Resilient, electric and sustainable 

At the fifth edition of the Global AUTO SCM Summit in 2020, experts revealed the challenges the Covid-19 pandemic presented to the automotive industry. However, the future is bright as they not only predict a good recovery but also see the rise of a new type of vehicle that is looking towards helping build a cleaner future.

The Covid-19 pandemic has affected almost all industries but the lockdown saw the automotive industry being hit not only because of vehicle immobility but many other factors. However, it has picked up over the last four months and automotive manufacturers are hopeful of a better future, not only in terms of sale of vehicles but also building a resilient supply chain that is prepared when it happens the next time around. In its fifth edition, the global Auto SCM Summit 2020 organised by the Indian Transport & Logistics News, experts discussed the effects of the lockdown and the future of the automotive industry at large. While the future looks bright, the pandemic’s effects can be still felt and the experts say it may take the next few months to recover properly in India.

The lockdown effect
It hasn’t been easy for the Indian automotive industry as they were not only grappling with Covid-19 pandemic constraints but also the effects of the lockdown in the last 10 months and it was felt in the warehouses. Phani Krishna, head - West, DSV Air & Sea Pvt Ltd, explains, “There was a lot of inventory pileup because of the first lockdown and the pandemic, and took around three to four months for it to clear out. It will also take a whole quarter for the inventory to be consumed and see outbound movement.” Yogesh Kulkarni, deputy GM, Mahindra Truck & Bus shares Krishna’s sentiment and believes that it will take one whole quarter for the company to bounce back through a V-shaped growth. Mahindra is being aided by their very own Supply Chain Resilience Index, which was created when the country was hit by the lockdown and it has helped them to reshape and realign their processes. However, Krishna says there is going to be double whammy now with the capacity constraint. “There is a commercial side to this that the space is going at a premium and even at a premium there is no guarantee that you have slots on the ship,” he adds.

However, the constraints are not only going to be on the ships but also at airports because of the urgency of the Covid-19 vaccine delivery across the world. Keku Gazder, CEO, AAI Cargo Logistics and Allied Services Company (AAICLAS), explains it rightly saying, “In the next few months, there is going to be a grappling of capacity at the airport and there is going to be jostling for space with pharma”. Gazder, though, has a simple solution and that is the need for information flow, as the faster they will be able to manage their terminals and ground handlers, the easier it will be for them.

The future is electric
While processes are in place to help the Indian industry make a comeback, there is another kind of slow revolution that is literally taking charge of the automotive industry. The future is not only looking brighter but better because of the rising demand for electric vehicles from informed customers. who are also thinking about the environment while thinking about luxury. Sujan Roy, head - Marketing, Electric Vehicles (Domestic), Tata Motors, explaining the gradual recovery of the industry informs that India saw a mild V-shape recovery, especially in the four-wheeler and passenger vehicle sales but says the two-wheeler and commercial vehicle space is yet to recover. He says, “Suddenly, people have seen their savings have gone up and more importantly, there is a need for these little sparks of joy and something to bring back the feeling of freshness and that is what is making people replace old vehicles with a grade higher.” Roy adds that there is also a presence of the first-time buyer and it is simply because they previously used shared transport earlier like Uber or Ola and they are no longer confident about the hygiene and that is why they are buying their own vehicle to create their own bubble for safety purposes.

The increased buying may have just led to people at least considering to buy electric vehicles which Roy predicts will take over India completely soon. Affirmatively, he says, “Smoke-belching vehicles will become a thing of the past in the next five years in India. Efficiency will go on increasing, prices will go on decreasing.” He adds, “There is an increasing demand for electric vehicles. We are currently at 400 Nexon eV electric vehicles per month and it could go up to 1000 vehicles per month soon.” Roy also informs that while electric vehicles have many types, the Government of India has chosen to build infrastructure for the battery vehicles because India primarily imports fuel. However, with the increase in the number of electric vehicles on the road, there is also a need for chargers and while they are still not popular, they will be easily available soon. Drawing a comparison between free Wifi and electric vehicle chargers, Roy sees free fast charging available just like the internet, when people visit different places in their cities in the years to come.

The demand for electric vehicles is encouraging for the future of the automotive industry and the environment but it also has several challenges and implications which will need to be addressed simultaneously not only in India but also globally. Gaylor Montmasson-Clair, senior economist, Sustainable Growth, Trade and Industrial Policy Strategies, says the Covid-19 pandemic has accelerated sustainability. But, it is important for the industry to look at it from the value perspective and the first is making sure that they are economically sustainable. The easiest way he suggests is to look at building the supply chain within one’s own country with the help of policies. “We have seen a buffering change from diesel-based vehicles to smart petrol and full electric vehicles. The financial model of the industry is going to change as there is going to be an impact on dealerships, very less maintenance and not many moving parts,” adds Montmasson-Clair.

Breaking down the challenges
This, he says, will change the model going forward because it will impact dealerships and also disrupt the supply chain. It is simply because there is an overlap in the supply chain for internal combustion engines and electric cars, there will be need for new parts for the electric engine and the fuel cell. However, the transportation of new parts will need the help of the air cargo industry and Frankfurt Airport has been playing an active role to facilitate the industry. Roland Weil, VP, Sales Cargo, Frankfurt Airport, says, “We are talking to airlines to stimulate the routes. We are seeing a lot more charters between India and Europe giving the automotive industry a chance to access the spare parts manufacturing.”

On the global scale, Montmasson-Clair questions the future of dealerships and mechanics and says it is more than just getting electric vehicles on the road. It is important to also think about how the automotive industry can be integrated with the energy industry. “We would ideally like to see electric vehicles use renewable energy. But then again, what happens to city planning, and the power charging. Municipalities and governments need to start planning already so that the vehicles can be used after the peak of demand, and that connects to urban planning and smart and livable cities,” the senior economist explains.

Putting Pune on the radar
Closer home, in India, Pune has established itself over time as one of the biggest automotive hubs and there is increasing talk of connecting it directly globally with the likes of Frankfurt rather than having to go through Mumbai. Weil reveals that he is in the process of finding out the best possible solution for the Pune-Frankfurt route to support the industry, even though they already have a direct flight on that route. Interestingly, he says that since the Indian city is also a vaccine hub, it may just help to jumpstart the automotive industry there. Krishna is optimistic about the city too especially because he believes that there is a lot of pent up demand for automotive goods in Pune and he is keen to get them in and out of the city.

However, Pune brings along many challenges with it and Gazder reveals that AAICLAS has capacity constraints and unlike their investment in creating additional capacities in Chennai, they are trying to make an integrated terminal at the Pune airport. He reveals that they are also grappling with the issue of land but hope to get the best out of it soon. All this while, AAICLAS is all set to open seven to eight terminals at various airports by the end of Q4 2021.

Transparency during crisis
The Covid-19 pandemic has also been a teacher and if there’s one quality the Indian stakeholders have learned during this time, it is to simply be transparent with their partners. Sanjiv Gupta, SpiceXpress, said their clients could see how they were braving it out and going to Covid-19 infested areas and see the work they were doing because they maintained transparency. Huned Gandhi, managing director, ASL Indian subcontinent Air & Sea Logistics, Dachser, echoing the sentiment said being transparent with their customers was one of the three main aspects that helped them. He said, “Proximity, transparency and providing our customers with solutions despite the challenges really helped us. The trust really went to a whole new level in the last eight months.”