Home Interviews “Electrification in India has better prospects in the near term”

“Electrification in India has better prospects in the near term”

“Electrification in India has better prospects in the near term”

Although a relatively late entrant into India, Bradley J Maggart, President, Hitachi Automotive Systems Asia Ltd sees tremendous growth opportunity for the Tokyo-based developer and manufacturer of automotive, transportation and industrial components. Speaking exclusively to APF’s Manish Pant, Maggart sees tremendous potential in high-value, low-cost engineering as well as software applications for the world from the country. In this era of great disruption across industries, the world is witnessing a shift from the automobile to mobility industry, he adds.

As far as mobility is concerned, globally Hitachi has been working in the two areas of electric vehicles and autonomous driving. But how optimistic are you about their feasibility in India?

In India, electrification has better prospects in the near term for a couple of reasons. One, based on the government’s stated policies. Two, the fact that with urbanisation come different societal problems, including pollution, that have to be dealt with. Three, beyond the charging issue, the current infrastructure supports electrification. If the charging issue can be solved then there is really not too much of a barrier. The big caveat is of course the affordability. And I don’t think that in general the Indian consumers will pay a premium price for these technologies unless they see economic benefits. However, autonomous is more challenging as it has four levels. In some countries they are racing towards three or four with basically driverless cars.

There are still benefits of level one or level two technologies in India such as driverless systems, automatic braking, lane keeping and that type of stuff. Infrastructure in India is a little bit more challenging for autonomous because of the unpredictability of traffic, the control systems and, in some cases, lack of enforcement. They will come, but then the whole things boils down to infrastructure, regulation and affordability.

Moving on to a big talking point at most Indian automakers these days, pollution and passenger safety have emerged as two big concerns. How is Hitachi helping Indian OEMs on those two fronts?

Our technology contributes to betterment of society by reducing CO2 emissions whether it is about timing control or electrification technology. Autonomous vehicles has a huge opportunity to improve safety. But India can take a number of steps to improve safety without getting into that mode of technology. And as different safety standards get implemented, you go from no seat belt requirement to driver seat belt requirement to rear seat belt requirements to air bags requirements. Similarly, there are a lot of different things in safety like crash test, crush test, braking distance and anti-skid braking system (ABS) that the rest of world has seemingly mastered but for which there are still opportunities here in India.

And then there is the cost factor. With each new safety feature, the price of an automobile also goes up.

That’s the real tragedy. How do you put a price or cost on safety? To me it’s to a certain extent an ethical question on how does one balance between economics and lives.

According to you, automation business is considered the core business in the Hitachi ecosystem. What do you see as the potential for this vertical in the Indian context?

The potential is huge. India is one of the fastest growing markets between now and 2022. Only China will add absolute vehicle volume. According to a forecast, India is set to become the third largest producer of vehicles and engines in the world. So, the opportunity is there. The market dynamics are very different. The affordability issue is big. If you look at the segmentation in the market, India has historically been an ‘A’ segment market moving into ‘B’ and ‘C’ segments. That provides opportunities. As you move up segments, you bring in more content, affordability and technology. But I think just like all emerging markets we have a trigger point of GDP per capita growth. And when the market takes off, then everybody wants to come into that market because the volume and competitive nature of the industry changes. People then start bringing in features and functions as opposed to price.

Relative to Hitachi, Indian automotive market is going to develop like many other markets that we participate in. I would admit that we are late in the market by only coming in 2015. There are many companies that have been in and out of the market several times. We don’t plan to leave the market. Therefore, timing the market is not easy; it’s not even advisable. But sometimes by coming in late you can benefit from everyone else’s mistakes.

In this scenario, what are your short and medium-term plans for India?

My experience in India goes back to about 15 years. I think India has a lot of potential for Hitachi. There is potential in high-value, low-cost engineering as well as software applications for the world. The latter is driving electrification and autonomous too requires software, and nobody does that better than India. That is one opportunity. Another opportunity relates to growing with the market and government regulations with our global customers here. We are going to make strategic investments that make sense based on our global standards and our customers’ expectations and requirements, and evolution of the market. Having said that, there is a line between the emergence of mature markets and emerging markets. I believe that some of the traditional products have a longer demand in India then in maybe Japan, Europe or the US. And that also provides an opportunity for Hitachi Automotive Systems India to play a role globally using India as a production hub to preserve the life of those products.

Duty on certain imported automotive components was hiked in the Union Budget 2018. Do you see the move
as having some impact on your business here?

Yes! There’s no question that if you increase the import duty on either finished goods or raw materials, it makes the cost of production go up. And while the long-term motivation may be good in order to develop the local Indian economy, that doesn’t happen overnight. So, there is going to be some period where somebody has to absorb this cost. And who is it? If it’s the suppliers, then there is less money for investment and development. If it’s the consumers, they will buy less cars. I think it is something that has to be managed very carefully. I know why they have done that: in order to encourage the local supply base. But I think it is going to make it difficult on the market in the next couple of years. And what’s the government going to do with the money?

We live in an era of disruptions. If I asked you to give me a few key trends as far as the automotive industry is concerned, globally and in India, what would they be?

The one thing that continues to amaze me, and I think that not everybody fully appreciates is the rapidity of change that is being driven by social media and information technology. If I look at it personally, I have three children between 23 and 28, and only one of them owns a car! And in America that’s pretty much unheard of for most part because most people have a car once they turn 16. The younger generation in America cares much less about car ownership and more about connectivity, ecology and social responsibility. There is a huge generational shift related to the surrounding technology and impact of millennials, if you will. Most people are moving from the automobile to mobility industry. And I think that’s just huge.

The other side of the generational issue is about preservation in many of the mature economies like Japan and America – and even in India – of mobility for the older generation. I think these are two extremes. There is a generation that is going up with vehicles, cars, buses and transport and how do those people continue to manoeuvre in society. And what is the new future in mobility when most people don’t want to own a car. They just want to be able to call a car through an Uber or Grab.

The other issue is safety and societal concerns. Information, safety and environment, those are the big trends. Technology is a big enabler. It’s, therefore, a very intricate question. At least in my lifetime, the automotive industry hasn’t so much change or disruption!

How do you put a price or cost on safety? To a certain extent it is an ethical question on how does one balance between economics and lives.

There’s no question that if you increase the import duty on either finished goods or raw materials, it makes the cost of production go up.

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