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COST OPTIMIZATION

The Indian auto-components industry can be broadly classified into the organised and unorganised sectors. The organised sector caters to the Original Equipment Manufacturers (OEMs) and consists of high-value precision instruments while the unorganised sector comprises low-valued products and caters mostly to the aftermarket category.

Margins in the replacement market and exports are higher than the OEM market. The OEM market is very competitive and component manufacturers have to compromise on margins to bag bulk orders. Moreover, delivery schedules and quality standards have to be adhered to very strictly.

Current Macro Concerns

Currently, the Indian auto component industry is being influenced by multiple trends, policies and discontinuities. One of the major changes being implemented is the change in Bharat stage Emission Standards from BS-IV to BS-VI.

Passenger vehicles and Two-wheelers industry is witnessing subdued retail sentiments due to higher cost of ownership. The other major change is the push for electronic vehicles (EV’s).

Affordability, overproduction, lack of innovation, change in mindset of millennials who prefer ride sharing cabs than buying an automobile, are some of the other key reasons for the slowdown in the auto sector resulting in several OEM and Auto Component manufactures slamming brakes on production.

Challenges of Auto Comp Manufacturers

  • Demand Volatility from the OEM’s put pressure on the margins during a downturn. Standardisation to achieve economies of scale is challenged with every model change by the OEM.
  • Poor Health of Trade Channels – Due to the vagaries of the market, there is always a threat of switching over to competition.
  • Fringe revenue streams from exports – For most companies, exports is still on a responsive mode.
  • Dependence on manpower employed for market coverage / penetration. This not only puts a drain on the finances, but also raises doubts on the efficacy of market coverage and quality of customers met.

Approaches for Business Transformation

  • Approaches for Business Transformation
  • Working closely with OEM’s on standardization and modularization.
  • Enhancing operational efficiencies to contain costs. Maintaining zero defects and adopting technologies for tracking quality.
  • Analysing the product / offering portfolio with the objective of rationalizing the range. Segregating them into “Stars and Tails” and re-examining the viability of offering them.
  • In exports, look at developing, introducing & selling to OEM’s who are global leaders, especially in Europe and North America.
  • Adopting digital technology – Mobile Apps, user friendly platforms etc. to counter the issue of manpower dependence for market penetration.
  • Shared mobility and EV’s are here to stay, companies should start work on creating products / offerings in this space.
  • Looking at Organisational restructuring to bring about the above-mentioned initiatives.

About the Author

Krishna Kaushik is a Dynamic, business savvy professional with verifiable year-after-year success in achieving revenue, profit and business growth objectives within start-up, turnaround and rapid change environments; known for streamlining business operations while serving as a catalyst for growth and expansion and quickly restoring forward momentum and generating revenue.

He has In-depth experience in driving sales and marketing initiatives predominantly in Channel management and Key Accounts Management. He has Visionary leadership qualities in assessing client needs, and strategically positioning programs aligned with customer and market needs/projections. He has Good understanding of brand management, market research, sales & network