Automotive Mission Plan 2006-16 focussed broadly on five aspects: Economic growth, passenger comfort, sustainability, quality, and cost competitiveness Image: Shutterstock Background: According to the Society of Indian Automotive Manufacturers (SIAM), Indian automotive sector today is a $74 billion industry and by 2026, the industry is expected to achieve a turnover of $300 billion- clocking a CAGR of ~ 15 percent. The Automotive Mission Plan (AMP) was drafted in 2006 to map the aspirations of the auto and auto component industry, to promote India as a preferred global manufacturing destination and introduced intervention and prescription mechanisms for promoting the industry. The first phase of the plan was called Automotive Mission Plan 2006-16 and focussed broadly on five aspects: Economic growth, passenger comfort, sustainability, quality, and cost competitiveness. AMP 2016-26 is likely to be formally announced by the end of the year and is expected to provide a ten-year road map. Recently at SIAM’s 55th Annual Conference, GoI and SIAM provided a brief overview of the new AMP which appears to recognise the need for auto and auto component manufacturers to move from plain vanilla manufacturing to building design and engineering capabilities. This column aims to analyse the achievements of AMP 2006-16 and highlights expectations from AMP 2016-26. Background of AMP 2006-16: As per the ministry of heavy industries and public enterprises, for FY 2014, automotive
industry formed 7.1 percent of the GDP, 45 percent of the manufacturing GDP, contributed 4.3 percent to exports, and 13 percent to excise revenues. During 2006-16, the industry created 19 million additional jobs and saved 8.6 billion litres of fuel. Source: Ministry of Heavy Industries and Public Enterprises While a lot of ground has been covered under AMP 2006-16, the industry missed out on the optimistic targets set under the plan. Infrastructure bottlenecks, delayed reforms, policy stagnation, high interest rates, and global financial meltdown played a complex role in demand disruption. The challenges presented by demand disruption could have led to a race for innovation. However, the message was ignored and we observe the following phenomenon: Most of the auto-component players are focussed on plain vanilla manufacturing of components with limited focus on integrated system. Some of the critical components, especially for passenger cars segment such as engine, transmission, and electronic parts are still being imported. According to the Automotive Component Manufacturers Association of India (ACMA), during FY 2013-14, 21 percent of components were imported from China alone, and the rest from Germany, Japan and South Korea Close to 2/3rd of auto-component exports still comprise traditional mechanical parts; value added products such as high-end safety and advanced electronic parts form less than 10 percent of exports Almost all Indian OEMs have launched several new models, very few new launches can be considered as cutting edge next generation models with the exception of a few While many of the global OEMs are increasing their designing focus in the Indian market, most of the new launches in the Indian market are global successful models Still most of the component designs are provided by OEMs with limited capability to
convert a concept into a viable prototype After-market export potential has been largely ignored with most organised auto- component players focusing largely on OEM sales. Aftermarket requires concentrated efforts to build global supply chain – both on-shore and off-shore capabilities, brand positioning, improved product portfolio and building pricing strategies AMP 2016-26: Based on the brief overview provided by the SIAM conference, AMP 2016-26 envisions at developing India as one of the top three automotive manufacturing hubs in the world. An optimistic revenue target of $300 billion for FY 2026 has been set. Some of the salient features of AMP 2016-26 are as below: 1. Auto industry to contribute 13 percent to the GDP – present contribution is less than 10 percent 2. Creation of incremental 100 million jobs 3. Projected $80 billion in capex investments 4. BS V emission norms to be adopted by 2019; BS VI emission norms to be implemented by 2023 for passenger vehicle 5. AMP envisages to implement ‘end of life policy’ for old vehicles ‘Make in India’ or ‘Made in India’? Vision AMP 2016-26 has been aligned with Make in India campaign which is essentially a Made in India initiative. Made in India initiative has brand perception challenges and could be overcome only by providing value added products and services such as improved safety features, technological enhancements, and quality management. National Automotive Testing and R&D Infrastructure Project The government has already spent $280 million for creation of centres of excellence and crash test centres. The centres would help the industry to comply with advanced norms and help in implementing AMP. The National Electric Mobility Mission (NEMM) Plan 2020 The National Electric Mobility Mission Plan 2020 and policy of Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India aims at creating a vehicle base of ~7 million electric cars by 2020. The policy aims to provide incentives to buyers as well as suppliers and for undertaking R&D initiatives, to create public charging infrastructure, to encourage retro-fitment of vehicles. National Automotive Board (NAB) under the supervision of the department of heavy industries has been constituted for implementation of the plan. Other policy initiatives The government of India has extended support to the industry by increasing customs duty on CBUs of commercial vehicles from 10 percent to 40 percent, reduction in duty on chassis for ambulance manufacturing from 24 percent to 12.5 percent, extension in concession on select
parts used in the manufacture of electric & hybrid vehicles and weighted deduction up to 200 percent of expenditure on R&D for computation of expenses under Corporate Tax. Implementation challenges AMP lacks clarity on real-time benefits for making additional capital investments and requires an implementation road map for AMP 2016-26. The key challenges for meeting the targets set out in the plan are alignment with global emission standards and safety norms, lack of infrastructure, urban congestion, integration of smart concepts-vehicle to vehicle and vehicle to infrastructure, meeting efficiency needs, and safeguarding intellectual property rights. Some of the other challenges are: 1. Customs duty and transfer pricing issues plaguing the industry 2. Implementation of simpler tax structures such as GST 3. End of Life Policy’ for old vehicles and ban on overloading – these are sensitive issues and may not find patrons in the political fraternity 4. Lack of growth opportunities for auto industry players have attracted them to other sectors BMR point of view While we have launched ambitious policies in the past, such policies have become plagued by reform stagnation and suffered subdued enthusiasm on incentivisation and implementation front. To help the industry leapfrog into the next generation of opportunities, we believe that a two-way road map has to be built by GoI as well as the Indian automotive industry. While the government has to make serious efforts on policy implementation, industry has to take the onus for making Make in India a truly Made in India campaign.