India’s automotive components sector is currently viewed as the most rewarding. But what does it take to secure ongoing contracts from leading vehicle manufacturers? How is the industry evolving in this transformative era? Sunil Bohra, Executive Director, Group CFO, and CEO of Safety & Comfort Systems, UNO Minda, shares his insights.
Q. How is the internal combustion engine (ICE) vehicle industry responding to the new wave of electronics in petrol and diesel powered cars?
A. There is a significant increase in electronics within the ICE vehicle industry. In fact, we often joke that cars, once primarily mechanical, are now becoming electro-mechanical systems.
Q. So, is the average cost of electronic components in vehicles increasing?
A. Absolutely! Almost every vehicle now features sensors. The centre console is fully electronic, the instrument cluster is electronic, and many cars now have electronic driver information displays. Even smaller components, such as window switches and mirror controls, are becoming electronic. Advanced driver assistance systems (ADAS) and telematics have become increasingly popular, and more car brands are equipping their vehicles with these technologies.
Q. Can you provide an example of rising cost for electronic components in modern vehicles? Have we reached a ceiling?
A. Lighting equipment in today’s cars exemplifies the evolution of electronic components in the vehicle industry. What used to be predominantly plastic is now largely about electronic integration. Initially, LED headlamps were about three times the cost of halogen ones, and now they are even more expensive. Tail lamps are becoming more complex and costly than headlamps, with prices increasing by 8X to 10X in some cases. This rise is due to heavy integration of electronics.
Depending on the segment, there may be additional features, but the overall cost of electronic components is on the rise. For instance, a wireless charger may be absent in an A-segment car, but present in a C or D segment. No, we haven’t even approached the ceiling for electronic components in vehicles; this will only continue to grow.
Q. Speaking of segments, have features that were once considered luxury now become mainstream?
A. Yes, that is how the technology adoption curve operates. Features like automatic rain sensing, automatic headlamps, and wireless chargers, once premium, are now standard in mass-market cars. In India, even three-wheelers now offer digital instrument clusters. Premium features tend to become basic over time. Innovations are costly initially, so early adopters in the premium segments absorb these costs. As they enter the mass market, manufacturing costs decrease, and this curve is very much applicable to the automotive industry.
Q. Is the timeframe for transitioning from early adopters to the early majority and then to mass market also decreasing?
A. Precisely! Technological changes are occurring rapidly. In the past, model upgrades happened every ten years. Now, facelifts are introduced every two to three years. The technology adoption cycle in the automotive industry is shortening, with premium features reaching the mass market faster, while those in the luxury segment become outdated even more swiftly. This rapid pace poses challenges and opportunities for all involved.
Q. What is driving this shortening of the technology cycle in the automotive sector?
A. This trend results from several factors coming together. Firstly, social media’s penetration across the country means that videos of cars with new features can be viewed anywhere, raising consumer expectations. Consequently, vehicle brands collaborate more with their suppliers to incorporate these features. Competition among vehicle brands and OEMs is intensifying, pushing them to innovate to stay ahead. Affordability breeds competition, which in turn enhances affordability—not only of features but also of cars in India.
Q. Can you provide an example of this affordability?
A. Alloy wheels serve as a perfect example. They are used in both ICE and electric vehicles. Previously, alloy wheels were only available on top variants. Today, even if a brand restricts these to higher trims, consumers often opt for aftermarket options. Many brands now offer different alloy wheels across models. For example, the top model might feature diamond-cut alloys, while the second top variant could have single-colour alloys.
Infotainment screens illustrate this further. Some brands now offer a 17.78cm (7-inch) screen in the base model but a 27.94cm (11-inch) one in the top variant. There are scooters being launched with interactive screens as large as 22.86cm (9-inches).
Q. How satisfied are you with the quality of components sourced from India compared to those sourced internationally?
A. The quality has certainly improved over recent years. While most tier 2 and tier 3 suppliers remain family-run businesses, they are actively enhancing their management and quality standards. Positive developments are occurring, with these companies adopting better management systems, resulting in improved quality of raw materials and components. Previously, the industry focused on parts per million; now we are discussing parts per billion.
Q. Can we create an automotive component giant in India that competes with the Germans, Japanese, Americans, and Koreans?
A. That is achievable, but it is important to remember that we can only manage a certain amount at a time. Domestic demand in India is skyrocketing, with growth rates of 25% to 26% year-on-year. It will take time for the Indian industry to expand its share of international revenue without compromising delivery targets set by domestic clients. Currently, international sales contribute around 15% to our revenue, up from 9% a few years ago. However, suggesting that India can host an automotive giant that competes globally is still a long shot.
We are driving international revenue through segments like switches for two-wheelers, automotive lighting, and RCTs, which are substantial in exports.
