How India's auto industry can drive its own growth

The ever-evolving global economy may dent the competitiveness of India’s automotive industry, but it could also serve as the catalyst for new growth opportunities. The uncertainty around US trade and its impact on the competitiveness of India’s automotive industry — which exported $9.5 billion worth of goods to the US last year — could be stabilised by new bilateral trade pacts similar to the Comprehensive Economic and Trade Agreement (CETA) signed in July between India and the UK.

With much of the existing trade from India to the US representing auto parts, there remains a thriving export industry in the finished vehicle sector to other parts of the globe, including both local brands like Maruti and Mahindra & Mahindra and global automotive brands like Hyundai and Kia.

The question then becomes: What can the auto industry do to ensure that it continues to succeed in the face of a rapidly changing geopolitical and economic climate? India’s auto manufacturing plants have already made huge leaps in quality, consistency and cost-efficiency, but now, the automotive logistics industry that connects Indian producers to global consumers’ needs to keep pace too.

Fortunately, there are signs that it is stepping up to the challenge with an unprecedented mixture of innovation and collaboration, even between rival automotive brands.

Export innovation

Investment from both private companies and the Indian government means the logistics process is actively transforming.

Strategic changes to car designs, such as removable bumpers, combined with the fitting of internal hanging structures with disposable racking in shipping containers, mean three to four export vehicles can be safely stored in a shipping container that previously carried only two vehicles. Beyond space capacity benefits, we are also seeing vehicle damage rates dropping sharply.

Meanwhile, increased bridge heights mean that freight trains can carry double-stacked containers, lowering unit costs. More investment in roads, with as much spent in the last decade as in the previous 60 years combined, means larger car carriers can transport more vehicles safely to ports, reducing both transport cost and carbon footprint.

Collaboration between automotive brands

Pragmatism now reigns, with rival manufacturers regularly teaming up to share space on outbound cargo ships.

This is because, even if a particular auto brand’s export volumes fall short of expectations, it still needs to move its cargo on the most efficient, larger Roll-on Roll-off (RoRo) vessels—and will therefore seek to attract those to Indian ports.

The increase in collaboration benefits everyone in the market. It enables exporters to scale volumes up and down without being deprived of cargo ship availability. It also decreases export costs and reduces the delivery time for overseas customers.

Better planning at better ports

The success of automotive exports is in part dependent on the quality and capacity of ports. Traditionally, Indian auto makers transporting vehicles west or south might have used the Port of Mumbai in the middle of the city, being forced to deal with the associated traffic congestion, time restrictions, lack of storage space and dust issues, which are a particular concern for vehicles being exported to Australia and New Zealand.

However, greater investments across the sector are leading to the next generation of privatised ports, like the nearby port in Nhava Sheva. There, logistics providers are working together with the government (through investment in local infrastructure) to enable greater volumes and cost-efficiencies.

Nhava Sheva is only a container port but has been designed to build more efficiency into the logistics process, offering better connections and export opportunities. It’s no surprise that Hyundai built its new Pune manufacturing plant close to the port.

What the future holds

Although the US economy may be on the tip of every tongue at present, the Indian automotive industry has many other markets within its grasp, particularly for finished vehicles.

Countries in Africa, the Middle East, and Latin America have already demonstrated their growing demand for vehicles manufactured in India. Automotive products are affordable given India’s competitive costs and well-educated labour force, and the logistics of exporting finished vehicles to those markets from India is becoming easier.

By investing in better logistics, enhanced transport infrastructure and continuous innovation, car makers will be able to meet demand and continue to grow around the world. An industry collaborating with the government and the supply chain to ensure investment will drive capacity and enable export volumes to remain high, creating greater efficiency and profitability across the industry.

(Views are personal; the author is Director of Ground, Rail & Finished Vehicle Logistics for the Indian Sub-Continent at CEVA Logistics)