What’s Up With India’s Automotive Transformation
Automotive companies will need to increase collaboration with suppliers in developing embedded and in-built modules for vehicles.
The automotive industry in India is enjoying good health right now, with investment up and growth steady. It became the world’s 4th largest automotive industry in 2017, with sales up 9.5 percent year on-year and India also became the 7th largest manufacturer of commercial vehicles in 2017.
Furthermore, a number of Indian government initiatives, in partnership with the country’s major automobile players, will see India emerge as the world’s third-largest passenger-vehicle market by 2021. What role can we expect connected vehicles and digital tools to play in this growing market?
An area of potential
Why is India’s automotive sector enjoying this growth? According to the India Brand Equity Foundation
in October 2018, it is a combination of a number of factors. The rise in middle class income and younger population may be a reason for the strong growth. Rapid urbanization means India will have more than 500 million people living in cities by 2030, around 1.5 times the current US population. Investment has been strong too, with foreign direct investment in the space totaling US$19.29 billion from 2000 to 2018.
India has significant cost advantages to external companies that makes it an attractive destination, and the report also posits that India will become a world leader in shared mobility by 2030, which means opportunities for electric and autonomous vehicles. With India also having a major focus on reducing road traffic accidents, the possibilities for connected vehicles are clear.
Connected vehicles and digital – where are we?
Commuters throughout the APAC region are showing some signs of moving away from car ownership, due to improved public transport infrastructure, plus rising costs of private ownership in general – things like fuel, parking and overall maintenance costs. According to PwC, the development of electric vehicles can address this changing market, with fully autonomous vehicles able to drive down the cost per kilometer of using shared transport by as much as 50 percent, and the ‘on-demand mobility’ trend expected to shape the future of APAC transportation.
For India, it may take a little longer for the idea of shared electric and connected vehicles to go fully
mainstream. According to Statista, revenues from India’s connected vehicles market reached US$1.05 billion in 2018. Statista also estimates that the industry will grow at a CAGR of 8.4 percent to a value of US$1.44 billion by 2022. That year will see India’s connected vehicles have a penetration rate of 3 percent. This is in contrast to the overall APAC connected vehicle market which will be worth US$47.4 billion by 2023, with a CAGR of 20 percent.
But there are reasons for optimism. According to another report by Telematics Wire, by 2030, the profits available to traditional automotive manufacturers may fall from 70 percent to less than 50 percent of the total worldwide industry, something that will naturally have an impact on Indian auto companies too. The balance could be picked up by new startups and disruptive digital companies, those that have embraced and developed new technologies, mobility services and digital solutions, which would help to drive forward the case for connected vehicles in India.
India will likely be subject to similar drivers as the rest of the APAC region. Digital adoption throughout APAC has always been high, and it has been found that Chinese consumers are prepared to pay as much as 20 percent more to purchase a connected car. In India, a growing, more affluent middle class means more spending on digital tech in general, and a younger, more expectant population will over time expect a more state of the art, technology-powered driving experience.
Connected vehicle attributes
What makes the connected vehicle attractive in the Indian market? There are four main areas.
1. Safety. India has a notorious problem with road accidents and overall safety, so the ability to safeguard against collisions or lessen the impact of accidents on drivers, passengers and other external parties such as pedestrians is highly attractive for both personal and business users.
2. Efficiency. Technology empowers the ability to reduce travel time and cost, thanks to it optimizing the vehicle’s performance and overall movement of traffic.
3. Experience. A key element of digital transformation is giving an enhanced user experience – in the case of the connected vehicle, delivering improved driver and/or passenger comfort and convenience alongside a more personalized in-vehicle environment.
4. Resilience. Being able to minimize the frequency or impact of unanticipated disruptions caused by issues with vehicle performance, again consequently making roads safer and having a positive effect on the environment.
These attributes can help continue the connected vehicles growth estimates for India on their present upswing, but it remains vital for India to put in place the ecosystem and infrastructure to support them. For example, telecom companies in India will need to provide the data services and network solutions to power connected vehicles.
Automotive companies will need to increase collaboration with suppliers in developing embedded and in-built modules for vehicles. Embedded services and in-vehicle connectivity could be the jump-start that will drive India’s
connected vehicle market forward, possibly powered by its affluent middle class. It is an area ripe for transformation and full of potential, with Microsoft CTO Global Delivery Services Ankur Agarwal forecasting that by 2025, new vehicle connectivity in India will be at 100 percent. Improved safety and efficiency will hopefully be by-products of that. It will be interesting to observe.