Acma & KPMG
Acma & KPMG
Acma & KPMG
Prepared for ACMAs National Conference on driving affordable and accessible technology innovations.
The sustain logo belongs to ACMAs Sustainable Technology Development Committee.
Table of contents
1
2
3
4
5
6
7
01
02
Executive summary
03
04
Regulatory landscape
07
09
18
Message
from KPMG
Rajeev Singh
Partner and Head
Automotive Sector
KPMG in India
Message
from ACMA
Vinnie Mehta
Director General
ACMA
Executive
summary
Indian automotive
industry
Introduction
The Indian automotive industry has
seen significant evolution in the last
three to four decades. In the 1970s,
India was a closed market with a
restrictive regulatory environment
and growth was limited by supply,
outdated auto models, high duties
and sales taxes. Post liberalisation,
Source: Society of Indian Automobile Manufacturers and *KPMG in India analysis, 2015 (Calculated values)
1. http://indiainbusiness.nic.in/newdesign/index.
php?param=industryservices_landing/329/1
3. http://www.siamindia.com/statistics.
aspx?mpgid=8&pgidtrail=9
4. http://www.investindia.gov.in/automobilesector/
Regulatory
landscape
Safety
According to a UN report, there are
more than 200,000 road accident
fatalities in India every year5.To
address this,the government
has been taking steps to review
safety regulations. The centre also
constituted a committee on road
safety and traffic management in
2005 and approved the National
Road Safety Policy in 2010 to take
concrete measures.
Several developed countries have
regulations for mandatory recall
of vehicles if defects are found
and reported by the customers.
Currently, vehicle manufacturers in
India make voluntary recalls. These,
recalls are a huge financial burden
for the automakers. The new Road
Transport and Safety Bill, highlights
that if 100 or more people complain
about a particular defect in a vehicle
that could cause harm to occupants
or other road users - to the Vehicle
5. http://www.who.int/violence_injury_
prevention/road_traffic/countrywork/ind/en/
Emissions
The Indian government has been
taking steps, such as launching of
an air quality index for several cities
for real-time monitoring and to
create awareness about pollution6.
Currently, the Bharat stage III
emission standard is mandated
throughout the country to regulate
air pollutants. However, the Bharat
stage IV standard, that is active
in select cities, has resulted in
vehicle manufacturers investing
in new engine technologies and
upgrades. Future standards such as
Bharat stage V and VI are likely to be
mandated in the near future7.
The issue of auto emissions and
overdependence on fossil fuels is
also being tackled through Indias
policies related to fuel efficiency
of vehicles. The Bureau of Energy
Efficiency (BEE) has already notified
new norms under the Corporate
Average Fuel Consumption (CAFC)
policy, which when implemented
would mandate a mileage increase
of about 14 per cent for all
passenger vehicles from 2016-178.
It would also require labelling of all
new cars, wherein information of
fuel consumption relative to other
models in the same weight class
would be provided. This would help
customers make a more informed
choice which could cause a pull
for low-fuel consuming models.
Customer preferences in India have
always been in favour of better fuel
economy vehicles due to lower
operating costs and this has been
a key reason of success for market
leaders in passenger vehicles.
6. http://www.bbc.com/news/world-asiaindia-32193742
7. http://economictimes.indiatimes.com/
industry/auto/news/policy/government-mayskip-a-stage-in-emission-norms-to-adopt-bs-vistandards/articleshow/46016203.cms
8. http://articles.economictimes.indiatimes.
com/2014-02-14/news/47336604_1_newnorms-fuel-efficiency-passenger-vehicles
Technologies and
trends that could
drive the industry
Lightweighting
As the weight of a vehicle directly
impacts its dynamics, agility,
fuel consumption and CO2
emissions, it has been drawing
the attention of the automotive
industry for decades now.
Lightweighting strategies today are
a combination of component design,
manufacturing process innovation
and substitution of materials.
Leading car manufacturers
in India have been targeting
lightweighting with materials such
as aluminium, magnesium alloy,
high performance engineering
plastics and high strength steel.
Vehicle manufacturers have to align
In India, lightweighting is
lagging behind in terms of global
practices as the ecosystem is
still in its nascent stage due to
lack of technological innovation
and inadequate investments in
R&D. Some major challenges
in lightweighting include high
cost of materials, varied material
properties, processing of raw
materials, moulding, manufacturing,
etc. Other challenges include ability
to sustain low vehicle repair costs,
infrastructure and skill development
of technicians for handling multimaterial joints, and full vehicle life
cycle assessments to gauge the
benefits of lightweighting material.
Material used
Advantages
Challenges
Aluminium (engines)
Harder to spot-weld
Uses labour intensive adhesive bonding
Source: Automotive Research Association of India and KPMG in India analysis, 2015
Cannot be recycled
10
Electrification of powertrain
Apart from conventional vehicles,
there are a variety of alternative fuel
based vehicles on the road, such
as CNG, LPG, electric vehicles,
etc. Of all the alternatives available,
Electric Vehicles (EVs) have been
on the radar of the government
and OEMs, globally. However,
the scenario of roads filled with
electrically operated cars still seems
distant. According to the 2015
Global Automotive Executive Survey
done by KPMG International, by
9. http://www.smev.in/industry-info/ev-industryoverview/
11
Source: Global EV Outlook 2015, Clean Energy Ministerials Electric Vehicles Initiative
11. http://www.zsw-bw.de/uploads/media/pi062015-ZSW-E-Mobility.pdf
12. Global EV Outlook 2015, Clean Energy
Ministerials Electric Vehicles Initiative
13. http://www.chinabusinessreview.com/
opportunities-and-challenges-in-chinaselectric-vehicle-market/
14. http://www.smev.in/industry-info/ev-industryoverview/
15. http://forbesindia.com/blog/businessstrategy/why-the-economics-of-mahindrareva-e20-dont-work/
12
Source : Electric Vehicles in India Policies, Opportunities and Current Scenario, National Institute,
National Institute of Urban Affairs scenario
16. http://www.business-standard.com/article/
companies/subsidy-withdrawal-hits-sales-ofelectric-vehicles-112061800043_1.html
13
Particulars
700
1200
Demand infrastructure
1550
3400
Charging infrastructure
100
200
Pilot projects
200
500
IEC/Operations
50
50
2600
5350
Total
Grand total
7950 million
Source : Electric Vehicles in India Policies, Opportunities and Current Scenario, National Institute, National
Institute of Urban Affairs scenario
charging infrastructure by
installing exclusive charging
stations at various places, which
are compatible only with the
company models. For instance,
a U.S. based OEM has installed
superchargers at strategic
locations in various cities in the
country which can recharge the
EVs manufactured by it.
Key developments
Global OEMs, apart from supplying
EVs, have also embarked on various
innovative business models to
enhance their service offerings
and differentiate themselves from
competitors. Some of the business
models are:
17. http://trak.in/tags/business/2015/04/09/7melectric-vehicles-2020-incentives-offered/
18. http://www.autocarpro.in/news-national/
mahindra-reva-slashes-e2o-price-rs-177lakh-8248
Smartphone application
to locate charging station:
Companies have also come up
with smartphone applications
that help drivers in locating the
nearest charging station that
is compatible with the vehicle.
For instance, an OEM provides
an application which helps to
locate the nearest charging
station of different providers. This
application is displayed in the
navigation system of the car.
14
Going forward
In India, the penetration of EVs
in urban areas depends on the
acquisition and ownership costs as
well as quality of and accessibility
to charging infrastructure. The
government should work towards
developing an environment that
encourages the private sector to
create charging infrastructure in
the country. Another important
focus, to boost the EV market,
should be on batteries that typically
constitute up to half of the vehicle
cost and weight. The government
should support research activities
to develop innovative and low-cost
batteries, recycling and reuse
of batteries, etc. The NEMMP,
focusses on battery cells and
Battery Management System
(BMS) technology as a priority.
Connected vehicles
The global automotive industry has
witnessed a lot of transformation
in the last two decades with
the digitisation of vehicles. It
is moving towards the concept
of connected vehicles, which
focusses on connecting vehicles
with the outside world and
enhancing on-board experience.
Automotive telematics combines
telecommunication and informatics
to provide various services such as
live traffic updates, smart routing
and tracking, roadside assistance
in case of accidents, automatic toll
15
Source: 2025 Every Car Connected: Forecasting the Growth and Opportunity, February 2012,
SBD and GSMA
21. http://www.infosysblogs.com/engineeringservices/2013/04/telematics_market_in_
india_-_a.html
22. http://timesofindia.indiatimes.com/india/GPSpanic-buttons-must-for-taxis-Government/
articleshow/46363591.cms
23. http://www.ibef.org/blogs/indian-car-rentalindustry-opportunity-to-build-and-indian-travelbrand
16
Source: Telematics: Force of change in automobiles, October 2014, Automotive Products Finder, as
accessed on 11 June 2015
Electronics
Developments in engine
management and a rise in demand
for connected, safer and greener
vehicles are expected to be key
growth drivers for the Indian
automotive electronics industry,
a market which has exhibited
exceptional potential in the last
few years and is expected to grow
further. The Government of India
has received investment proposals
of INR180 billion during the period of
July to December 2014 for its
Make in India initiative, which has
mainly come from the automotive
electronics sector25. There is a
24. http://www.mynewsdesk.com/in/
pressreleases/india-telematics-marketestimated-to-reach-301-23-millionby-2021-1115656
* Currency converted, 1 USD = INR63.4655,
RBI reference rate as on 13 July 2015, NSE
25. http://www.teleanalysis.com/analysis/whyautomotive-electronics-contribute-majorityof-rs-18000-cr-investment-11786.html
26. http://www.statista.com/statistics/277931/
automotive-electronics-cost-as-a-share-oftotal-car-cost-worldwide/
27. Why automotive electronics contribute
majority of Make in India investment?,
TeleAnalysis, 22 December 2014
17
18
Supply chain
capacity
28. http://auto.ndtv.com/news/abs-nowcompulsory-for-trucks-and-buses-751343
29. http://indianexpress.com/article/india/indiaothers/government-in-a-rush-to-upgrade-
Emission norms
Currently, BS-IV emission norms
are in place in 33 cities all over
India, while BS- III is the norm in
the rest of the country. The new
government has been keen on
advancing the timelines to roll out
BS-VI norms and skip the BS- V
stage altogether29. However, this
has serious implications for the auto
value chain, specifically for engine
component suppliers. A large global
auto component manufacturer
in India has already expressed
its inability to the government to
roll-out a BS-VI compliant engine
within the stipulated timelines
and has stated that even a BS-V
compliant engine would need a lead
time of more than four years. The
supplier has also warned of serious
safety and quality implications if
appropriate time and effort is not
spent on the development of the
new engines30,which would not just
require advanced features such as
Diesel Particulate Filter (DPF) and
Selective Catalytic Reduction (SCR),
but may also require well developed
infrastructure for driving. According
to estimates, the changeover
from BS-IV to BS-V may also need
an industry-wide investment of
INR500 billion31, which may require
collaboration of OEMs as well as
lower tier suppliers to effect the
change.
emission-norms-but-wheres-the-enginewheres-the-fuel/
30. http://www.livemint.com/Industry/
xnIiqOgR3SzznHXpkX6xjO/SkippingBSVmayput-cars-at-risk-Bosch.html
31. http://indianexpress.com/article/india/indiaothers/government-in-a-rush-to-upgradeemission-norms-but-wheres-the-enginewheres-the-fuel/
19
Lightweighting
Though the role of large OEMs
cannot be understated in the
development of cost-effective
and strong, lightweight materials,
a KPMG International survey
suggests that Tier 1 suppliers are
equally expected to control the R&D
and production of such materials32.
While lightweighting provides new
opportunities for suppliers, it could
be a threat to Tier 2 suppliers if they
are unable to adapt, paving the way
for new players to enter the value
chain.
In order to sustain, component
suppliers may need to invest in
R&D and shorten their development
cycle to meet the demands of
faster response time of the OEMs33.
However, in India, as witnessed
during the post-liberalisation
period, OEMs themselves have to
participate actively in building and
preparing local suppliers for the new
trends, if they intend to continue
sourcing components locally at
low costs. Lightweighting could
also mean new manufacturing
processes, investment in new
machines, etc. and OEMs may not
just have to handhold their suppliers
to develop and implement new
technology, but may also need
to provide financial resources in
the form of debt or equity to build
capacity. OEMs may also need to
form agreements to share costs
with their suppliers during a recall,
so as to overcome the inertia
in the supply chain for the new
developments.
Electrification of power
trains
Lithium ion battery in EVs have
replaced the traditional lead-acid
battery used in automobiles due to
its lighter weight, quicker charging
times, higher efficiency and longer
range. In India, though OEMs can
procure these batteries from global
manufacturers for their electric
vehicles, it may be in their best
interest to develop capabilities of
local lead-acid battery suppliers to
keep costs low in the long-term. The
capabilities of existing players can
be built quickly through strategic
acquisitions and OEMs may need
to play a role in financing such
acquisitions.
To establish a viable e-mobility
market OEMs must also collaborate
with other players of the value
chain that include utilities, charging
infrastructure, application
developers, owners of charging
location, leasing companies, etc.
They must also come up with
innovative business models so that
they can improve the attractiveness
of EVs to end customers by
providing services like lease, rent
or share EVs; service for batteries,
mobile services, etc.
34. http://www.infosys.com/industries/
aerospace-defense/industry-offerings/
Documents/connected-vehicles-technology.
pdf
20
Summary
In the coming decade, automotive
players may have to embrace new
technologies and trends, driven
by changing customer demands
as well as government regulations
regarding safety and environmental
concerns. In the Indian market, the
price-sensitivity of the consumer
could drive critical changes in
the industry and may require
innovations in both products and
processes. This transformation may
not just need an active collaboration
between all the existing players
of the value chain, but may also
require leveraging synergies of
non-automotive industries. The
government too would have to
be in sync with the needs of the
industry and play an active role in
the transformation.
35. http://deity.gov.in/content/intelligenttransportation-system-its
36. http://www.dot.gov.in/sites/default/files/u8/
Tata%20Automotive%20Industry.pdf
21
About KPMG
KPMG in India
KPMG International
22
About ACMA
The Automotive Component
Manufacturers Association of
India (ACMA) is the apex body
representing the interest of the
Indian Auto Component Industry.
Its active involvement in trade
promotion, technology up-gradation,
quality enhancement and collection
& dissemination of information
has made it a vital catalyst for this
industrys development.
23
Glossary
Acronyms
ABS
ADAS
AEB
ASIC
BMS
BNVSAP
BS
Bharat Stage
CAFC
CAGR
CAN
CAN Phy
CDI
CNG
DPF
ECU
ESP
EV
Electric Vehicle
FAME
FDI
GDP
GPS
HIL
Hardware-in-Loop
HS/LS Drivers
High-Side/Low-Side driver
ICE
INR
Indian Rupee
IoT
Internet of Things
IT
Information Technology
ITS
LDO
Low-dropout regulator
LPG
MIL
Model-in-Loop
MPV
Multi-purpose Vehicle
NCAP
NEMMP
NEV
OEM
R&D
SCR
SIAM
SIL
Software-in-Loop
SoC
System-on-Chip
SUV
Microcontroller
UN
United Nations
WHO
24
Nitin Atroley
Partner and Head
Sales and Markets
T: +91 124 307 4887
E: [email protected]
S V Sukumar
Partner and Head
Manufacturing Sector
T: +91 22 6134 9501
E: [email protected]
Follow us on:
kpmg.com/in/socialmedia
Latest insights and updates are now available on the KPMG India app.
Scan the QR code below to download the app on your smart device.
Google Play
App Store
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual
or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information
is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information
without appropriate professional advice after a thorough examination of the particular situation.
2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated
with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.
The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International.
Printed in India. (010_THL0715)