Regulatory Trends Disrupting Business Innovating Cost Structures Mahesh Kaikini Plant Head Gurgaon 26 November 2017
Regulations Overview Regulations Controlling human or societal behavior by rules or alternatively a rule or order issued by an executive authority or regulatory agency of Government and having the force of law Regulation Typology Economic Regulation Regulation in Public Interest Environmental Regulation Sector Regulations Each Sector might have its exclusive regulatory law and policies Sector regulation can take account of specific technical nuances that charactise a sector Rationale for Regulations To Promote public interest To check anti-competitive practices Prevent Market Failure External - General CII Cost Congress 2017 2
Regulation Technology Innovation Reg Tech Solutions provide ideal platform for supporting Industry s strategic growth agenda, accelerating speed to market and optimizing business processes while meeting regulatory standards These solutions first connect business processes with labyrinth of complex regulatory obligations and then streamline and simplify these mandates into manageable processes These solutions use the power of automation to reduce headcount spend and other compliance related cost. External - General CII Cost Congress 2017 3
Indian Automobile Industry The Indian auto industry is one of the largest in the world. The industry accounts for 7.1 per cent of the country's Gross Domestic Product (160 billion dollar industry). The industry has attracted Foreign Direct Investment (FDI) worth US$ 17.40 billion during the period April 2000 to June 2017, according to data released by Department of Industrial Policy and Promotion (DIPP). Mammoth impact of regulations and new technology on industry. External - General CII Cost Congress 2017 4
Emerging Trends in Automotive Industry. 1 2 Increasing number Time Frame for New Vehicles is 1-2 Years, the cycle of Development is measured in months. 3 Rs 1000 BS VI 4 in 2020 External - General CII Cost Congress 2017 5
Regulations Shaping Indian Automobile Industry Environmental imperatives BS VI emission norms (Equivalent to Euro VI) Adopting new technologies in a short span of time could hurt the auto industry and impact demand as new technologies will raises prices Safety Requirements Front and Side crash test for 4 W and ABS/CBS for 2W Makers to beef up safety features like mandatory airbags and child restraint systems etc. Customer Expectations Voluntary recall in case of manufacturing defect Makers to improve product quality multifold to avoid penalties External - General CII Cost Congress 2017 6
Themes I Design to Cost Themes Commonisation Way forward Each uncommon part needs Double space Double investment Changeover time / reduce productivity / multiple supplier / testing Assembly level / BOP level / RM Level Global Sourcing / Multi-sourcing Each part family should have Global supplier Needed for sharp volume fluctuations Provides new process benchmarks Access to new technology / material Alternate Raw Material Yield Improvement Need to move to local RM / Cheaper Global RM source Alternate grade / RM Design for improvement in yield External - General CII Cost Congress 2017 7
Key Challenges Focus Areas Cost Challenges Increased material cost on account of technologically advanced sensors Heavy investments Possible Solutions Shared platform and manufacturing Design Solutions Technology Air Fuel Management system On-Board Diagnostic Exhaust Gas Regeneration Robust Design Technology partners Infrastructure Skill Dust Control Environment New machines with closer tolerances Write off Existing Investments Reskilling High skilled workforce for Stringent Quality Flexible Manufacturing systems Low Cost Automation Digitalisation, IOT Change Management Comprehensive Competency Framework External - General CII Cost Congress 2017 8
Business Model Innovation is about transforming key elements of your business or inventing completely new ways of doing business HINDSIGHT What do you know about your customers? INSIGHT How does this enable you to get closer to their needs? What customers or needs have you ignored so far? FORESIGHT How might this inform what you will need next? What products, processes or business model for the future? External - General CII Cost Congress 2017 9
Technology Disruptions An Overview 1. Evolving concepts (Products / Services / Aggregator) is disrupting global markets multifold. We are already at Cusp of Energy & Transportation disruption. 2. Mobility Disruption is four fold: a) Energy storage b) Electrical Vehicle (EV) c) Self-driving Cars d) Solar 3. One of the major force of mobility disruption is Li-Ion battery. Battery constitutes approximately 50% of vehicle cost. Cost reduction in past was @ 14% CAGR & prediction is for even steeper reduction. 4. Tipping Point for Electrical Four Wheelers is 2020 i.e. ownership cost will come down drastically. a) Moving Parts in EV has reduced from 2000+ in Internal Combustion Engine (ICE) to 18 in Tesla. b) High performance at low cost (reducing battery cost). c) Increasing ICE cost due to stringent regulation. d) EV works as Data Generator for other industries. 5. Solar has reached grid parity in advanced economies. 6. Solar Disruption has revolutionised energy landscape. Reduction in solar price coupled with increase in fossil (6 ~ 16%) has brought about the change. External - General CII Cost Congress 2017 10
To Sum Up India is on tipping point for EV Adoption, Manufacturers must expedite the product development of EV. Manufacturers must deep-dive in Technology and understand manufacturing of Batteries, Electric Motors and its Value Chain. Need to formulate a Strategy team for constant focus on new technology evaluation and subsequently developing appropriate Business Model. External - General CII Cost Congress 2017 11
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