Indian auto industry coasts demonetization slump; gears up for future

It was a year of mixed fortunes for the Indian automobile industry that experienced growth as well as tax, legal, and government policy challenges. The growth in the sector will ensure that the Passenger Vehicle market in India will surpass the Japanese market by selling about 5 million Vehicles by 2017-18.

In 2017, we can look forward to new government policies, the introduction of GST in the first quarter of 2017, and new emission and safety standards. Demonetization will also play a significant role in impacting transaction trends.

The Indian automotive industry stands at an impressive USD 74 billion today. The industry is well poised to take the spot as the third largest auto market by the end of the current fiscal.

India currently enjoys being the second largest market for two wheelers, and the third largest for small cars. There are various factors that contribute to India’s growing automobile sales. Easy availability of financing options, poor public transport, a favorable duty structure, and a rising family income have contributed heavily towards the growth of the Indian auto market. In addition to this, a key factor has been average age of the Indian car buyer hover below 33.

In the Indian scenario, the automotive sector will look for new efficiencies by leveraging technology. We spoke to CIOs of leading automobile companies to understand their technology deployment priorities: Venkatesh Natarajan, Sr. VP – IT, Ashok Leyland, Jagdish Belwal, CIO, GE Transportation, R. Jorapur, CIO, Bajaj Auto, Vijay Sethi, CIO, Hero Motocorp.

How do you see the industry faring this year?

Venkatesh Natarajan: Though the economy is slightly sluggish at this point in time due to the demonetization effect, but I believe our fundamentals are very strong. So, we only expect things to improve moving forward. 

So, overall, whether it’s for the passenger vehicle segment, or the two-wheeler segment, or the commercial vehicle segment, I think the next financial year will be good.

Vijay Sethi: Till November, sales figures were fantastic. There was a huge impact in November, but the industry has overcome that now. We’re seeing sales figures climbing up again. And market is going to fare better as the year progresses.

What will be the impact of GST on Indian auto?

Natarajan: The impact of GST is also to be looked in to. The initial impact of GST will result in a bit of a downslide. But once this settles down, the impact of GST will be significant.

How long the downslide lasts is questionable, though. It could be around eight to twelve months, in my opinion. It will be a while before the industry starts realizing the benefits of GST.

So, I believe, there will be a slight dip and then we’ll see a substantial increase.

Sethi: From an IT perspective, GST is going to be one of the largest and toughest projects for all organizations. It may seem simple, but the amount of changes both in processes and IT infrastructure is going to be huge.

What are the technologies the auto sector will be focusing on in 2017? 

Natarajan: There are a host of technologies which are relevant for the auto industry. Today, if you do a quick scan of the technology landscape and the digital trends, you’ll see a whole lot of technologies available at your disposal.

The automotive industry will continue going strong on mobility and analytics. In addition to this, the sector will be latching on to newer technologies including artificial intelligence, chat bots. 3D printing will start maturing with organizations adopting it for additive manufacturing. So, these are some of the technologies which will gain traction this year.

Sethi: During the last year, we gave a lot of focus on SMAC (Social Mobile Analytics & Cloud). I call them conventional technologies now. We’re now taking this to the next step.

We’ve done POCs on newer technologies like predictive analysis, IoT, robotics, bots, and augmented reality. So, these are the new focus areas we’ve already started looking at.

Jagdish Belwal: Mobility will be one key trendsetter this year. In addition to this, keep an eye out for connected car technology making an impact in ’17.

R. Jorapur: One of the core objectives is to reduce transportation time and cost from the supplying plant to the dealers.

Impact of IoT and robotics in the auto segment

Natarajan: IoT and robotics are very relevant to the sector. IoT has not seen significant usage in the manufacturing space in India, but there is sporadic usage of these technologies in the industry. I foresee organizations exploring avenues for deployment of IoT technology.

If you see the automotive industry, you’ll see that it has predominantly focused on the front-end operations. This is for improving operational efficiency, productivity, and how it helps in cost reduction.

But, I see those shifting gears now to see how digital can also play a role in generating new revenue streams and increasing profitability at the organization.

At Ashok Leyland, we’ll be focusing on chat bots, virtual reality, and augmented reality. We’ll of course continue focusing on other technologies like mobility. We’re deep into it for the last four years, and we’ll continue our foray into advanced technologies.

There some pilots and POCs which are already underway on these technologies.

Sethi: The focus is on looking at technologies that can bring more value to the business. So, be it augmented reality, artificial intelligence, robotics, or IoT – if any of these bring a huge business value, and we should be looking at them.

We even experiment on technologies which haven’t yet matured. We’ve experimented with augmented reality, IoT, and predictive analysis. Some of these projects could mature over the next two to four years.

What are the challenges you foresee in 2017?

Natarajan: The industry has to gear up to embrace GST, and that seems to be one of the biggest challenges. How organizations adapt themselves to GST still remains a kind of a black box in terms of how we’re going to leverage the new GST norms.

Sethi: I believe there will be one major challenge, and that will be a resource challenge. This is in terms of finding competent people who are sincere and aware of the new technologies and the business impact of technologies.

Resources will be there, but there will be a huge challenge in finding good resources. CIOs ought to give a lot of importance on upgrading the skillset of their teams and also working closely with their partner ecosystem.

I believe GST, in the long run, could be a very positive reform for the industry. It could result in a good increase in sales. So, compared to 2016, I expect this year to be a lot better.

Another major change I see is that from 1st April, the emission norms are going to change – BS-4 will be mandated across the industry. There could be initial challenges, but I don’t foresee that as something major, as companies have already started rolling out BS-4 vehicles.