Industry 4.

0 and
India's Automotive
Industry
2nd Automotive Forum & Awards
– Theme Paper

6th of July, 2017

Message from the
Secretary,
Department of Heavy
Industry,
Ministry of Heavy
Industry and Public
Enterprises,
Government of India

Assocham Auto Forum and Awards 2017.pptx 2

 Message from the President, Assocham

The 2nd ASSOCHAM Auto Forum & Awards 2017 is being held at a time when the Automotive industry globally is presented with new
opportunities through Industry 4.0, smart manufacturing and digitisation.

In India too, for the industry, GST as expected will be a game changer. It will boost India’s economy, drive growth and lead to ease of doing
business giving a thrust to ‘Make in India’ program. By undoing hurdles and rationalizing tax structure GST will surely usher in a new era of
economic freedom.

We hope that this paper will be read by all the relevant stakeholders and they will benefit from it and it will strengthen the position of
ASSOCHAM as the leading Apex Chamber of Indian industry.

I congratulate the ASSOCHAM and the Roland Berger Teams for their efforts in organizing the 2nd Auto Forum & Awards, 2017.

With best regards,

Sandeep Jajodia
President, ASSOCHAM

Assocham Auto Forum and Awards 2017.pptx 3

 Message from the Secretary General, ASSOCHAM

It is indeed my pleasure in organizing the 2nd ASSOCHAM Auto Forum & Awards 2017. The Theme of this year’s Forum is “Make in India to
Green India”.

It is our endeavor to reflect the topical issues impacting the Auto Industry and we believe that they have truly contributed to the “Make in India
Program”. With the Government’s commitment of moving towards eco-friendly technologies and solutions, we feel that the hybrid and electric
vehicles is the way forward and we completely support the initiative.

The Implementation of the GST has so far seen positive impact on the Auto Industry and we welcome that.

ASSOCHAM is organizing the 2nd Auto Forum to have discussion on the issues from GST to Digitization & Automation to the Green and Eco-
friendly Technologies and we hope that the Industry will benefit.

The Awards presented on the occasion are just an acknowledgment and encouragement for the Auto Industry.

On behalf of ASSOCHAM, I would like to thank the Teams at Roland Berger and ASSOCHAM for preparing a comprehensive Background
Paper on the Industry, which will be a reference document for the benefit of the Indian Auto Industry in the future.

With warm regards,

D. S. Rawat
Secretary General, ASSOCHAM

Assocham Auto Forum and Awards 2017.pptx 4

 Message from the Chairman, ASSOCHAM National Council
on Automotive Industry
It gives me immense pleasure to present and chair the 2nd ASSOCHAM AUTO FORUM & AWARDS 2017 with a central theme of “Make in
India to Green India”.

As the industry aligns itself with the introduction of GST and the changing global dynamics, it has become important to leverage the
opportunities being generated. As organizing Chairman of this event, I hope to present an appropriate platform to stimulate both our knowledge
and combined intellect in a direction which benefits the country and the industry.

ASSOCHAM’s efforts remain focused to ensure a holistic and interactive session between all stakeholders in the Auto and Auto Ancillary
domain. The forum’s theme and awards has been envisaged on the fundamental opportunities available through GST, Digitization and Eco-
friendly technologies and to encourage all-round participation.

I would also like to thank Ronald Berger in presenting this white paper to the industry and hope that collectively every organization will be able
to derive the intended benefits from it.

R. S. Kalsi
Executive Director, Maruti Suzuki & Chairman, Automotive Council, ASSOCHAM

Assocham Auto Forum and Awards 2017.pptx 5

 Message from the Co-Chairman, ASSOCHAM National
Council on Automotive Industry

Manufacturing and related services have created virtuous cycles of economic growth in many countries. Germany, Japan, South Korea, China
are just some of the positive examples of a consistent focus on manufacturing and related technology development. India's potential to
become a leader in manufacturing and technology cannot be doubted. Well-run manufacturing companies in India clearly demonstrate that
Indians are as adept at high-quality manufacturing than Germans or East Asians.
In many ways, the automotive industry has been at the forefront of this development. Companies such as Nissan and Hyundai have
established India firmly as an export hub in their global manufacturing network. Local companies such as Maruti Suzuki, Tata Motors,
Mahindra, Ashok Leyland, Bajaj Auto and others are able to compete with their products in selected global markets. Suppliers such as Bharat
Forge, Amtek, and Motherson have expanded their reach and brands on a global scale. Many Indian companies have adopted Japanese or
Western management and quality techniques or are in the process of doing so. Appetite for global acquisitions has been strong for a number of
years now and a respectable number of those has been successful.
Industry 4.0 is the next opportunity for Indian automotive industry to re-invent itself in terms of processes, technologies and value chain to
deliver on the Make in India initiative. Many of India's innovations have been cost-based, i.e., provide appropriate value with less cost by
changing materials, value chains, product specifications, etc. Other innovations have focused on new business models, e.g., the
transformation of fix cost into variable cost. Real product-based innovations resulting from the R in Research & Development are still rare in an
international comparison. This area needs to be driven going forward, it is after all an area that provides the most sustainable competitive
advantage.
The task that industry, the new government and the nation face is massive. The opportunity and up-side is tremendous. I am confident, that a
consistent, step-by-step approach will bring the change that we all desire and deserve.

Dr. Wilfried G. Aulbur

Member Global Supervisory Board and Managing Partner, Roland Bergeri & Co-Chairman, Automotive Council, ASSOCHAM

Assocham Auto Forum and Awards 2017.pptx 6

Contents Page

A. The VUCA world. 8

B. The global automotive scenario 11

C. The Indian automotive market 17

D. Key trends in the automotive industry 22

E. Key challenges for India's automotive industry and way forward 49

F. Credits 61

This document shall be treated as confidential. It has been compiled for the exclusive, internal use by our client and is not complete without the underlying detail analyses and the oral presentation.
It may not be passed on and/or may not be made available to third parties without prior written consent from .

© Roland Berger Assocham Auto Forum and Awards 2017.pptx 7

A. The VUCA world.

Assocham Auto Forum and Awards 2017.pptx 8

The overall world economic climate is subdued and reflects
uncertainty about future economic development
Global economic indicators
World economic climate1) [Index; 2005 = 100] Region-wise economic climate1) [Index; 2005 = 100]

114.9 Highest value 105.3 106.1

99.1
Q3 2007 90.4 Ø 91
95.6

ASIA
107.7 81.6
104.1 105.0 74.6 78.9
110.4
99.5
95.0 96.8
90.5 103.8 104.6
95.4 93.7

AMERICA
Ø 88

NORTH
87.8 85.4 90.2
86.0 88.7
82.4 82.8
78.7 69.5
58.6

136.4
118.9 112.7
116.8
EURO AREA

100.3 Ø 105
Lowest value 107.5 111.6
50.7 Q1 2009 93.0 114.7
83.7
55.8
Q1 2006 Q1 2008 Q1 2010 Q1 2012 Q1 2014 Q1 2016 Q1 2006 Q1 2008 Q1 2010 Q1 2012 Q1 2014 Q1 2016
1) Arithmetic mean of judgment about the present and expected economic situation
Source: Ifo Institute Assocham Auto Forum and Awards 2017.pptx 9
This global downturn is amplified by larger number of VUCA
(Volatile, Uncertain, Complex, and Ambiguous) challenges

CLIMATE CHANGE
SHARING ECONOMY INDUSTRY 4.0

DIGITAL
DISRUPTION

REFUGEE CRISIS
BREXIT

VOLATILE
PROSPECTIVE
WORLD LEADERS TERRORISM
FUTURISTIC TECH TENSION IN SOUTH
SYRIAN WAR
CHINA SEA

FRUGAL INNOVATION
AGING POPULATION RECESSION & FOOD CRISIS POOR
POLITICAL INSTABILITY INFRASTRUCTURE

RESOURCE
DEPLETION VOLATILE URBANIZATION
SHORTENING INCREASING
PRODUCT COMMODITY PRICES CONNECTIVITY
LIFECYCLES

Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 10

B. The global automotive
scenario
The impact of VUCA world has
been felt in the automotive
sector across geographies and
segments as well

Assocham Auto Forum and Awards 2017.pptx 11

 In passenger car market, traditional TRIAD markets are expected to
slow down; future growth expected to be driven by BRICS countries
Global passenger vehicle market
Global passenger vehicle sales1) [m vehicles]
> Traditional TRIAD markets
are expected to slow down;
CAGR CAGR Japan and Korean markets
+2.4% 2012-2016 2016-2020 are expected to marginally
+3.6% 82 shrink by 2020
78
75 8 4.3% 3.2% – US market is expected to
71 8 plateau after peaking in
7
65 7 2015 owing to economic
Others 6 cycles, higher auto loan
33 interest rates and advent of
27 29 5.2% 4.6% shared mobility
26
BRICS 22 > Significant growth expected
from BRICS nations,
6 6 6 -0.7% -0.6% especially India and China
Japan/Korea 6 6
4.6% 0.1% – Significant growth expected
17 18 17 in China where Govt. has
North America 14 16
taken measures to reduce
taxes on small cars
Europe2) 16 16 17 18 18 4.2% 0.6% – Low inflation, energy prices
and falling interest rates
2012 2014 2016 2018 2020 should boost Indian
automotive market
1) Excludes light commercial vehicles; Region definition as per IHS classification 2) Excluding Russia

Source: IHS, Roland Berger Assocham Auto Forum and Awards 2017.pptx 12
 Global CV market is expected to pick up; sales in MHCV segment is
expected to grow faster after the recent downturn
Global commercial vehicle market
Global commercial vehicle sales1) [m vehicles]
> Both MHCV and LCV
CAGR CAGR segments are expected to
2012-2016 2016-2020 grow; MHCV growth is
expected to be faster after the
Global MHCV -0.8% 3.5% downturn in the last 4 years
Global LCV 0.5% 1.7% > South America, North America
and Europe are expected to
drive growth in MHCV
+0.3% +2.0% segment due to increase in
19 domestic demand owing to
18 18 19 better economic conditions
18
4 4 4 -1.4% 2.5% > Growth in LCV segment is
Others 4 4
expected to be primarily
driven by BRICS markets as
8 7 8 8 -4.0% 3.9% European and North American
BRICS 8 markets stabilize after periods
of high growth
4 4 4 7.7% -1.0% > Chinese and Indian markets
North America 3 4
are expected to grow
Europe2) 2 2 3 3 3 5.7% 0.5% following recovery in their
domestic demand
2012 2014 2016 2018 2020
1) Includes light commercial vehicles; Region definition as per IHS classification 2) Excluding Russia

Source: IHS, Roland Berger Assocham Auto Forum and Awards 2017.pptx 13
Agricultural vehicle market is expected to rebound; Brazil, India,
USA and China expected to drive growth
Global agricultural vehicle market
Global agricultural vehicle sales ['000 vehicles]
> Significant differences exist
across markets based on
CAGR CAGR level of mechanization
2014-2016 2016-2022
> Globally, agricultural vehicle
+2.8% 5,000 market is expected to reverse
-3.5% 4,699
4,549 the recent downward trend
4,234 4,372 with ~3% CAGR projected
growth from 2016-2022
-2.6% 2.7% > Drive for food self-sufficiency,
3,009 increased Government
Others 2,708 2,847 support in the form of
2,570 2,673
subsidies and other incentives
for mechanization are key
-2.5% 0.7% drivers for growth, especially
Japan 208 in matured markets such as
210
140 200 202
205
143 150 -5.1% 2.9% USA and Europe
USA 126 135
691 728 786 -2.5% 3.0% > Brazilian market is expected
China 656 665
116 118 -7.5% 3.0% to recover from the slow
Brazil 99 105 111
growth due to strong pre-buy
India 685 584 593 666 728 -7.7% 3.8% effect in recent years;
however 2014 market levels
2014 2016 2018 2020 2022 are expected to be reached
only by 2022
Source: IHS, Roland Berger Assocham Auto Forum and Awards 2017.pptx 14
China & India are the largest tractor market accounting for 50% of
global sales, followed by USA and European Union
Snapshot of major international tractor market
China ['000 units] USA1) ['000 units] Europe Union1) ['000 units]
>30 HP Others 202 208 184 184 170
185
2230
416 1815 1858
421 515
1,814
1,394 1,343

FY13 FY14 FY15 FY13 FY14 FY15 FY13 FY14 FY15

Brazil1) ['000 units] Turkey ['000 units] Japan ['000 units]

65 >30 Others >30 Others
55 55 59 52
50 52 45 46
17 22
21
48 57
48
28 30 25
2 4 3
FY13 FY14 FY15 FY13 FY14 FY15 FY13 FY14 FY15
1) These countries primarily use >100 HP tractors

Source: VDMA Economic Report 2015 for Agrievolution Countries Assocham Auto Forum and Awards 2017.pptx 15
 OTR vehicle market is expected to slow down in all major segments
except construction which is expected to rebound post its decline
Global Off-the-Road vehicle market
Global off-the-road vehicle sales1) ['000 vehicles]
> Growth across all segments is
expected to be moderate
CAGR CAGR owing to weak business
+2.8% 2012-2016 2016-2020 confidence and uncertain
9,266 geopolitical outlook around
+4.3% 8,700 the world
8,300
> Construction vehicle segment
7,608 2,670 3.7% 2.7% is expected to regain
7,010 2,537
2,404 momentum following flat
2,232 367 4.3% 3.7% sales/contraction across most
Others 2,079 317 327 378 8.4% 2.5% markets in recent years
343 356
India 316 1,105 > Mining industry is expected to
268 292 1,050 1,072 3.2% 1.3%
248 grow on the back of increased
Brazil 972
925 demand in hard rock mining
Japan and Korea 2,025 6.4% 2.7% and cost pressures for raw
1,822 1,924
USA 1,421 1,623 material producers

2,364 2,484 2,721 3.4% 3.6%

China 2,068 2,172

2012 2014 2016 2018 2020

1) Includes vehicles for construction, mining, industrial, energy and other sectors; classification/application as per IHS definition

Source: IHS, Roland Berger Assocham Auto Forum and Awards 2017.pptx 16
C. The Indian automotive
market

Assocham Auto Forum and Awards 2017.pptx 17

Indian PV market has seen a CAGR of 3.5% over past 5 years;
Segment B is estimated to overtake segment A in the coming years
Indian PV market: Overview and segment-wise performance
CAGR > India is expected to become
4,195 (2015-20) the third largest PV market by
0%
+9.4% 0% 2020
9% Segment F +1.9%
> A growth rate of CAGR 9.4%
Segment E +4.6%
is expected in the period 2015
13% Segment D +0.2% – 2020
+3.5% 2,832 Segment C +21.3% > Strong consumer sentiment,
2,682 0% especially in cities, low
2,547 2,406 2,476 0% 0%
inflation and improving
0% 0% 12%
2,340 0% 0% 0%
0% 14% economic conditions are
1% 0% 1% 9% 42% Segment B +14.6%
17%
16%
15%
7%
driving overall growth
15%
6% 11% 9% > Segment B is expected to
11%
39%
overtake segment A in the
33%
27% 28% 31% coming years owing to the
29% increased demand for longer
and safer cars
36% Segment A +4.6%
> SUV's are expected to drive
51% 44% 43% 44% 45% 39% growth in segments B and C

2011 2012 2013 2014 2015 2016 2020

Source: IHS; Roland Berger Assocham Auto Forum and Awards 2017.pptx 18
Indian CV industry has shown signs of recovery in FY16, M&HCV
cargo segment led the upward trend with 26% CAGR in FY14-FY16
Indian CV market: Overview and segment-wise performance
CV Industry market evolution1) ['000 units] > Overall volume contraction observed
in FY12-FY15 has slowed down with
CAGR [%] modest signs of recovery in the
FY FY Indian economy
-11%
2012-14 2014-16 > CV sales are seeing an uptrend on
907 0.4% the back of improved economic
893
49 48 Overall -11.2 0.4 indicators, pro-investment climate,
39
50 47 decrease in interest rates etc.
50 LCV Passenger -6.9 7.0
705 711 > M&HCV demand is expected to rise
43 649 49 further owing to expected increase in
222 30 34 LCV Cargo -23.2 7.8
39 45 44 industrial output, higher agricultural
299 29
37 Buses -11.9 6.5 production and pre-buying ahead of
162
114
258
BS-IV implementation
196 M&HCV Cargo -26.5 26.4
83 72 > SCV segment is also expected to
34 25
grow in the future; growth expected
SCV Passenger 47.7 -45.1 to be driven by increasing use in
438 intercity transportation
361 360
309 300 SCV Cargo2) -0.2 -8.7 > Despite robust growth, M&HCV, LCV
segments still below FY12 levels

FY12 FY13 FY14 FY15 FY16

1) Bharat Benz volumes not considered since not incl in SIAM, 2) SCV segment includes soft top vans & also <3.5 ton cargo vehicles like ACE, Dost, Super Ace etc.
Source: SIAM, Secondary research, Roland Berger Assocham Auto Forum and Awards 2017.pptx 19
Indian agricultural vehicle market primarily consists of tractors; 31-
50 HP remains the major segment within tractors
Indian agricultural vehicle market: Overview
Indian Agricultural vehicle market split, CY 2015 Power wise split-up of domestic tractor sales [FY16]
∑ : 583 K units
2% 4.6% <20 HP
Tractors
6.1%
Others 20-30 HP
6.7%
30-40 HP
36.7% 40-50 HP
45.9%
>50 HP

98%

Indian tractor market sales ['000 units]

> Indian agricultural vehicle market is dominated by tractors
+3%
with only ~2% other farm vehicles
CAGR +6% -15% > Tractor industry is expected to reverse the decline in last 2
681 665 651 years with 3% projected growth till 2020
596 565 – Sales decline in recent years due to deficient monsoon,
which impacted crop production and rural sentiment
> Due to lower average farm sizes, overall share of other
agricultural equipment or high HP tractors with more
advanced technology is low
CY12 CY13 CY14 CY15 CY20
Source: TMA, Secondary research, Roland Berger Assocham Auto Forum and Awards 2017.pptx 20
Indian OTR market faced a dip in the recent past but is expected to
pick up again and reach ~400K units by 2020
Indian Off-the-road vehicle market
Indian OTR vehicle market sales by segment ['000 units] CAGR Comments
(2015-20)

+3.6% > Mining and industrial

367
segments to see growth
+4.9%
317
uptick higher than the market
316 307 +3.8%
average
288
268 > Growth in the segment has
254 52% Others
extremely strong linkages to
52% 52% 52% +5.6% the Gross Capital Formation
51%
50%
50% at an economy wide level.
Mining +4.5%
0%
7%
6%
0% 0% 0% Industrial
0% 0% 7% 7%
0% 6% 6%
7%

42% 41% 40%

40% Construction +3.2%
43% 43% 42%

2011 2012 2013 2014 2015 2016 2020

Assocham Auto Forum and Awards 2017.pptx 21

D. Key trends in the
automotive industry

Assocham Auto Forum and Awards 2017.pptx 22

In light of all the disruptions, some key trends are emerging in the
automotive industry
1 Industry 4.0
> Automation, data exchange, 3D printing,
etc., will change the way we produce our
cars
3 Big Data
the automotive
> Big data and Internet of Things (IoT) will
help manufacturing companies run
networked production systems
Autonomous
5 driving
> Autonomous or driverless driving is expected to
completely revolutionize the automotive industry and
many OEMs are working on this concept
Source: Roland Berger
2 Connected cars
> Connected cars take advantage of
connectivity to the "Internet of Things"
(IoT) and enable a completely new driving
experience
Key trends in 4 Car sharing
> Car sharing includes renting of cars for
industry short periods of time, often by the hour
and has revolutionized individual mobility,
by making it more advantageous to not
own a car, but pay per use
Safety and
6 emission norms
> Push towards greener fuels, electric
transmission and other related concepts
to reduce the impact on environment and
increase passenger safety
Assocham Auto Forum and Awards 2017.pptx 23
 D1 Industry Trend 1 – Industry 4.0

Industry 4.0 is integration of industrial and digital value chain

combining a wide set of technologies at different stages of maturity
Example of technology mapping – Extract
PRODUCT DESIGN /
PROCESS MONITORING / CONTROL
Monitoring,
command
Virtual Traceability
Flow
industrialization Interconnected management
machines & plants Active sensors
"virtual Automated logistics /
manufacturing Remote monitoring, MANUFACTURING
Internet of Things Precision
plant" digitalized, mobile app, shared Thermal, OPERATIONS
production databases hygrometric, "Smart" machine
process simulation counting sensors...Shared GPAO (self-correction)
Centralized Flexibility
CFAO3) Laser sensors, vibra
planning and Per piece
management of switches, corrective Additive
RFID tracking manufacturing
machines Automated internal programs
PLM2) logistic Cobotics
MES4) Precision 3D printing,
Gravage engineering
laser, Intelligent Assist SERVICES
GPAO, PLM, GV grinding, Multi-support and Devices
flashcode, RFID5) laser cutting, Conditional (INTEGRATION,
Numerical puces multi-operation
CAO, command HFwelding machines Big data, maintenance MAINTENANCE)
Digitalization of
IAO1) Transfer remote
Batch order-flow
management center Retrofit maintenance
Programmed /
Traditional De-programmed SNC, programs, Augmented operator
techniques machines Machine multi-spindle, etc. WORK
installation ORGANIZAT
Duty organization
Lean Manufacturing Learning organization
Task specialization ION
Available maturity / Emerging maturity / Future maturity /
Industrial diffusion Limited diffusion Precursors
1) Computer aided Engineering 2) Product lifecycle Management 3) Computer aided design and manufacturing 4) Manufacturing execution system 5) Radio frequency identification 4)
Computer assisted production management
Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 24
 D1 Industry Trend 1 – Industry 4.0

Industry 4.0 impacts all major automotive functions – Degree of

importance varies depending on relevance for end-customer value
Management processes
Sales/Business
> Give sense to complexity
development
CYBERSECURITY BIG DATA > Creativity
> Collaborative manufacturing
> Stronger protection for internet CLOUD
based manufacturing COMPUTING
> Technology products with
longer life cycle > Customer & marketing
SENSORS > Cyber Physical Systems (CPS) intimacy
ADVANCED > Numerical command > Flexibility
CLUSTER OF SUPPLIERS deviation
Engineering/Design
> Zero default / MANUFACTURING – Full automation > Perfect match with customer's
> Reactivity
SYSTEMS – Totally interconnected systems needs with production mass
SUPPLIERS – Machine to machine communication efficiency
> Traceability
> Predictability > On demand manufacturing
MASS
Supply Chain CUSTOMIZATION
Procurement management
CLIENTS

3D PRINTING / NANOTECHNOLOGY / AUTONOMOUS

LOGISTICS 4.0
> Fully integrated
supply chain
> Interconnected systems
> Perfect coordination
ADDITIVE MANUFACTURING
> Scrap elimination
> Mass customization
> Rapid prototyping
Production
WIND
ADVANCED MATERIALS
> Smart value added products
> Technical differentiation
> Connectivity
RESOURCES OF THE FUTURE
ALTERNATIVE / NON CONVENTIONAL
ROBOT
VEHICLE
> Real time - Autonomy - > Flow optimization INTERNET OF THINGS
Productivity > Increased security
> Object tagging
> Full transparency > Lower costs > Internet-object
(contextualization,
comprehensiveness,
PLANT OF THE FUTURE A communication via low
PLANT OF THE FUTURE B power radio
collaborative robot) on data > Real time data capture
reporting CLUSTER OF PLANTS
> Optimized stocks
> Reduced wastes
> Clean and renewable energies
everywhere
> Energy Storage
SOLAR GEOTHERMIC > Alternative raw materials

Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 25

 D1 Industry Trend 1 – Industry 4.0

Disruptive processes and strategies are also expected to transform

business models
Key end customer value driven by Industry 4.0
Drastic reduction in time to market via ultra- Customer
Engineering
short design cycles and rapid product realization value increase

Production Moving towards mass customization in manufacturing Business

to provide even more individualized products – fuelled model change
by full horizontal and vertical integration

Supply chain Huge increase in supply chain agility/speed – Easier to Customer

reconfigure and more responsive, lowering boundaries value increase
across companies

Cross- Intelligent algorithms and data will become the new Business
functional differentiator – Risk of an "Industrial Google" emerging model change

Significant impact on process landscape – Huge challenge to adjust processes with the same speed as
new solutions emerge – Organizational speed might become a competitive advantage

Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 26

 D1 Industry Trend 1 – Industry 4.0

Globally the automotive sector is at the forefront of Industry 4.0 – all

players are launching initiatives or even pilot projects
Overview of selected current automotive Industry 4.0 projects
Focus on production planning / logistics / engineering [pilot
Focus on production [initiatives] stage]

Company Partners Industry 4.0 Projects Company Partners Industry 4.0 Projects
"Collaborative Robotics"; A new generation of safer, more
user-friendly robots works more closely alongside humans "Applied reference architecture for virtual services and
as a team in assembly line as a team programs"

"3D Printed Thumb"; 3D printing customized thumb that "Synchronous production through partly autonomous
can bring reinforcement for factory workers and to help planning and human-centric decision support"
them to work safely and efficiently with minimum strain on
their hands.
"Gesture-based quality assurance"; Gesture-based quality "Collaborative Robotics"; A new generation of safer,
assurance"; to improve quality assurance process for more user-friendly robots works more closely
painted bumpers by gesture interaction alongside humans as a team in assembly line as a
team

"Condition monitoring"; Optimized up-time of Schuler

"IWEPRO"; Modular/job-shop production with de-central presses in the key plant in Wolfsburg
intelligence
"RFID-based parts tracking"; Optimizing logistics
"mecPro2"; Model-based new development process for processes based on RFID technologies for the
cyber physical systems automotive industry
"Optimization of cylinder head manufacturing"; With
"smARPro"; Smart assistance for humans in production the help of data mining technologies and real-time
systems analytics capabilities
"Intelligent headlamp technology"; Actuator-based
"KapaflexCy"; Self-organizing capacity flexibility in human- systems for self-aligning intelligent headlamp to
cyber-physical system improve road safety, incl. new production concepts

"Intelligent heat transfer for efficient electric vehicles";

"LUPO"; Performance assessment of autonomous to develop a self-regulating thermal management
production objects system for electric vehicles

Source: Company websites, Roland Berger Assocham Auto Forum and Awards 2017.pptx 27
 D1 Industry Trend 1 – Industry 4.0

Industry 4.0 is expected to have a fundamental impact on traditional

ways of doing business in India
Impact of Industry 4.0

1 Flexibility / Mass
customization
> Ability to reduce changeover time – seamless production change
> Dynamic product schedules allowing real time adaptation to customer needs

2 Direct client > Closer relationship between producer and customers

> Disintermediation and change of business rules
relationship
> Development of market specific solutions relevant for Indian production system

3
> Required workforce would move from blue collar jobs to software operators
Higher demand for > Reduced share of labour cost and upward movement of India in the value chain
skilled labour > Higher labour work quality achievable on a broader scale with implementation of smart manufacturing
> Less working forces in daily operations due to automated robotics
> Increase machine up time & utilization; reduce breakdown time due to conditional maintenance

4 Asset
rotation
> Reduce stocks along the value chain
> Increase in efficiency but complemented with better physical infrastructure

5
Decentralization / > Reduce impact of size / scale effect – Ability to decentralize processes
Regionalization > Possibility to relocate production process close to customer needs
> India centric manufacturing which is not for exports but for India's advantage

6 Fast-product > New product industrialization is performed seamlessly and without disruption
launch > People are guided through virtual tools to adopt new products and have a better product experience
> Simultaneous global launches would be possible

Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 28

 D2 Industry Trend 2 – Connected Cars

Connected cars are vehicles connected to mobile networks and

providing wide range of mobility services
A vehicle with access … exchanging 2 ways data … and allowing a wide range
to mobile network… with its environment… of mobility services
Road infrastructures Safety 38 62
(Traffic lights, parking, tolls…)
Infotainment 75 13
Humans Navigation 69 13
(Drivers, pedestrians…)
Driving style 31 13
Mobile devices
(Mobile, tablet, smartwatch…) EV specific 13 19
Maintenance 19
Service providers
Security 13
(Leaser, insurance, hotel…)
Convenience 6
Other vehicles Commercial 6
Insurance
Urban mobility

% of OEM offering the service (Europe)

% of OEM planning to offer the service (Europe)
Source: Roland Berger analysis Assocham Auto Forum and Awards 2017.pptx 29
 D2 Industry Trend 2 – Connected Cars

Multiple connected initiatives have already been launched around

the world across various industries

My watch I am being Invitation to be

My insurance I have
keeps me My GPS learns driven towards guided toward
bill depends of nothing to do,
posted and from everyone the closest free my friends
my driving my car is
warns me from in real-time parking space pops up when
behavior driving alone
dangers nearby I am close

TORONTO

Insurance cost Smart watches GPS takes into The application The apps geo- The car is fully
depends of the inform and alert account in real geo localize the localize friends autonomous and
driven distance drivers in real time time alerts & infor- closest parking and promotions drives alone to the
(Pay As You Drive) about car's mations coming space, free or and propose desired destination
or of your driving function, traffic, from drivers, traffic charged, and guidance / booking
pattern (Pay How driver's biometrical and infrastructures guide you when the car is
You Drive) conditions towards it close

Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 30

 D2 Industry Trend 2 – Connected Cars

Connected vehicles business models are based on vehicle and

journey data – Market players already positioning themselves
Connected vehicles ‒ Development and outlook
Mid 1990s: 2011: 2015: 2020:
M2M communication1) Internet-based infotainment Introduction of eCell Complete vehicle interconnectedness

Key players (extract) Highlights

OEM: A BMW Connected Drive
BMW Daimler Audi > In-car information and entertainment services and apps, e.g.:
– E-mail, organizer and calendar functions
– Different entertainment apps
Supplier: – Access to social media
Bosch Continental TRW B Hyundai Blue Link
> Integrated in-car solution; Bluetooth connection to smartphone content:
IT/Telco: – Automated SOS calls in emergencies
Google Apple Telefonica – Roadside assistance
– Vehicle location in the event of theft

Technology service providers:

Need for interconnecting living environments –
OCTO Airbiquity OEMs offering ever-increasing innovative "connected vehicle" solutions

1) Introduction of "M1" by Siemens makes wireless machine-to-machine communication possible

Source: Roland Berger/Lazard Assocham Auto Forum and Awards 2017.pptx 31

 D2 Industry Trend 2 – Connected Cars

OEMs have set ambitious targets for connected vehicles; sales are
expected to reach 67% of total car sales by 2018
Penetration of Connected Vehicles 2018 Major OEMs Connected Vehicles objectives
[% passenger car sales] [% passenger car sales]
100%
90% 100%
2) 100%
1) 100%
67% 100%
100%
90%
90%
3) 90%
35% 3) 80%
75%
17% 70%
70%
1)
70%
60%
50%
30% Sophisticated IVI
2013 2015 2018 2025
Simple IVI

> Connected cars sales are expected to reach ~67% of > Almost all of the OEMs have set very ambitious targets for
total passenger car sales by 2018, up to 90% by 2025 commercializing connected vehicle by end of 2018
> Premium brands are leading the move, with highest targets
1) Japan only; 2) North America only; 3) 40% for sophisticated IVI and 80% for simple IVI especially with "remote calculation power"

Source: OEMs interviews, IHS, Roland Berger analysis Assocham Auto Forum and Awards 2017.pptx 32
 D3 Industry Trend 3 – Big Data

Big data is deeply rooted in transaction-heavy, digital industries and

has now reached traditional industries, such as Automotive
History of Big Data: What is the origin?

Pioneers Early Trend Followers

Adopters Setters

2006 2009 2012 2014

The relational "Big

model data"
> Terabytes > Petabytes
> Centralized, > Distributed,
expensive scalable storage
storage > Real-time
> Generic requests requests that are
handled in 10-20 configurable and
minutes sophisticated

Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 33

 D3 Industry Trend 3 – Big Data

Customer data is already revolutionizing many industries – Big Data

champions leading the way
Big data pioneers: What have they achieved?

50%
Digital shopping lists
Know the value of customers Indi- > Metro helps customers with individual dietary
of profit by
> Segment-specific alignment of the overall travel
chain vidual plans, provide them suggestions of products
> Prediction based on detailed analysis of previous
a few 1.000 > Customers being addressed by name by cabin diets
crew, being shuttled to the plane in a Porsche purchases
customers

Data driven banking Supplement to in-store offer

Geo-
4.5m > Based on transaction analysis, every day 4.5 m
mailings offers are selected and sent out
> After buying new homes, clients buy new
fencing
> Bar code scanning that grants customers
personalized offers and rewards based on their
location
mailings furniture and electronics, so they need credits used > Putting more information in the hands of the
per day customer

7x Hurricanes and pop tarts USD Election campaigns

> Estimated USD 60 m more donations through

higher sales
> Using weather data to optimize product range
at short notice
> Findings: Ahead of a hurricane, strawberry
Pop Tarts sell 7 times their normal sales rate
60m
more
A/B testing and targeted web design
> Using
family picture with Mr. Obama alone vs. Obama

donations

Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 34

 D3 Industry Trend 3 – Big Data

The potential of Big Data is in the optimization of the existing

business model and the generation of new business opportunities
Potential and impact of Big Data: is it really the new oil?
OPTIMIZATION OF
EXISTING BUSINESS Revenue1):

+ 3-6%
> Sales increase through more targeted
customer approach, new customer
segments and increased loyalty
> Cost and CAPEX reduction through
faster, more effective and efficient
Cost savings1):

BIG
processes along the entire value
chain - 2-5%
DATA
POTENTIAL > New business models to create value Existing vs. new1):

7:1
$
out of Big Data – often with third
parties (e. g. data brokerage, new
data-enabled products & services)
> Data as value generator for emerging
business units, such as mobility
services
NEW DATA BASED
1) Indicative project experience
BUSINESS MODELS
Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 35
 D3 Industry Trend 3 – Big Data

Several application areas with high Big Data potential can be

identified
Reduced material price Reduced special trans- Insights
1 Integrated testing 2 Integrated fault
elimination variance portation charges

Value added services such as

Financial Services or Mobility
Services are highly data-driven
however absolute Big Data
potential for core business is higher
Profiling Individual offering/
communication
Highest potential exists in eight
application areas of Quality &
Diagnostics (1&2), Sourcing &
Supply Chain (3&4), Marketing &
Sales (5&6) and After Sales &
Services (7&8)

Due to the highest synergy potential

Individualized Capture unknown MB and the fastest implementation
After Sales offers vehicle owners speed, the applications (1)
Integrated testing and (5) common
customer profiling shall be pilot
applications in a first wave

Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 36

 D3 Industry Trend 3 – Big Data

Even in the Autocomp value chain; companies have recognized the

impact and are tailoring their product and service offers
Case study: Michelin
Michelin's big data monetization model

Customer segments
Information Big data > Owners of trucks, buses, light trucks and civil engineering fleets
Offering categories

services solutions
Key solution offerings
Equipment Tires as a
services service > Applications to help improve efficiency of fleets and increase
their profit margins based on data captured through embedded
sensors
Tires with
Products Tires – Effifuel – Reduce fuel consumption
sensors
– Effitires – Managing tires expenditure
Pre-digital Digital – Effitrailer – Optimizing trailer management
product line product line
USP
Product strategy > Contractually agreed objectives of cost savings
> Services are supported by a dedicated team of experts who
provide long term support including driver training, on site visits
etc.
Source: Secondary research, Roland Berger Assocham Auto Forum and Awards 2017.pptx 37
 D4 Industry Trend 4 – Shared Mobility

Shared mobility has enormous potential with disruptive effects on

car rental and car ownership
Car sharing potential

Average time a car is idle: 22 hours a day

Worldwide annual car ownership market:
No. of vehicles one car sharing car replaces:

USD 5,500 bn1) 4-10 in Europe and

6-23 in the US
Percentage of drivers who could envision
sharing a car: 56%
Worldwide car-rental market
USD 35 bn
Worldwide car sharing membership:
1.8 million
272%
Worldwide car sharing market:
USD 1 bn
Car sharing vehicle growth (2006-2012):

1) Based on vehicle holding costs and installed car base; average country vehicle holding costs based on US figure and corresponding PPP

Source: Navigant; Koncept Analytics; World Bank; TSRC (Berkeley); Time; German Car Sharing Association; Roland Berger Assocham Auto Forum and Awards 2017.pptx 38
 D4 Industry Trend 4 – Shared Mobility

Car sharing schemes target both businesses and private customers

B2C and B2B car sharing models

B2C B2B
Open community: car sharing service to the Closed community: car sharing services to specific
1) 1)
general public customer groups

1)

Institutions (companies, university campuses,

Customers etc.) with significant fleet sizes and in need of
All eligible adults within a defined area – mobility solutions
formal prerequisites such as possession of
driver's license, etc. apply Employees, students, faculty, etc. of subscribing
End users institutions

Flexible and low-cost car usage with no

Main ownership hassles (insurance, maintenance, Increased fleet utilization, lower costs and
benefits etc.) enhanced mobility options

1) Zipcar, car2go and DriveNow all have a B2B services for businesses with typical transportation needs – Zipcar also partners with universities to offer on-campus car sharing

Source: Secondary research; Roland Berger Assocham Auto Forum and Awards 2017.pptx 39
 D4 Industry Trend 4 – Shared Mobility

Car sharing exists around the world today – Members are expected
to continue growing rapidly by almost 27% p.a. in the next few years
Worldwide car sharing market by continent
2021:
246,000 vehicles; Details
35 million users1) > Starting in Europe, car sharing
16% CAGR growth has moved to North America
in car # 36%
and will grow significantly in
47% developing countries, es-
pecially in Asia
2015:
86,000 vehicles; > New programs already esta-
5.8 million users blished in key cities of develo-
ping countries – e.g. São Paolo
17% and Beijing (2009), Hangzhou
38% 36% and Istanbul (2011), Mexico City
2006: (2012) and Bangalore (2013)
11,700 vehicles;
346,600 users 26% > Many players are already offe-
ring their services globally – e.g.
5%
DriveNow, Zipcar, Autolib
34%
61%
37% CAGR growth
in car #
Europe North America Asia Pacific & Others
1) Registered users

Source: Secondary research; Roland Berger Assocham Auto Forum and Awards 2017.pptx 40
 D5 Industry Trend 5 – Autonomous Driving

Autonomous driving isn't the future: they're here & they work. The
question is not if they'll replace drivers, but how quickly!

Google's Self Driving Car Project
> A project by Google that involves
developing technology for autonomous
cars
> The project uses 10 cars modified with the
autonomous driving technology
> In April 2014, the team announced that
their vehicles have now logged nearly
700,000 autonomous miles
> Only 2 incidents reported till date, both due
to human error!
Kiva Systems - Betty Bot
> Betty Bot is a highly automated, self-
optimizing warehouse robot developed by
Kiva Systems, that is already operating in
many fulfilment centres across the world
> in 2009, with the help of Kiva's automated
warehouse, Zappos, an online US retailer,
started delivering items within 24 hours of
a purchase
> Amazon acquired both Zappos and Kiva
system soon after for $1.2 Bn and 0.75 Bn
respectively
Terex - Automated Guided Vehicles
> Unmanned, automated container transport
vehicles or Automated Guided Vehicles
are now a reality for port operations with
features like:
– Payload 70 tonnes
– Precise control using management and
navigation software and transponders in
the terminal road surface
– Positioning to +/- 25 mm accuracy
– Battery-electric drives for zero exhaust
emissions in the terminal

Given that self-driving cars don’t blink, don’t text while driving, don’t get sleepy or lazy,
it easy to see them being better than humans because they already are!
Source: Based on Humans Need Not Apply, a film by C.G.P. Grey, 2014 Assocham Auto Forum and Awards 2017.pptx 41
 D5 Industry Trend 5 – Autonomous Driving

Automated driving will be introduced in multiple stages starting with

conditional automation; full automation expected around 2025
SAE levels of automated driving
Automated driving functions
4/5. High/Full
3. Conditional automation
automation
2. Partly automation
0. Warning 1. Driver assistance
information
> High automation
> Performs automated – May request human
> Coordination of DAS functions: intervention but can
systems for new – Automated highway handle backup
> Independently contingency options if
functioning DAS functionality: driving, urban driving,
> Pedestrian detection traffic driving, valet driver is not
systems: – Automated highway
> Blind spot detection parking responsive
– Lane keeping assist driving, stop & go,
> Lane departure warning > Monitors environment & > Full automation
– Adaptive cruise emergency braking
> Collision warning gives warning when – System can handled
control > Requires constant driver
attention human intervention is all driving aspects
– Brake assist system
– Park assist > Can require immediate needed
– etc. human intervention

Time

Source: SAE, Roland Berger Assocham Auto Forum and Awards 2017.pptx 42
 D5 Industry Trend 5 – Autonomous Driving

OEMs follow various paths to autonomous driving using AI-methods.

Silicon Valley wants to disrupt Automotive mobility industry

202X
"Deep Neural Networks
& Classical" algortithms …
Premium New
Premium 3
> 2018 Premium 4
Premium 1 Volume 2
Premium 2 …
Volume 1
> 2016
…
"Classical"
algortithms Level 3: Level 4: Level 4: Level 4: Level 5:
Driver as No fallback, e.g. No fallback, High-speed All modes,
fallback Parking, High- City (<40mph) door2door
way traffic jam ("Robo-Cab")
(low-speed)

Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 43

D5 Industry Trend 5 – Autonomous Driving
While no OEM has undertaken autonomous car development in
India, various hobbyist projects have emerged for autonomous cars
Autonomous Cars development in India – Some examples
1 AuRo Robotics Campus Shuttle
> Developed by IIT-Kharagpur alumni,
Auro is developing autonomous
shuttle for campuses, theme parks
and retirement communities.
> Vehicle undergoing final tests in Santa
Clara University, US and expected to
launch in end-2016, ferries 4 users at
a time
Autonomous cars
in India
> Mahindra announced "Driverless Car
Challenge" with a prize money of
USD 700,000 in 2014
> 672 teams participated with 20
members in each team. Shortlist of 13
teams dueled in 2015 for claiming title
of national champions
3 Mahindra- Driverless Car Challenge
Source: Secondary research, Roland Berger
2 Autonomous Tata Nano
> Developed by robotics team at TCS as
a hobby project, a retrofitted Nano with
SICK radar sensors has been tested on
Bengaluru roads with AMT transmission
> The team is testing the technology on
other cars. Current investments have
been more then 1 Crore rupees on this
project
> Developed autonomous valet parking
prototype for CES 2015 with 12 cameras
mounted for roaming guidance.
> It may be equipped with 5 to 6 laser
sensors, controllable through mobile
phones, tablets and other wearable
electronic devices.
4 Tata Elxsi Valet Parking Concept
Assocham Auto Forum and Awards 2017.pptx 44
 D5 Industry Trend 5 – Autonomous Driving

In light of the push towards AD, autocomp suppliers face changing

competition, new capability requirements and focused R&D efforts
Implications for automotive suppliers

1 the overall penetration of ADAS/AD features will likely rise dramatically over the next
decade; rapidly growing revenue pool for automotive suppliers

2 Most of the additional functionalities (and thereby revenues) will be software-driven – huge
potential for software focused suppliers

3 Suppliers will have to drive-up speed and flexibility in their overall R&D timelines; dedicated
teams and processes might need to be setup outside the traditional R&D organization

4 There will be significant competitive threat to incumbent suppliers from new players who
are more competent in software development and meeting the requirements of an AD car

tire manufacturers, like other suppliers will need to move from a traditional 'hardware' focus to an increased
digitization mindset with increased attention towards integrating sensor technology and software

Source: Roland Berger/Lazard Assocham Auto Forum and Awards 2017.pptx 45

 D6 Industry Trend 6 – Emissions and Safety

In line with global developments, Indian industry is also moving

towards stricter safety and emission norms
Overview of safety and emission norms in India
2009 2011 2013 2015 2017 2019 2021 REGIONAL DIFFERENCES

Emission BS III BS IV BS VI > Limited regional differences now,

Norms because while BS-IV (equivalent to
Side Airbags EURO IV) was implemented in 13 major
Safety Rear
cities in 2010. The pan-India
Steering impact ABS
Norms Offset
implementation of BS-IV was effected in
Speed warning Apr 2017
front
Impact tests
1 Emission 2 Safety
Delhi
> BS-IV is mandatory from 2017; sale and > Bharat New Vehicle Safety Assessment Agra
registration of any new vehicle not complying Program (BNVSAP) proposed to start testing
with BS-IV emission norms is not be allowed from Oct 2017 onwards Ahmadabad Kanpur
anywhere in the country from April 2017
> Within 2 years of implementation of BNVSAP, Surat Kolkata
> Oil Ministry has decided to switch over directly all new cars expected to comply with voluntary Pune Secunderabad
from BS-IV to BS-VI auto fuels by April 1, star ratings based on safety performance tests Hyderabad
2020 Mumbai
> SIAM said that the Indian auto sector is > Airbags, ABS and speed warning systems
expected to become standard features Oct Bangalore Chennai
committed to adhere to the BS VI emission
norms by 2020, provided fuel is available six 2018 onwards
months in advance > In CVs, ABS has been made mandatory from
> Emission norm timelines are same for PV and April'15 onwards for all vehicles weighing 12 BS IV cities (2010)
CV markets tonnes or more

Assocham Auto Forum and Awards 2017.pptx 47

 D6 Industry Trend 6 – Emissions and Safety

A new program – BNVSAP1) has been proposed which would assign

ratings to cars based on their crash test performance
Crash testing: Bharat new vehicle safety assessment program (BNVSAP)
Crash testing schematics BNVSAP1),2) – Key features
40% overlap = 40% of the width of the widest > Key features of the program include:
540mm part of the car (not including wing mirrors)
– A: Steering Impact Requirement
– B: Side door impact for all passenger cars
1000mm 40% overlap
– C: Approval of vehicles with regard to the protection of occupants in the
64kph event of a lateral Collision
(40mph)
– D: Approval of vehicles with regard to the protection of pedestrian and
other vulnerable road users
– E: Requirements for behavior of steering mechanism of a vehicle in a
Head-on Collision
500mm
– F: Protection of occupants in the event of an Offset Frontal Collision
2004 Oct'17 Oct'18 Oct'19
1500mm
R-Point
A, B
50kph (30mph)
C, D, E, F
R-Point = hip point for a C, D
95th percentile male
E, F

1) Bharat new vehicle safety assessment program For existing models For upcoming models Already in place
2) Discussions are ongoing between industry & OEMs on the roadmap
Source: Press articles; Secondary research; Roland Berger Assocham Auto Forum and Awards 2017.pptx 48
E. Key challenges for
India's automotive
industry and way forward

Assocham Auto Forum and Awards 2017.pptx 49

The way forward for automotive industry focuses on tackling six key
challenges
Key challenges
Organization 2
1 Process performance > Organization delves into adoption of
management practices and how well
> Process performance includes India has adopted such practices and
processes followed in India to achieve how does it fare vis-à-vis other
export competitiveness, import countries
substitutions etc.

6 R&D Current Workforce skilling 3

> R&D includes what percentage is challenges
the R&D spend of companies of > Skilling includes the level of skilled
their total revenues for Indian workforce in India and how they
manufacturing sector have grown vis-à-vis other
countries

5 Infrastructure Automation 4
> Infrastructure includes the infrastructure ecosystem > Automation includes current rate of automation and
provided to the manufacturing sector in the form of use of robots in Indian manufacturing sector
FDIs and other investments v/s other countries

Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 50

 E1 Key challenges to overcome – Process Performance

Advanced manufacturing technology is necessary to address

challenges for Indian automotive players along sectoral dimensions
Key Needs of the Indian Auto Supplier Industry – Example Machine Tool Industry

1. Technology,
Productivity &
> Machine tools should come with the latest technology (drives, CNC controller, etc.) imp. speed & accuracy
> Machine systems should have multi system manufacturing capabilities, adaptive control technology for
achieving optimum cutting speeds, usage of sophisticated interlocks, and allow quick change/ low setup time
Accuracy

2. Cost, Reliability > Breakdown rate and repair expertise is critical; downtime should be minimal; Sub-system reliability &
& Reparability supplier quality must be ensured; Accuracy & repeatability should not deteriorate after a certain time period

3. Service
Support
& > Timely response to enquiries and quotations, solutions and options expertise
> Spares availability, service support , breakdown diagnostics/experience reliability & expert trainings are key

4. Access,
ergonomics &
> Ease and safety considerations during maintenance and repair
> The access to the machine should be designed keeping in mind the user and not just based on optimization
of costs; aesthetics should incorporate sizing considerations and reduction of machine footprint
aesthetics

5. Documentation
& Training
> Documentation supplied should be adequate and clearly detail all the relevant aspects of machine operation
> Training delivery quality and capabilities in local languages are critical for suppliers

6. Other Service
Factors
> Solution and application engineering, machine design
> Delivery, commissioning & project management
> Incorporation of customer feedback, sharing proactive improvements

Source: ACMA-IMTMA Interviews & Surveys, RB analysis Assocham Auto Forum and Awards 2017.pptx 51
 E2 Key challenges to overcome – Organisation

India trails the average management practice score vs. developed

nations, inconsistent performance across the value chain
4 US manufacturing, mean = 3.33
3
2
1
0
Density of firms

4
3 Indian manufacturing, mean = 2.69
2
1
0
4
3 Brazil and China manufacturing, mean = 2.67
2
1
0
4
3 Indian textile, mean = 2.60
2
1
0
Management score

Source: Nicholas Bloom, Benn Eifert, Aprajit Mahajan, David McKenzie and John Roberts, "Does management matter? Evidence from India," National Bureau of Economic Research,
NBER Working Paper 16658, Jan 2011, http://www.nber.org/papers/w16658. Assocham Auto Forum and Awards 2017.pptx 52
 E3 Key challenges to overcome – Workforce Skilling

India has an advantage in terms of strength of the workforce in the

future, their skill training is a major challenge
Expected average age of countries in 2020; low levels of skills training in India
Present extent of formal skill training in India & skilling
India's demographic dividend: a large future workforce requirement
> Today 62% of India's population is in the working age group of 15- > It is estimated that ~170M (15-45 years age group) in the non-farm
59 years, with 54% of the total population below 25 years of age sector would need skilling, reskilling & upskilling
> The demographic dividend of India is expected to last for another > Similarly, in the farm sector, ~128.25M would need the same
25 years

Expected average age in 2020 [years] % of total workforce which has undergone formal
47 skill training [%] 96
46
40 80
75
68
29 52

India USA UK Germany Japan South

India USA Europe Japan Korea

Source: National Skill Development Policy , Roland Berger Assocham Auto Forum and Awards 2017.pptx 53
 E4 Key challenges to overcome – R&D

Significant portion of Indian mfg. industry operates legacy plants with

ltd. automation. Limited willingness to invest in new technologies
India currently has only 1/8th of automation rate compared to China
Current Automation Rate: Industrial Robots/1,000 Workers (2013) Comments

Republic of Korea > Industry 4.0– besides other

490
challenges – seriously threatens
Japan 330 India's position as a low-cost country
Germany 225
The Leaders > Last year, India imported only 2600
USA
robots v/s China's 75,000
140
> With increasing digitalization of the
France 125 manufacturing Industry in the Triad,
Australia 75 cost advantage through availability
United Kingdom The Aspirers of cheap labour vanishes
60
> Low automation rate shows that
China 23 India is not ready for Smart
Brazil 8 Manufacturing yet – urgent changes
are needed
Russian Federation 3 The Laggards
> India needs to reposition itself, and
India 3
go beyond current efforts to focus on
'Make in India'
58
(Global Average)

Source: World Robotics 2013 "http://www.worldrobotics.org/uploads/tx_zeifr/Executive_Summary_WR_2013_01.pdf", Roland Berger Analysis Assocham Auto Forum and Awards 2017.pptx 54
 E4 Key challenges to overcome – R&D

R&D spend in Indian OEMs is low when compared to other

countries; Even with factor cost advantages addtl. efforts desirable
R&D spend as % of revenues – 4 wheelers [2015] Comments
5.77% 5.81% > R&D spend as a % of revenue in 4
4.48% 4.58%
3.65% 3.25% wheelers OEMs is at par with the
2.36% global OEMs
1.29%
> Maruti, being the exception, spends
only 1.29% of its revenues on R&D
TML Maruti 2) M&M Hyundai Ford Renault Honda Toyota
Suzuki > R&D spend among CV players is
very low as a % of revenues, usually
Indian OEMs Global OEMs1)
ranging from 1-1.5%
R&D spend as % of revenues – R&D spend as % of revenues – 2 > R&D spend for 2 wheelers is very
CV [2015] wheelers [2015] 5.70% low compared to the global
1.55% counterparts. Where the global
1.44% 3.99%
1.08% OEMs are spending substantially on
2.58%
1.71% 1.89% R&D, Indian OEMs lag behind
> India is still known to operate legacy
Ashok SML Isuzu Eicher Hero Bajaj TVS Honda Yamaha machines and there is still
Leyland motocorp Auto Motorcycle resistance to investment in
technology and lesser focus on
Indian OEMs Indian OEMs Global OEMs1) product innovation
1) R&D expenditure for global OEMs is expenditure of the entire company on a global scale across geographies as a % of overall global revenues
2) Excluding technology costs (royalty) for development of Indian products which would bring the figure closer to 5%
Source: Company websites, Roland Berger Assocham Auto Forum and Awards 2017.pptx 55
 E5 Key challenges to overcome – Infrastructure

Indian Auto FDI is 4.4% of total FDI (2000-13, USD 9.3 bn). Low
compared to global markets, investments also via internal accruals

FDI in Automotive [USD bn] Sub-sectors of FDI flows in India Comments

> Inward FDI in USA during 2003-12 in
113.79 automotive has been USD 53.74 bn
15%
> While the same figure during the same
28% time period for Germany has been an
astounding USD 113.79 bn
18% > For India, FDI in automotive from
2000-13 was USD 9.32 bn, which is
53.74 quite low compared to developed
automotive markets
38% > While overall FDI may have increased
in Asia but India's share remains very
9.32 low, only USD 9.3 bn

> FDI investments continue to remain

USA1) Germany2) India3) very important for development of
automotive markets and developed
Automobile Industry Auto Ancillaries/Parts
markets continue to receive substantial
amounts
Passenger Cars Others (Transport)
1) Automotive includes Motor vehicles + Motor Vehicles + Transport Equipment and figures are from 2003-12 2) Includes Primary and secondary direct investment & from 2000-14
3) Automotive include Automobile Industry, Passenger cars, Auto ancillaries / Parts and others (transport) and figures are from 2000-13
Source: DIPP FDI in Automobile industry 2013 "www. dipp.nic.in", OCED Stat "OECD Stat http://stats.oecd.org/Index.aspx?DatasetCode=FDI_FLOW_INDUSTRY, Deutsche Bundesbank, Roland Berger
Assocham Auto Forum and Awards 2017.pptx 56
 E6 Key challenges to overcome – Automation

Adoption of Automation led Industry 4.0 is needed to Improve India's

global perception on tech, innovation, safety quality and cost
Impact on India's brand image

Upgrading "Made in India" brand

High-tech
Innovative
Safe
Good quality
Cost effective

Source: Make in India Report, Press Reports, Roland Berger Assocham Auto Forum and Awards 2017.pptx 57
 E6 Key challenges to overcome – Automation

This can enable Indian manufacturers to become globally

competitive, thereby potentially increasing its exports
Industry 4.0 and Global Competitiveness
Global Competitiveness ranking (Overall) Industry 4.0 and Global
Competitiveness
Overall Global rank TRI1 Overall Global Rank > India is losing out on Global
score score Competitiveness mainly due to its
2015-16 2015-16 2014-15 huge budget deficit and poor overall
Country 2015-16 2014-15 technology readiness
> India is ranked 120 out of 140
China 4.89 28 74 4.89 28 countries in terms of overall
technology readiness for its business
Indonesia 4.52 37 85 4.57 34 > Implementation of Industry 4.0 in India
would thus help India improve on its
Philippines 4.39 47 68 4.40 52 competitiveness
> With increased competitiveness,
India 4.31 55 120 4.21 71 exports will also be bolstered
> All these factors combined would put
Vietnam 4.30 56 92 4.23 68 India at par or even better than
economies like China which are higher
up in the Global Competitiveness
Ranking
Global rank / 140 countries
1) TRI – Technology Readiness Index (rank out of 140 countries)

Source: The Global Competitiveness Report 2015-2016, Roland Berger Analysis Assocham Auto Forum and Awards 2017.pptx 58
Indian automotive industry players have already started adapting
their business strategy by leveraging key Industry 4.0 concepts (1/2)

1
Advanced Manufacturing technologies
> The Fives-Michelin joint venture created in
2015 aims to be a leading player in 3D metal
Integrated communication and technology
> Use of embedded sensors/RFID chips in
2
tires to collect data
printing and is expected to concentrate on > Michelin's Cross Climate tire was a direct
manufacturing industrial machines catering to result of product research based on
a variety of sectors including automotive sensorized research

Leveraging
Industry 4.0
Mass customization via big data
> Through Michelins Solutions unit, insights
3
concepts generated from data gathered through
sensors is packaged and sold to customers

5
Automation and robotics on a per-vehicle per year basis
> Rockwell Automation serves as the preferred
supplier for Michelin for all of its factories;
agreement intended to deliver solutions to
enable Michelin to leverage their industrial
assets
Use of green materials
> Company has set an internal target to increase the % of
renewable materials in tire to 30% by 2020
4
> Heavy research into new production processes
incorporating bio-sourced materials

Source: Secondary research, Roland Berger Assocham Auto Forum and Awards 2017.pptx 59
Indian automotive industry players have already started adapting
their business strategy by leveraging key Industry 4.0 concepts (2/2)
Illustrative not exhaustive
OEMs / Companies Comments

> Maruti Suzuki uses around 2400 robots in its Gurgaon and Manesar plants' production lines

> Ford has over 437 robots in its assembly lines and body shop in its Sanand plant

> Hyundai uses over 400 robots in its Sriperumbudur plant's production line for welding and
painting jobs

> Tata Motors uses approximately 100 robots in its Sanand Plant's production lines for
manufacture of Tata Nano
> Bajaj Auto uses 100-120 "Co-bots" (Collaborative Robots) in its assembly line and
production facilities. Started in 2010

> John Deere uses robots and Co-bots in its assembly lines

> Renault manufacturing plants use robots and Co-bots to drive screws into engines, thereby
showing signs of their progress in handling smaller parts as well

Source: Primary interviews, Secondary research, Roland Berger Assocham Auto Forum and Awards 2017.pptx 60
F. Credits

Assocham Auto Forum and Awards 2017.pptx 61

About ASSOCHAM (1/2)

EVOLUTION OF VALUE CREATOR

ASSOCHAM initiated its endeavour of value creation for Indian industry in 1920. Having in its fold more than 400 Chambers and Trade
Associations, and serving more than 4,50,000 members from all over India. It has witnessed upswings as well as upheavals of Indian
Economy, and contributed significantly by playing a catalytic role in shaping up the Trade, Commerce and Industrial environment of the
country. Today, ASSOCHAM has emerged as the fountainhead of Knowledge for Indian industry, which is all set to redefine the dynamics of
growth and development in the technology driven cyber age of ‘Knowledge Based Economy’.

ASSOCHAM is seen as a forceful, proactive, forward looking institution equipping itself to meet the aspirations of corporate India in the new
world of business. ASSOCHAM is working towards creating a conducive environment of India business to compete globally.

ASSOCHAM derives its strength from its Promoter Chambers and other Industry/Regional Chambers/Associations spread all over the country.

VISION
Empower Indian enterprise by inculcating knowledge that will be the catalyst of growth in the barrierless technology driven global market and
help them upscale, align and emerge as formidable player in respective business segments.

MISSION
As a representative organ of Corporate India, ASSOCHAM articulates the genuine, legitimate needs and interests of its members. Its mission
is to impact the policy and legislative environment so as to foster balanced economic, industrial and social development. We believe
education, IT, BT, Health, Corporate Social responsibility and environment to be the critical success factors.

MEMBERS – OUR STRENGTH

ASSOCHAM represents the interests of more than 4,50,000 direct and indirect members across the country. Through its heterogeneous
membership, ASSOCHAM combines the entrepreneurial spirit and business acumen of owners with management skills and expertise of
professionals to set itself apart as a Chamber with a difference.
Currently, ASSOCHAM has more than 100 National Councils covering the entire gamut of economic activities in India. It has been especially

Assocham Auto Forum and Awards 2017.pptx 62

About ASSOCHAM (2/2)

acknowledged as a significant voice of Indian industry in the field of Corporate Social Responsibility, Environment & Safety, HR & Labour
Affairs, Corporate Governance, Information Technology, Biotechnology, Telecom, Banking & Finance, Company Law, Corporate Finance,
Economic and International Affairs, Mergers & Acquisitions, Tourism, Civil Aviation, Infrastructure, Energy & Power, Education, Legal Reforms,
Real Estate and Rural Development, Competency Building & Skill Development to mention a few.

INSIGHT INTO ‘NEW BUSINESS MODELS’

ASSOCHAM has been a significant contributory factor in the emergence of new-age Indian Corporates, characterized by a new mindset and
global ambition for dominating the international business. The Chamber has addressed itself to the key areas like India as Investment
Destination, Achieving International Competitiveness, Promoting International Trade, Corporate Strategies for Enhancing Stakeholders Value,
Government Policies in sustaining India’s Development, Infrastructure Development for enhancing India’s Competitiveness, Building Indian
MNCs, Role of Financial Sector the Catalyst for India’s Transformation.

ASSOCHAM derives its strengths from the following Promoter Chambers: Bombay Chamber of Commerce & Industry, Mumbai; Cochin
Chambers of Commerce & Industry, Cochin: Indian Merchant’s Chamber, Mumbai; The Madras Chamber of Commerce and Industry, Chennai;
PHD Chamber of Commerce and Industry, New Delhi and has over 4 Lakh Direct / Indirect members.

Together, we can make a significant difference to the burden that our nation carries and bring in a bright, new tomorrow for our nation.
D. S. Rawat
Secretary General
d.s.rawat@assocham.com

The Associated Chambers of Commerce and Industry of India

ASSOCHAM Corporate Office:
5, Sardar Patel Marg, Chanakyapuri, New Delhi-110 021
Tel: 011-46550555 (Hunting Line) • Fax: 011-23017008, 23017009
Website: www.assocham.org
Assocham Auto Forum and Awards 2017.pptx 63
About Roland Berger

Roland Berger, founded in 1967, is the only leading global consultancy of European origin. With 2,400 employees working in 34
countries, we have successful operations in all major international markets. Our 50 offices are located in the key global business hubs.

Roland Berger advises major international industry and service companies as well as public institutions. Our services cover the entire
range of management consulting from strategic advice to successful implementation: e.g. new leadership and business models;
innovative processes and services; M&A, private equity and restructuring; and management support on large infrastructure projects.

Our firm is owned solely by a group of 220 Partners. We share the conviction that the firm's independence provides the basis for
unbiased advice to our clients.

At Roland Berger, we combine sound analyses with creative strategies that generate real and sustainable value for the client. We
develop and consolidate our expertise in global Competence Centers that focus on specific industries and functional issues. We
handpick interdisciplinary teams from these Competence Centers to develop the best solutions.

Roland Berger has been operating in India since 2012 and currently has offices in Mumbai, Delhi, Pune and Chennai. The firm in India
is led by Dr. Wilfried G. Aulbur.

Assocham Auto Forum and Awards 2017.pptx 64

The Roland Berger Automotive Competence Center is a
THOUGHT LEADER and regularly delivers landmark studies
Publications and studies
ACC Insights Recent studies & articles (selection)
Automated vehicles Index
> Presentation of competitive positions of world´s
> The Automotive leading automotive nations
Competence > Illustration of necessary against prevailing legal
framework
Center's client
magazine
On the road toward the autonomous truck
> Going out to top- > Functional demands on OEM´s and Suppliers in the
match decision development of truck automation until 2025
makers in the > Identification of major technical and legal challenges
automotive
business globally
> Three to four Automotive 4.0 - A disruption and
publications new reality in the US?
> Identification of major, potentially disruptive trends
per year > Illustration and quantification of various scenarios and
> Circulation of their impacts on the automotive industry
around 3,500
copies per Global Automotive Supplier Study
issue > Assessment of current situation, success factors and
future challenges
> Recommendations of short and long term actions for
automotive suppliers

Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 65

We are the global benchmark for leading edge publications in the
sector
Roland Berger studies: recent examples for automated car and truck / Automotive 4.0
“Automated Vehicles” index Autonomous driving:
published by fka and Disruptive innovation that
Roland Berger: promises to change the
Analysis of the competitive automotive industry as
position of the relevant we know it – it’s time for
automotive nations (Germany, every player to think:act!
US, China, Sweden, the UK,
South Korea, France, Italy
and Japan)

On the road toward the

autonomous truck:
Opportunities for OEMs
and suppliers

Source: Roland Berger Assocham Auto Forum and Awards 2017.pptx 66

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Dr. Wilfried G. Aulbur Rahul Gangal
Member – Global Supervisory Board, Partner
Managing Partner India Roland Berger
Head Automotive Asia, Roland Berger

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Assocham Auto Forum and Awards 2017.pptx 67