urbanised villages, as some would like to call them.
We are probably going to witness the most exciting phase in the automotive industry’s journey. There will be tectonic shifts, which can either be huge opportunities or challenges for an individual player, depending on how it chooses to respond.
I, for one, am very excited and looking forward to the road ahead.
Pawan Munjal is chairman, managing director and chief executive of Hero MotoCorp. The views expressed are personal. Respond to this column at feedback@livemint.com.
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