New Delhi: Never say no to a customer, and see partnerships from the customer’s perspective to understand what they want, says Deepak Jain, Chairman Lumax Group at ETAuto Unplugged episode with Arun malhotra, Industry Veteran. Jain, the third generation in the family business, was recounting his two most important takeaways from his father DK Jain’s learnings.
Deepak Jain joined the industry in 1997 and has seen the evolution happening across the platforms. “Working with the diversity in Indian states is equal to working with the different cultural mix of various countries,” he said.
Having trained in diverse markets like Detroit and Japan, Jain believes that India has a unique proposition. Although part of the global supply chains, for India it cannot be a cut copy paste of global solutions.
The fabric of the component industry consists of about 1000 players who are largely in organised sectors. This may be divided into three categories – first, global MNCs who came in and set up their footprints like Bosch, second is the joint venture partners like Lumax, and the third are largely owner and promoter-led who are in search of technology partners.
The auto component industry provides a big opportunity for the country as about 50% of the manufacturing GDP of the country comes from the auto sector. In FY23, the Indian auto component industry clocked the highest-ever turnover of INR 5.6 lakh crore (USD 69.7 billion), and grew 32.8%.
Changes over the years
In 1997, the industry was booming and multiple collaborations were happening. In the mid-80s, OEMs stabilised as Hero and Honda came in, Suzuki and Govt of India joined hands. However, in 1999, it went completely crashing down and in 2000, the auto industry collapsed. The matured markets could manage people but India at that point could not. That was the first time the industry got challenged with massive degrowth – not just OEMs, but Tier- 1, 2, 3 suppliers also. “That brought a lot of learning, and served as a wakeup call for the industry to understand that there could be downturns and industry must be able to manage degrowth as well.”
After this, there was growth and recovery but in 2008 there was the Lehman Crash. As an economy, this was the first time India also faced a lot of chaos but recovered in less than 12 months. This showed resilience of the economy.
The coalition government happened for three decades. India was integrated with the global supply chain and there were export opportunities, even though the volumes were small. But the focus was on manufacturing. The unionisation and management have also gone through their learning curves.
From 1999 to 2010, the government aspired to focus on the auto industry and enhance its competitiveness globally owing to its impact on the economy. In the early 2000s, there was a lot of engagement between political corridors and industry leaders in constant talks of stable policies, however that could not be done owing to the coalition government.
“If we see there are also different needs of customers within the economic strata within the population. I believe the economic liberalisation of getting the global investments into India and liberalising the industry which was very big and inspired the industry,” he noted.
“An auto ancillary business needs to rely and have a good relationship with their technology partners. Managing great relationships with our partners was a new learning,” Jain added.
For the aftermarket industry, he believes India still has the USD 10 billion market and it will grow further. But the formalisation of the sector is still needed for safe components to the end consumer. While the laws are there, the enforcement of laws is still a concern, it also needs to be taken as awareness.
China plus one strategy
Covid-19 helped induce the realisation that if you are part of the global supply chain, everyone is in it together. Tier-1s have the responsibility of specifically hand holding their Tier 2, 3. However, a lot of fragmentation has happened there, so consolidation is possible.
“Personally, I do not like the China plus one strategy. I think it has been a wakeup call for everyone. In 5 years, as the domestic market takes big leaps, we will have more export opportunities. More important is to deliberate on what stands for brand India. If the quality is right, India can compete not just with China but with any economy in the world,” Jain said.
According to him, India missed the bus as our dependence on China increased but India has a massive potential to still grow its manufacturing footprint.
OEMs need to build a resilient supply chain on technology and competitiveness. Auto ancillary should follow the OEMs blindly and not shy away from investing heavily. The Union Government should provide a stable policy framework, engage with industry more, do fine tuning but not on knee jerk reactions. And the onus lies on industry to collaborate with academia more as technology is evolving. Incentives from the state and the Centre have a great part to play.
“I hope that by 2033, India will be no 2 in the world. We need to use local competencies and scale to go global.”
Giving an example of the ICE two-wheeler industry to build global competencies, Jain said the global trend is such that we can anticipate a massive era of disruption. And India will have multiple powertrain options and infrastructure mix, which will be good for the country. The worst would be to bet on one technology. Today the aspiration is to have a bigger chunk in the global value chain. So we need to think from an Indian perspective keeping in mind the global scenario.