Continental India is one of the major component manufacturers in India spearheading the introduction of new technologies and boosting the Make-in-India campaign. Prashanth Doreswamy, Country Head of Continental India and Managing Director of Continental Automotive opens up about the industry’s current scenario and the way forward.
The Indian auto component industry has been making headlines for quite a few reasons lately. While the auto component industry was amongst one of the most impacted sectors due to the Covid-19 pandemic, it also showed great resilience. In the Union Budget 2021, Finance Minister Nirmala Sitharaman proposed an increase of tax on a select number of auto parts in order to promote local manufacturing.
Later, Minister of Road, Transport and Highways Nitin Gadkari too suggested the auto component industry should opt for 100% localisation, which would help the country to become an auto manufacturing hub and also make it an important player in the global supply chain. Last year, the government announced the Production Linked Incentive (PLI) scheme that earmarked Rs 57,042 crore for the automobile and auto component manufacturing industry as combined, the lion’s share of the total Rs 1.45 lakh crore allocation under the scheme.
Continental India is a key part of the German multinational auto component and technology supplier Continental AG. Autofintechs spoke to Prashanth Doreswamy, Country Head of Continental India and Managing Director of Continental Automotive to learn the current status of the industry, the policy impacts.
Edited excerpts below.
Q. The Budget 2021 has proposed the imposition of a 15% customs duty on certain auto parts from the current 7.5-10%. Besides that, there will be 5% of infrastructure and agriculture cess. How does this move impact the auto component industry?
The increase in customs duty for certain auto parts has raised concerns in some quarters. In the short term, yes, there could be an increase in the overall cost of the vehicle. The duties on parts such as ignition wiring sets, safety glass, etc., have been increased, effective 02 Feb 2021. The next set of revised rates will be implemented from October 2021. The focus here, we have to remember, is to promote MSMEs and local manufacturing.
Q. Automotive safety has been making headlines off late. How do you see the Indian advanced safety technology market is growing? What has been the Covid-19 impact in this segment and how is the recovery?
India has been focused on improving road safety for the last few years. We’ve seen the introduction of policies that made ABS mandatory for bikes over 125cc, airbags in cars, etc. India is also working to make Electronic Stability Control (ESC) and Autonomous Emergency Braking (AEB) mandatory in cars by 2022-23. There is a strong focus on making Indian roads safer. Programs like Global NCAP will play a key role too, in creating awareness which would translate into the uptake of safety technologies.
Affordability should not mean a compromise in quality and necessities.
Consumer awareness on the other hand is on a raise too, thanks to the progressive dialogue initiated by the industry through various safety awareness campaigns. Technologies such as ESC, Parking Assist, and Tire Pressure Monitoring System (TPMS) are among features that are expected in a vehicle today.
Covid-19 did have some impact on the sales and growth of the industry. However, post the lockdown, automotive sales have been on a steady rise. The recent scrappage policy announced during the Union Budget 2021 will also encourage demand. We await clarity on details about the policy, but the introduction of this is a move in the right direction.
India has always been a value-driven market.
Q. With the new regulatory reforms on safety, the auto industry stakeholders are talking more on the subject. Do you think automakers and customers in India are prioritising safety over vehicle price/affordability?
India has always been a value-driven market. While the addition of safety technologies results in a small price increase of the vehicle, the consumer also understands the value of these technologies. Having said that, through local R&D and engineering efforts we have opportunities to adapt globally proven technologies to local needs and demand. One good example of this model is Continental’s affordable one-channel ABS, MiniMAB, which is a small and lightweight solution designed to keep the Indian market in view.
Affordable should not mean a compromise in quality and necessities. India has one of the highest figures in road accidents, and we all – OEMs, component makers, policymakers, and the end consumer – need to work together to make our roads safer.
2021 will see a demand for advanced safety and smart connected technologies.
Standard safety functions like ABS, ESC have been around for many years, legislated in several geographies, and are already quite affordable. At Continental, we have been focusing on bringing newer safety technologies to India. Our R&D team is working towards adapting these technologies to the Indian road conditions, as well as making them affordable for the market. Following our philosophy of ‘in the market, for the market’, we are also investing in localization.
Moreover, if safety technologies become a norm rather than a premium upgrade, the adoption of such technologies will increase, and gradually this will bring down the cost of the product. This is how developed economies evolved over the decades when it comes to vehicle safety systems.
Q. What’s is Continental India’s capacity expansion plan in the FY22? How has been FY21 so far for the company?
As mentioned above, localization is a vital business factor for Continental India. Continental, with an ‘in the market, for the market’ approach, has been consistently investing in the Indian market and will continue to do so. In mid-2018, we announced a high-three-digit crore investment into India. We have made investments in localizing several products or expanding the capacity of existing lines to meet local demand.
For example, the Capacity expansion for Airbag Control Units in Bengaluru, Wheel Speed Sensors in Manesar in 2019 and 2020. Another example is the launch of a new greenfield project in Pune in December 2018 for premium Interior Surface solutions.
We are on track with the industry trends, as 2021 will see a demand for advanced safety and smart connected technologies. We will continue to support our customers in this requirement by offering innovative technologies at a cost-competitive price. And our ‘in the market, for the market’ strategy, will help us achieve this goal, right from product conceptualization, engineering, validation, and manufacturing.
Q. M&As in the automotive sector have seen a surge lately. Is Continental India open to collaborating with startups in the country to enhance the R&D and product coverage in the automotive safety segment?
Agility is key to innovation, and Continental is approaching this from multiple avenues, not just startups. Globally, Continental has set up the startup organization Co-pace. Co-pace taps into future business models and creative concepts outside the confines of the traditional corporate structure. It acts as an incubator for the ideas of Continental employees – in addition to the cooperation program for external startups and Continental’s own venture capital unit, employees have an opportunity to incubate their concepts, accelerate them to market maturity as quickly as possible, and scale the resulting business models.
Co-pace gives entrepreneurs the freedom and resources to grow; accelerates Continental’s agility and innovation. In fact, a participant (employee) in our first co-pace cohort launched a new company, PassiveBolt, in Michigan.
Continental India has forged partnerships with several academic institutions, including IIT-D, IIT-M, IIIT-B, IIIT-D.
Apart from this, Continental has engaged with top engineering institutions in India for cutting-edge research and to build competencies on niche ADAS functionalities that pave the way towards automated driving. In the last few years, Continental India has forged partnerships with several academic institutions, including the Indian Institute of Technology Delhi (IIT-D), Indian Institute of Technology Madras (IIT-M), International Institute of Information Technology Bangalore (IIIT-B), Indraprastha Institute of Information Technology Delhi (IIIT-D), among others, for collaboration in this rapidly evolving technology area.
Continental India’s strategic partnerships aim to support three key strategic pillars – technological advancement, creating an industry-ready talent pool, and enabling open innovation in the ecosystem.
Q. Indian automotive players have been long accused of not emphasizing much on R&D as compared to other global companies. How do you see this changing (if at all)?
R&D in the Indian automotive sector is on a growth path. The growing emphasis on R&D is the welcoming change in the Indian automotive sector and is going to establish India as a global hub for innovation and cutting-edge ideas, going beyond mere cost-effectiveness.
According to a recent report by KPMG, Bengaluru is among the top 10 global innovation hubs in the world.
A very recent report from KPMG places Bengaluru among the top 10 global innovation hubs in the world. India moved up the rank to 52 on the Global Innovation Index (GII) in 2019 as compared with 66 in 2016. (GII provides detailed metrics about the innovation performance of 127 countries and economies around the world. Its 81 indicators explore a broad vision of innovation, including political environment, education, infrastructure, and business sophistication.). The growing startup ecosystem in India is at the forefront of innovation.
Continental’s TCI today supports end-to-end product development from requirement engineering to product build-up and testing in specific areas encompassing software, electronics, and mechanics. TCI’s engineers are making significant contributions to the development of advanced technology for developed markets. TCI is also actively contributing to the global requirements.
TCI is involved in several global-level projects, ranging from the market solution like one channel ABS solutions for 2- wheelers, to highly sophisticated technologies for domains such as Advanced Driver Assistance Systems (ADAS) and Artificial Intelligence. Adding value with its understanding of the local market and customers, TCI is fast emerging as a “Center of Competence” for 2-wheeler markets and customized products for the BRIC countries.
Q. The auto industry is facing major disruption due to CASE. Are the Indian auto industry, customers, and other stakeholders ready to adopt the change, given the fact that there are issues like infrastructure, consumer perception, etc?
These are the long-term trends – a future we are headed towards. While some of these might see a shift in the short-term, given the pandemic, but the future is Connected, Autonomous, Shared, and Electric.
Much like any long-term transformation, it will take some time to fully adopt these technologies and there are challenges like infrastructure and consumer perception along the way. But we are already on the right path. Almost every average car today features connected technologies like navigation etc., ADAS technologies like AEB are in talks to become government-mandated, the government is already pushing towards electrification for instance the Delhi government recently announced its Switch Delhi campaign. The shared mobility has taken a backseat post-pandemic, but we might see a recovery gradually once we overcome the Covid-19 situation.
Q. What’s the biggest challenge the Indian automotive technology and the component sector is facing when it comes to becoming a global player?
India has the talent pool and resources required for innovation and becoming a global player. In the long term, we need to focus on skilling and upskilling of talent and close the gap between the academic set-up and industry requirements. This apart, a rapid scaling up of infrastructure, and easy access to the resource are other factors that contribute to overall growth.