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LEAN MANUFACTURING

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35MARCH | 2013 |

OF INDIA’S AUTO INDUSTRY

Capturing the potential

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35MARCH | 2013 |

Its rapid growth may have stalled, but with a GDP of $11.6 trillion – the ninth largest in the world, India has emerged in recent years as one of the most interesting economies to wwatch

India has been tipped to overtake China as the world’s largest economic power by the US National Intelligence Council.

Automotive has emerged as a significant sector in this growth and India is now ranked as the sixth largest producer of motor vehicles in the world; the vast majority of which are manufactured for domestic use, rather than export.

Statistics are one thing, but I really got a sense of the country’s automotive potential during a GXS business trip in Delhi last year. I was

fortunate enough to experience travel on India’s roads during the journey from Delhi Airport to my hotel in the south west of the city and I was immediately struck by the sheer number of cars on the roads.

Most of these cars were fairly small by Western standards, and there was a preference for two-wheeled vehicles, but nevertheless the quantity of motor vehicles on the road was striking.

It is also notable that this swell of motor traffic will inevitably put significant pressure on local governments to improve the road

Mark Morley,ndustry Marketing turing, GXS

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who has established a manufacturing presence in the region. Now owned by Tata – one of India’s largest conglomerates, JLR has established a plant in Pune to manufacture the Land Rover Freelander, a small SUV popular in the UK.

The majority of the components,

infrastructure. Based on what I saw during my trip, there needs to be substantial investment in road infrastructure if the automotive industry is going to successfully persuade the population to make the switch from two and three-wheeled vehicles to four.

Domestic vehicle production levels for 2012 in India were at 3.1 million vehicles. To put that in context, it’s almost twice the number of vehicles that were produced in the UK for the same year.

The figure in India is expected to double by 2015, and by 2020 almost 10 million vehicles are expected to be manufactured in the country. When you think that the population is currently 1.2 billion, this is still a very small percentage versus the population size.

The 16.5 million two and three-wheel vehicles produced in India during 2012 is expected to triple in size by 2020; in effect making the market for two and three vehicles remain at four times the size of the car market.

Many Western car manufacturers have established new plants in India, purely to serve the domestic market.

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India is now ranked as the sixth largest producer of motor vehicles in the world; the vast majority of which are manufactured for domestic use”– Mark Morley, Director of Industry Marketing for Manufacturing, GXS

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including the body are manufactured at a plant in the UK and then shipped out to JLR’s plant in India for assembly. These are known as Completely Knocked Down (CKD) kits; though over time it is expected that more of the components that go into assembling the Freelander will be locally sourced.

JLR announced at the end of January 2013 that it started production of the Jaguar XF car at its Pune factory so that it could sell more vehicles into the growing premium end of the car market.

A more recent investment example is Japanese utility vehicle manufacturer Isuzu Motors, which announced plans in January to invest $185 million in a manufacturing plant at Sri City, Andhra Pradesh.

The new facility is to produce the MU7 Choiz SUV for the domestic market, and the company will be the latest to take advantage of the ‘Automotive Corridor’ around Chennai. The area’s two ports and world famous auto-parts supply chain has attracted leading manufacturers including Mitsubishi, Ford and Renault-Nissan.

While India keeps most of the vehicles it produces for its domestic market, it is a huge exporter of automotive components. Most of the big car manufacturers have established component sourcing centres in the country, and automotive manufacturing hubs have been established to the North, South, East and West.

One of the most attractive things about India for overseas investors is that it now has the world’s second largest pool of certified professionals, and the highest number of qualified engineers.

This means that foreign manufacturers can invest in the country safe in the knowledge that they will be able to secure appropriate resources – something many other emerging markets cannot match. India’s huge and highly skilled workforce gives it

India’s auto industry

39MARCH | 2013 |

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India’s aauto innddustry

a major advantage, but the key to achieving its potential may lie in mastering lean manufacturing strategy.

The influx of new car manufacturers in India has led to new supplier parks being established close to car production plants. The close proximity of these suppliers to their customers helps to shorten the length of supply chains and hence reduce overall logistics costs.

This helps to foster lean manufacturing techniques, especially when trying to implement seamless just-in-time production systems. The lean approach will also allow the country to counter the impact of rising wages and costs to improve the bottom line for both domestic and foreign investors.

Looking ahead, the next big challenge for the country will be greater adoption of technology to enhance its supply chains. In

India has a large number of qualified engineers

India’s huge and highly skilled workforce gives it a major advantage”– Mark Morley

particular there is hardly any use of EDI technology across the component supply industry, except with some of the Western suppliers such as Bosch and Continental that have brought their own EDI standards and tools with them.

Electronic Data Interchange

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41MARCH | 2013 |

delivers a fast and effective way to transfer essential information vital to support the lean approach and boost efficiency. Alongside the more visible improvements like better-quality road infrastructure, the adoption of technology like EDI will be an important step for the country if it is to master the lean process and achieve the impressive growth forecast for 2020.

You can read more of Mark’s comments on Driving B2B, at www.gxsblogs.com/morleym

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