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Sponsored -ET Accenture CEO Breakfast

Long term solutions are essential for the Indian auto sector to realise its true potential {Brand Content Initiative}

For years, Rajeev Chaba of MG Motor and Venkatram Mamillapalle of Renault India, have been making presentations about India’s great potential in terms of the auto sector even though the reality in execution has been a far cry from realising the potential. While today, we are the fourth largest automobile market in the world, a lot remains to be achieved.

The past year particularly has been a rough one with GST, fuel regulations, and an overall economic gloom casting a long shadow on the industry. Covid has only made matters worse with the overall market shrinking by almost 18 per cent in FY 20. In such a scenario, what is the strategy that industry leaders are building, how are they ensuring their path to recovery? The Economic Times CEO Breakfast, presented by Accenture, was an attempt to decode how the auto sector’s top leaders are reimagining the product and what is their go-to-market strategy.The discussion was moderated by Alokesh Bhattacharyya, Senior Editor, ET and Suchetana Ray, Senior Assistant Editor, ET.

Considering the current crisis facing the sector, the first step is to identify the structural issues facing it. Several leaders mooted for digitalisation being the way forward for the sector as it brings in efficiency and strengthens the entire value chain. However, there are some more pressing issues that need immediate attention. “We need to establish the importance of the sector to the economy. For that we need a nodal agency for the sector, more high-quality roads and better scrappage policy,” said Chaba.

But just having a scrappage policy isn’t enough. Clarity in policies and clarity in infrastructure are also important. It isn’t possible for a sector to thrive if the rules of the game keep changing. “We want to switch to alternate fuels, but what roadmap the government intends to take isn’t clear. You can’t give people every single option available and expect them to invest,” said Ashwath ram of Cummins India.

Despite the challenges and the current crisis, it’s important to identify demand drivers for the industry. Does that mean companies should adapt direct-to-consumer sales model through online platforms? The panel echoed the importance of contact points with customers for companies – both online and offline. They believed that dealers would continue to be relevant and act as facilitators between the OEM and the customer. “The 2nd quarter was a washout but the business is gradually coming back. It’s not that our customers don’t have money anymore but the pent-up demand is not converting to purchase at the moment,” said Martin Schwenk of Mercedes-Benz India.

To create demand, Renault India expanded its rural base through project Vistar. Today, 25 per cent of its revenue comes from rural markets. “We need government support and policies that will support the growth of the sector. There is enough work to be done by OEMs as well because as we move from ICEs to EVs there is a lot of threat to suppliers – from 2,400 parts in an ICE car,it will go down to 1/3rd in an EV,” said Venkatram Mamillapalle of Renault India.

With the festive season coming up, people will splurge and try and uplift their mood. But, what happens in Jan-Feb next year? If there is no demand stimulation, how can you uplift the sector? While the

government will give stimulation to the economy in general, OEMs have to keep the interest on through innovations, product launches, brand extensions and sales promotions such as limited editions.

For players like Amara Raja Batteries, there is no need for any demand stimulation. Vijayanand Samudrala stated: “Battery purchase is a distress purchase like medicines, one can’t wait if he needs a battery. In the current scenario, digital has helped us make our product available for essential services such as telecom, healthcare and data centres.” The company has used digital processes to empower channels map the demand manually and ensure that the product is available at the right place.

The auto industry is also looking at disrupting the entire operating model from a sales perspective. The very ownership of cars that exists today needs to be questioned. While every OEM is trying to intervene digitally to ensure they are right up there; the experiences are still broken. “Instead of trying to ‘force’ the complete transaction online, OEMs and dealers need to focus on how to create a structured omni-channel framework and digitalise for specific intervention,” said Dipti Vaishnav.

Going forward, auto players have to focus on the entire linkage from a customer experience perspective – both online and offline. There has to be a constant effort to engage with the customer. As Raghu Gullapalli of Accenture aptly puts it, “Digitalisation and automation are clearly the way forward for the auto industry, but government intervention and clear policies are needed for the sector to thrive in the long run.”

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