How Auto Industry is Improving Momentum with Increasing Vehicle Demand
Experiencing steady growth over the last few decades, the Indian auto industry is on the rise. Some of the contributing factors include a satisfied end-user market, improved consumer sentiment, and return of adequate revenue to keep the financial system stable.
The auto industry accounts for almost 7% of India’s gross domestic product (GDP) and around 19 million people, both directly and indirectly. A stable government framework increased purchasing power, a large domestic market, and developing infrastructure are propelling the industry forward. On top of this, the Make in India initiative is fast making India a favorite of investors.
Major investments are being made into the Indian auto components sector. Take for example MRF Ltd is planning to invest Rs 4,500 crore ($ 660.231 million) in its two factories in Tamil Nadu as part of its expansion plan. Hero MotoCorp is investing Rs 5,000 crore ($ 733.59 million) in five manufacturing facilities across India, Colombia, and Bangladesh, to increase its annual production capacity to 12 million units by 2020.
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Challenges on the way
In a span of a few years, the automotive components industry has scaled three times to $ 39 billion in 2015-16, while exports have grown to $ 10.8 billion. Growth in the domestic market and increasing globalization (including exports) of several Indian suppliers have been big contributing factors to this rapid up-scaling.
It has been forecast by ICRA that the industry will grow by 8-10% in the financial year 2017-18, an impressive number, based on higher localization by original equipment manufacturers (OEM), higher component content per vehicle, and rising exports from India.
According to the Automotive Component Manufacturers Association of India (ACMA), the Indian auto components industry is expected to register a turnover of $ 100 billion by 2020 backed by strong exports ranging between $ 80- $ 100 billion by 2026, from the current $ 11.2 billion.
The auto industry however has also found itself mired in some challenges due to its rapid growth. The competition from other countries and the internal policies of the government are affecting the sector directly or indirectly. The need of the hour is for the auto industry to become more competitive and productive so that the growth that the automobile industry is experiencing is not slowed down. Some of the challenges the auto industry is facing include,
- With respect to machines, challenges include high maintenance cost, aging machines, and low productivity which accounts for 26 percent, 20 percent, and 17 percent respectively
- Frequent breakdowns (15%), a high workforce to operate (12%), and low automation or no automation (10%)
- Supply chain challenges include material handling, customer demand, and transportation due to inventory management
- Inventory challenges include demand variability, extended response time, lack of visibility of supply chain, lack of collaboration between partners, quality level, and reliability of service from suppliers
- Supplier-related challenges include delayed delivery, improper quality raw material, non-availability, the high price of the product
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How to counter the challenges to keep the momentum of the auto industry going?
Customer Satisfaction
Customer satisfaction at competitive prices and high-quality service through on-time delivery can provide a clear lead to an organization among competitors in today’s otherwise competitive world. This advantage on a steady basis will provide a platform for sustainable development. An integrated staged approach for this can create an efficient working environment. It can deliver more rational and optimum benefits.
Cross-functional Teams
To achieve progress, it is important that the approach is not defined narrowly and that a cross-functional team (CFT) infrastructure is in place to ensure that the benefits of the application can be utilized properly.
Implementation of New Methods
Implementation of things like Total Productive Maintenance (TPM), Value Stream Mapping (VSM) and time and motion study in the existing system can give great results in domains of 3Ms: machine performance, material flow and manpower productivity respectively.
Structured Approach
By assessing the process in different levels, a standardised system can be designed to identify existing issues and resolving them. This includes the study of customer demand, examining the external and internal conditions, combining different operations to increase the productivity per person as well as per station. Integrating these principles can help organisations, to optimise resources and produce high quality products to meet market demand.
The automobile industry is growing exponentially and is unlikely to stop anytime soon. The auto industry thus needs to make sure it meets this demand by increasing its efficiency, productivity and scale.
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