Emerging Automotive Technology (AEL312)

Unit: I Automotive Industry

Topics to be covered
Present status of Automotive Industry - Global Automotive Industry - Indian Automotive Industry Industry Challenges and Concepts for 21st Century Crucial Issues facing the Industry and Approaches to meet these challenges. Future of Automotive Industry

Global Automotive Industry

The automotive industry is one of the largest and most multinational of all industries. It is a key indicator of economic growth and a major contributor to the gross domestic product of the country. On a global level, the assets of the top ten multinational automotive enterprises represent 28% of the assets of the worlds top 50 companies, 29% of their employment and 30% of their total sales. The automotive industry today is in the middle of a dramatic and largely unprecedented transformation. The heart of this transformation is not about how the auto company does its work but rather how it defines itself.

Global Automotive Industry (contd..)

The model of the car company that Henry Ford created and Alfred Sloan perfected integrated, scale driven, product-pushoriented prevailed for decades. It drove the consolidation of the U.S. industry from dozens of manufacturers to four to three. It governed the development of the post-war European industry. And it was the model upon which the Japanese manufacturers relied as they shot up the global league table having made timely and effective adaptations that were overlooked, for a while, by the oncedominant U.S. industry.

Global Automotive Industry (contd..)

Today the traditional model of the auto company is under direct attack. Alternative visions and concepts have emerged for every piece of value that the traditional car company adds designing cars, engineering them, manufacturing them, assembling them, and marketing them. These visions and concepts are not just being tested on paper but through experiments that are getting ever bolder and more daring. Some industry commentators have speculated about the possibility of creating a virtual car company along the lines of a Gateway or a Dell.

Global Automotive Industry (contd..)

The conventional wisdom is economic pressure will force the auto industry to collapse to perhaps six major players, two in each of the three legs of the triad (North America, Western Europe, Japan). It is futile to try to define the future shape and structure of an industry as large, as complex, and as politically central as the auto industry. Most of the challenges the automotive industry will face in the next 10 or 20 years can be identified today. They are shaped by changes in the underlying economics of the auto business, from supplier through consumer, and by definition they are sufficiently broad to be of interest to all the participants in the industry.

Indian Automotive Industry

Automotive Industry, globally, as well in India, is one of the key sectors of the economy. Due to its deep forward and backward linkages with several key segments of the economy, automotive industry has a strong multiplier effect and acts as one of the key drivers of economic growth. The well developed Indian automotive industry produces a wide variety of vehicles: passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motor-cycles, mopeds, three wheelers, tractors and other agricultural equipment etc.

Indian Automotive Industry (contd..)

The Indian automobile industry is currently experiencing an unprecedented boom in demand for all types of vehicles. This boom has been triggered primarily by two factors: (1) increase in disposable incomes and standards of living of middle class families; and (2) the Governments liberalization measures such as relaxation of the foreign exchange and equity regulations and reduction of tariffs on imports that has fueled financing-driven purchases. Industry observers predict that passenger vehicle sales will increase substantially as the market grows and customers purchasing abilities rise, there will be greater demand for higher-end models which currently constitute only a tiny fraction of the market.

Indian Automotive Industry (contd..)

According to the Society of Indian Automobile Manufacturers, annual vehicle sales are projected to increase to 5 million by 2015 and more than 9 million by 2020. The majority of Indias car manufacturing industry is based around three clusters in the South, West and North. The Southern cluster near Chennai is the biggest with 35% of the revenue share. The Western hub neat Maharashtra is 33% of the market. The Northern cluster is primarily Haryana with 32%. Chennai, is also referred to as the Detroit of India with the India operations of Ford, Hyundai, Renault and Nissan headquartered in the city and BMW having an assembly plant on the outskirts.

Indian Automotive Industry (contd..)

Gurgaon and Manesar in Haryana form the Northern cluster where the countrys largest car manufacturer, Maruti Suziki, is based. The Chakan corridor near Pune, Maharashtra is the Western cluster with companies like General Motors, Volkswagen, Skoda, Mahindra and Mahendra, Tata Motors, Mercedes Benz, Land Rover, Fiat and Force Motors having assembly plants in the area. Aurangabad with Audi, Skoda and Volkswagen also form part of the Western cluster. Another emerging cluster is in the state of Gujarat with manufacturing facility of General Motors in Halol and further planned for Tata Nano at Sanand. Ford, Maruti Suziki and Peugeot-Citroen plants are also to come up in Gujarat. Kolkata with Hindustan Motors, Noida with Honda and Bangalore with Toyota are some of other automotive manufacturing regions around the country.

Indian Automotive Industry (contd..)

These trends have encouraged many multinational automakers from Japan, U.S.A., and Europe to enter the Indian market mainly through joint ventures with Indian firms. The automobile industry in India is one of the largest in the world and one of the fastest growing globally. Indias passenger car and commercial vehicle manufacturing industry is the seventh largest in the world, with an annual production of more than 3.7 million units in 2010. India, with its huge domestic market, rapidly growing purchasing power, market linked exchange rate and well established financial market is emerging as an attractive destination for new investments in this sector.

Industry Challenges
The global automotive industry today is delivering unprecedented levels of customer value. Vehicles today are vastly superior to and more reliable than those produced just a decade ago in terms of economy, safety, comfort, functionality and performance. Fierce global competition for customers is the prime mover behind the increase in customer value. But the automotive industry structure that has endured for eighty years may be reaching the limit of its potential. Delivering the next significant increment of value to automotive consumers while remaining profitable will require dramatic increases in productivity across the value chain.

Industry Challenges (contd..)

There are five common challenges facing the worlds automakers and their implications for the structure and dynamics of the auto industry are described below from research and client experience: - Globalization - Product Differentiation - Product Development - Supply Chain Restructuring - Marketing and Distribution

Industry Challenges (contd..)

Globalization North America, Western Europe, and Japan are home to 18 of the top 20 VMs in the world and account for nearly 90% of the global production. All three of these regions are mature automotive markets with low expected unit growth rates and capacity in excess of regional demand. VMs therefore have turned their sights toward growth opportunities in emerging markets: Latin America, North and South Asia, China, India, Eastern Europe, and Russia. These markets are forecasted to grow at more than double the average industry rate over the next ten years.

Industry Challenges (contd..)

Product Differentiation Competition for sophisticated consumers is fierce. Vehicle buyers have an abundance of choices of vehicles with increasingly similar functional and performance characteristics. In order to increase share, maximize price realization, and use their capacity, VMs must offer differentiated products that win with consumers. Every VM, it seems, has or soon will have a vehicle that combines some of the key attributes of SUVs (ride height, allwheel drive) with the passenger compartment and amenities of a standard sedan.

Industry Challenges (contd..)

Product Development Vehicle development is expensive and time consuming, and risky. VMs as a group have made enormous progress reducing cycle time and cost despite growing product complexity, new technologies, and more stringent regulations. Costs to design, engineer, and a tool a major new model can reach into the billions of dollars. All are looking for ways to reduce development time and cost to improve profitability and to better react to market changes.

Industry Challenges (contd..)

Supply Chain Restructuring A more recent but equally powerful initiatives is for VMs to begin to rely more fully on suppliers for systems and modules. Systems usually are defined in terms of functions the steering system, the braking system, the driver information system consisting of a number of components that are not necessarily located with each other. A module is a number of components that may not be at all related functionally but can be assembled and supplied as a unit to final assembly.

Industry Challenges (contd..)

Marketing and Distribution Competition for customers and the expense of differentiating products have forced VMs to look downstream for new ways to create and capture value.

Two main approaches have emerged. The first, follow the car, is to participate more extensively in the stream of postassembly transactions relating to a vehicle, beginning with the initial sale and ending at the scrap yard. The second, follow the customer, to build and exploit more durable relationships with customers over their vehicle buying lifetimes. Both of these, require radical changes in the ways that VMs define and serve their markets.

Crucial Issues facing the Industry

At the beginning of the twenty-first century, the worlds love affair with the car is a source of concern on several fronts such as: - The impact of the car on the environment, especially in terms of its contribution to CO2 emissions and global warming; - the anticipated growth in the worlds car population, mainly in developing countries, which has the potential to increase this impact; - traffic accidents, which are a major cause of death and injury, particularly among the young; - the cars current reliance on oil; - the economic and social cost of road traffic congestion.

Crucial Issues facing the Industry (contd..)

Environmental Transport is a major user of energy and contributes considerably to carbon dioxide (CO2) emissions. The adoption of the Kyoto protocol by the EU, calling for a significant reduction in greenhouse gases, is a major driver towards cutting emissions. The EU and individual Member States, in cooperation with manufacturers, have pursued a policy of emission reduction for many years. Emission standards have been progressively tightened over the last two decades, but the increasing number of vehicles has limited the overall improvement in air quality.

Crucial Issues facing the Industry (contd..)

A plan for gradual achievement of international pollution standards/ norms by domestic vehicle manufacturers such as in India has been adopted. Emission norms came into force in 1991 for petrol vehicles and 1992 for diesel vehicles. These norms have been progressively made stringent. Environment concerns led to India narrowing the gap with Euro norms at a rapid pace and currently BS-IV or Euro IV equivalent norms are in force throughout the country.

Crucial Issues facing the Industry (contd..)

Fuel Transport consumes about a third of all energy used in the EU15 and road transport alone accounts for more than a quarter. About half of oil, around 80% of which is imported, is consumed by road transport. Dependence on imported supplies, which may not be secure, are subject to growing competition from the emerging economies. At the same time, approaching the limits of production may reinforce the pressure for increased efficiency and alternative fuels. Some electrically powered vehicles have been in use for several years. These vehicles have a limited range and dependent on heavy battery packs, which require frequent recharging from the grid.

Crucial Issues facing the Industry (contd..)

Fuel (contd..) In the 1990s, car producers such as Toyota and Honda developed hybrid vehicles, which use an internal combustion engine in tandem with an electric driving system. These are more efficient and less polluting than conventional engines but still rely on oil. Research in this area is proceeding along two main lines: - finding alternative sources of fuel for the internal combustion engine; and - developing an alternative means of power for road vehicles.

Crucial Issues facing the Industry (contd..)

Safety Every year there are many road accidents. Road vehicle accidents are the main cause of death. Despite the increase in the level of traffic the number of accidents has fallen. However, the situation is still unacceptable and difficult to justify. In order to reduce the number of road deaths, the action program aim at: - encouraging road users to improve their behaviour; - making vehicle safer; - improving road infrastructures. As far as the automotive industry is concerned, the second aim is the most important. The industry is pursuing several measures in the interests of both passive safety, to protect occupants when an accident occurs, the active safety, designed to avoid accidents altogether.

Crucial Issues facing the Industry (contd..)

Safety (contd..) Vehicles are developing into platforms for advanced electronic systems which can control a vehicles safety functions. This technology offers great potential for a quantum leap in the field of road safety, thanks to smart active and passive safety measures which can improve compliance with driving rules, in particular regarding speeding and impaired driving ability, as well as providing intelligent protection in the event of an accident. The priorities for accident protection or passive safety measures are: - audible or visual seat belt reminder systems; - safer car fronts for pedestrians and cyclists;

Crucial Issues facing the Industry (contd..)

Safety (contd..) - the impact of increasing numbers of 4x4s, sports utility vehicles (SUV) and multipurpose vehicles. Accident prevention or active safety measures are focusing on the development of intelligent transport systems including: - speed management devices to reduce stopping distances, increase stability and prevent roll-over accidents; - warning to detect driver fatigue or worsening of performance; - devices capable of alerting the driver to the risk of collision.

Crucial Issues facing the Industry (contd..)

Safety (contd..) Other devices under consideration are: - driving by wire-control systems; - improving visibility, particularly at night.

Navigation Systems Developments in IT made it possible for navigation and guidance systems based on digital mapping. These are available with the coming into service of the Satellite Positioning System. The development of automated highways where computers control the vehicles has long been

Future of Automotive Industry

There is plenty of evidence that the automobile will change more in the next ten years than that it did in the last fifty. The automobile will keep making history. And the fascination with the automobile will continue to know no political, national or cultural borders. Automobile will become safer, greener and more electric.