Time to set a global agenda

Auto Monitor , 31/1/2002

For the phenomenon of accelerated change, that Alvin Toffler so dramatically described as 'future shock', Indian automotive industry is a telling illustration. Looking back at the last five decades, the initial first half is devoid of any change. Then, the 1980s saw the rumblings of mild change in the form of entry of international technology in a new breed of two wheelers, especially motorcycles, followed by LCVs and what may be called as India's first world class car. These were the earliest signs of 'globalisation' in Indian automotive industry. The change process gained some momentum 1990s which saw accelerated emission regulations, alternative fuels and, close on the heels of economic reforms, the rush of global automotive giants who collectively offer over 100 models in four distinct car segments. The last decade also witnessed an exponential growth in vehicle population accompanied by growing concerns in respect of air quality and road safety. Into the new millenium, the automotive industry's agenda is a long one with globalisation an overriding theme. There are a few fresh issues in prospect but the many implications of globalisation will continue to dominate.

Apt, then, that we start with some fundamental questions on globalisation.

First of all, what do we mean by globalization?

If by globalisation we mean a set of actions required to deliver global products and services to the consumer, it has already started happening. Thanks to the opening up of the market, an Indian consumer has local access to the same products that his counterparts in many parts of the world drive. Simultaneously with the products themselves, sales and after sales infrastructure is also moving towards global practices. This is certainly true in case of cars and to some extent, in two wheelers. India is no more an island in the global market. It is part of a technologically contiguous territory - and an expanding one at that - in the world market. In terms of technology, product options and sophistication, this growing geographical segment is somewhere at the mid-point of a necessarily heterogeneous world market.
This transition in the car and two wheeler segments has been facilitated by the arrival of a growing class, its nucleus made up of global Indians, with access to global information and, often, pay cheques issued by the global economy. A class that is world-class and believes it deserves world-class. Their aspirations liberated from tradition, these life style symbols added the missing colours in their self-portraits.

In the case of commercial vehicles, the demand drivers are entirely different. Commercial vehicles are not life style products, but capital goods and should make economic sense to the operator. The vehicles are only a factor in the operating environment, which collectively determine the operating economics. The state of our road network, our loading / unloading and operating practices, the commercial speeds are all peculiar to India and anything but global, best answered by the indigenous models. It is the customer's business decision when he opts not to buy international models, nor even high productivity vehicles offered by the indigenous industry in anticipation. India will become a market for world class trucks not before our roads and the fuel quality improve to world standards, not before the end customer starts demanding safety and comfort which will come at a price including better remuneration to the driver and the operator, and better fare from the passenger.

Does globalisation mean serving global markets?

In 2000-01, 22,913 cars, 111,138 two-wheelers and 13,779 commercial vehicles were exported. Clearly, many of the multinational car manufacturers see sourcing opportunities out of their huge investments in India. In the large technologically contiguous markets, Indian products are indistinguishable from cars that roll out from overseas assembly lines.

At the same time, our export potential is far in excess of our current performance. A quantum leap in Indian exports will call for greater innovation (not necessarily in technology), an entrepreneurial approach and - even more basic - manufacturing processes that are globally competitive. The beachheads that Japan's auto industry built on American soil were precisely these values. On their patented back-stage, manufacturing strengths of quality and costs, they offered innovative products and product applications that redefined the market. Even today, the psychographic heterogeneity of mankind has ensured steady markets for Harley Davidsons and Beatles. Personal vehicles being personality projections and not mere means of transport, there are unfulfilled desires that offer many niche segments. This can be capitalised by car manufacturers to improve the RoI on their huge investments and two wheeler manufacturers, to sustain current growth rates.

The same thing cannot be said for commercial vehicles. Unless and until the external factors in the domestic operating conditions - road, fuels, freight rates, customer expectations et al - graduate to global standards, significant strides in exports cannot be expected. However accelerated emission norms and the accompanying technology upgradation will help us bridge the gap with more part of the world and will enhance our export capability.

The use of exports performance as a barometer of globalsation raises a question frequently asked in the context of the WTO regime. Should boundary-less world trade mean converting some parts of the world into colonial style trading zones? How about the local job creation and aspirations?

Clearly, a sustainable world order demands sharing of opportunities for wealth creation. Globalisation and market expansion based on local value addition and job creation will be a more acceptable idea worldwide. Some aspiring Indian MNCs in other industry sectors have already seen the wisdom in this approach. It will be in the interest of every country including India to make local value addition not a dicktat but an attractive business alternative to import of ready-to-use products.

In short, globalisation means
i) being part of a technologically contiguous territory in the world market and not necessarily, - at least, not yet - part of the most developed markets.
ii) a significant presence in the export market, not through the export of ready-to-drive vehicles but through local value addition that will contribute to local economies.

Having looked at globalisation from the two ends - of the product and the market presence - we can address the question we have heard now for a decade: Should we globalise? The answer is short and straightforward. We do not have a choice. India - her many parts that currently co-exist in different centuries - is irrevocably getting integrated with the world. Rather than waiting for the inevitable, prudence demands that we embrace it by design from a position of preparedness, through calibrated steps to become globally competitive. This applies even more for the country's automotive industry. From the national perspective, it is important that this industry attains global competitiveness. It contributes 4% of GDP and Rs 152 billion in taxes and provides employment to 12 million people. It has the potential to make a much larger contribution to the economy and to job creation.

The industry's future success will lie in attaining global competitiveness in its manufacturing processes. Our manufacturing base has the benefit of adequate backward and forward integration. We already have world class manufacturing technology and processes. What has not kept pace are the shop floor practices, denting one of our biggest competitive advantages. We have a long way to go before we attain global levels of productivity and quality. The wild (month-to-month) demand fluctuations in recent years have taught the industry the virtues of flexibility but rigid labour laws stand in the way. Labour and tax reforms are two key tasks in the state domain, along with infrastructural adequacy. Count here not just roads but all the inputs, their uninterrupted, fuss-free availability.

Equally, the industry has ceased to attract talents. It is no more the preferred destination for the technically qualified. The industry needs the cream of our universities to come on board, especially in shop floor management and in design. Again, it is a question of competitiveness. Is the auto industry competitive as an employer? Though this is a company-specific issue, do we need a cultural shift offering greater empowerment and rewarding careers that match ambitions of the new generation?

An automobile is part of every child's fantasy. We have to rekindle the interest, restore the glamour in the industry. That is one of the spin offs of international auto shows like Auto Expo, which has grown to become many things to many constituents: a multi-brand show case for the customer, a walk-in test market, a captive sample for MR, a meeting place for prospecting collaborations, business associations and market expansion. Auto Expo is also the time industry dresses up in its Sunday best and the dream machines fire the imagination of young inquiring minds.

The industry has to connect with the people. And glamour helps.