Society of Indian Automobile Manufacturers (SIAM) recently announced that the 2-wheeler industry in India has crossed 20 million units in sales for the first time, in FY 2018. This is across 12 OEMs registering an average industry year on year growth of 16%. It includes the top six – Hero, Honda, TVS, Bajaj, Royal Enfield and Suzuki.
An interesting observation is that the doubledigit growth for the 2-wheeler industry has come after six years despite GST roll out and Demonetization. New product launches, capacity expansion and exports seem to be the common growth themes for most companies.
Does technology have anything to do with this growth?
In our last article (The Hunt Report Vol. 12) we spoke of autonomous vehicles for the customer, governments push to help OEMs to set up infrastructure and collaboration with global firms. Well, it still seems to be a thing of the near future. An industry professional said, “Two-wheelers are the easiest to go in for electrification, particularly from the cost perspective. India now needs to take strides and strengthen its EV policy”. He adds, “Short term focus will be on emission norms, safety, comfort, infotainment and telematic.”
The first wave of Technology adoption seems to be coming from Electric Two-wheelers, however the industry still lags in the much necessary infrastructure push. There are less than 500 EV charging stations in the country today. Consumers are getting used to AHO (from April 2017) and ABS/CBS (April 2018 for new models and April 2019 for existing models).
A senior professional from the autocomponent industry mentions, “Twowheelers are ideal for electrification and a lot easier than passenger cars.Coming to e-mobility for two-wheelers, total cost of ownership (TCO) will be attractive only if battery prices come down to around $100 per KwH. The price gap is highest in the 100- 125cc commuter bike segment. There is still sometime before we get there.”In contrast, the industry believes that the Chinese EV’s are a threat for a hugely under-penetrated EV market in India today.
We have recently seen the launch of Ather Energy’s 340 smart electric scooter, along with one year of free maintenance including road side assistance and unlimited charging at public points.
It’s All About Design, Engineering & Technology
Hunt Partners believes that Design and Engineering are core to bring about the change 2-wheeler customers want to see, amongst others and that styling is a key component to adapt several changes. Hunt has recently appointed the Global Head of Design at a top 3 player (to join in Q3), who mentions, “The gestation period varies between 18 months to 3 years for an e-scooter and 6-7 years for an e-motorcycle. However, the demand in the country for such a product, will certainly see OEMs shorten the timeline for delivery.”
The Need for Talent
One of the key challenges many leaders spoke to us about is that of talent – individuals who understand this blend of design, engineering and technology. Hunt Partners view here is that, the huge opportunity in India for Global and Local OEMs lies in its scale (downstream activities such as sales, marketing, distribution and service), hence the time so far has gone in strengthening the downstream of the business but the upstream (design, engineering, technology, product innovation) has been left behind.
“Let’s take the example of Design. India has not produced a single Indian origin designer globally for the industry. The reason is because when Global players entered India in 2005-06, they retained design support in North America and Europe. And Indian OEMs have mostly desired such talent from overseas”, remarks a senior HR professional at a 2-wheeler OEM in the country.
A recently published SIAM report highlighted that while many of the Global OEMs are increasing their designing focus in the Indian market, most of the new launches here, are global successful models. We will like to point out here that lack of homegrown talent in the industry will hamper growth in the second largest automobile market in the world; especially at a time when many global players are setting up shop floors or development centers here.
It is to be noted that while the market will continue to see new model launches and facelifts, all companies are gearing up for the incoming safety norms (for the existing two-wheeler model range) and the BS VI emission norms in near future on priority. Despite its challenges, the Indian 2-wheeler industry seems to be on a powertrack to reach where its customers want it to be.