Engineering in India –
Cost Arbitrage to Cost Innovation

Dr. V Sumantran
Executive Vice Chairman – Hinduja Automotive Ltd...
180

179

160

Globally, Demand and Capacity
are Moving East

140
120

2006

Production Growth
2
1.5
1

-1

USA

France

U...
India: A manufacturing destination
• India in 4th place 2013 Global Manufacturing
Competitiveness Index, projected to reac...
Near-shore example of Cost Arbitrage - Mexico
India: A manufacturing destination

6
India: Losing the labor cost advantage
•
•

India's cost advantage as an offshoring destination, its trump card, has
dropp...
We need a sustainable Advantage
Cultural inspiration for Innovation
Cultural inspiration for Innovation
Can India make Cost Innovation a strategic platform ?
Most of the Growing Economies have constrained Affordability
The Affordability Challenge
Globally, there is demand for Cost Innovation

New Cars Increasingly Out of Reach for Many
Ame...
What is Cost Innovation ?
Cost Innovation is more than Jugaad
Cost Innovation Requires special skills

To design a desk that may cost $1000
is easy for a furniture designer but to
desi...
Cost Innovation is hugely challenging
Cost Innovation does not mean complexity
Cost Innovation does not mean complexity
Cost Innovation may require changing rules of business

Passengers

6

Speed

430 kts

Range

3000 km

5
400 kts
2600 km

...
Cost Innovation may require changing rules of business

Cessna CJ1+ Cockpit

•
•
•
•

•

Two pilot cockpit configuration
W...
Cost Innovation is aided by minimalism
Cost Innovation means defining the requirements clearly

Euro-4

European CRDi System
• 4 cylinder -- 2 bank concept for
i...
Cost Innovation can mean intelligent re-use
 New Rules
 New Thinking
 Re-Use
 Minimise Complexity
 Challenging Goals
 Downsizing
 Requirements Driven
Recognition

“Frugal engineering is achieving more with fewer
resources. The cost of developing a product in the
West is h...
Recognition
“ As a group, we have said that is strategically
important for us to be in the low-cost vehicle
market and the...
Hinduja Automotive Landscape

Exhaust System
Technology
Foundry Business

Engines & Gensets

Medium & Heavy CV

Defence Mo...
Jan-Bus : Cost Effective Flat Floor BRT Bus
Changing LCV cost of ownership
35

Copyright 2012 © Defiance Technologies Limited

24 October
Technology driving cost
advantage

Competition
Weight
Cost

Lighter
Cost Effective
Philosophy and Inspiration

“ Engineering is a combination of
Brains and Materials……….

Charles “Boss” Kettering
Philosophy and Inspiration

“ Engineering is a combination of
Brains and Materials……….
…. the more the Brains, the less
th...
Thank you
NASSCOM Engineering Summit 2013: Cost Arbritage to Cost Innovation - Dr. V Sumantran, Vice Chairman, Ashok Leyland and Exe...
NASSCOM Engineering Summit 2013: Cost Arbritage to Cost Innovation - Dr. V Sumantran, Vice Chairman, Ashok Leyland and Exe...
NASSCOM Engineering Summit 2013: Cost Arbritage to Cost Innovation - Dr. V Sumantran, Vice Chairman, Ashok Leyland and Exe...
NASSCOM Engineering Summit 2013: Cost Arbritage to Cost Innovation - Dr. V Sumantran, Vice Chairman, Ashok Leyland and Exe...
NASSCOM Engineering Summit 2013: Cost Arbritage to Cost Innovation - Dr. V Sumantran, Vice Chairman, Ashok Leyland and Exe...
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NASSCOM Engineering Summit 2013: Cost Arbritage to Cost Innovation - Dr. V Sumantran, Vice Chairman, Ashok Leyland and Executive Vice Chairman, Hinduja Automotive Limited, UK

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Keynote: Breaking the barrier from cost arbitrage to value
engineering

Future of Engineering, where is the engineering is heading to

Dr. V Sumantran, Vice Chairman, Ashok Leyland,
Executive Vice Chairman, Hinduja Automotive Limited, UK

Published in: Technology, Business
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NASSCOM Engineering Summit 2013: Cost Arbritage to Cost Innovation - Dr. V Sumantran, Vice Chairman, Ashok Leyland and Executive Vice Chairman, Hinduja Automotive Limited, UK

  1. 1. Engineering in India – Cost Arbitrage to Cost Innovation Dr. V Sumantran Executive Vice Chairman – Hinduja Automotive Ltd. Vice-Chairman – Ashok Leyland Ltd.
  2. 2. 180 179 160 Globally, Demand and Capacity are Moving East 140 120 2006 Production Growth 2 1.5 1 -1 USA France UK Canada Belgium Spain Iran Thailand Germany Poland Turkey S. Korea Italy Brazil Russia -0.5 Czech Republic 0 India 0.5 Mexico 2005 Japan 2004 China 2003 Change (Million units) 80 2002 Example : Auto Industry 103 100
  3. 3. India: A manufacturing destination • India in 4th place 2013 Global Manufacturing Competitiveness Index, projected to reach 2nd place in 5 years. 3
  4. 4. Near-shore example of Cost Arbitrage - Mexico
  5. 5. India: A manufacturing destination 6
  6. 6. India: Losing the labor cost advantage • • India's cost advantage as an offshoring destination, its trump card, has dropped to 30-40% Quicker response time, better tech support and near-shore advantages are driving businesses to other outsourcing destinations Country Labor cost increase Percentage (2013) India 10.3 China 9.3 Philippines 7.2 Malaysia 6 Hong Kong 4.8 Singapore 4.7 Australia 4.2 Japan 2.4 US and UK 3 7
  7. 7. We need a sustainable Advantage
  8. 8. Cultural inspiration for Innovation
  9. 9. Cultural inspiration for Innovation
  10. 10. Can India make Cost Innovation a strategic platform ?
  11. 11. Most of the Growing Economies have constrained Affordability
  12. 12. The Affordability Challenge Globally, there is demand for Cost Innovation New Cars Increasingly Out of Reach for Many Americans By Paul A. Eisenstein, NBC News | CNBC – Wed, Feb 27, 2013 9:59 AM EST
  13. 13. What is Cost Innovation ?
  14. 14. Cost Innovation is more than Jugaad
  15. 15. Cost Innovation Requires special skills To design a desk that may cost $1000 is easy for a furniture designer but to design a functional and good desk which shall cost $50 can only be done by the very best
  16. 16. Cost Innovation is hugely challenging
  17. 17. Cost Innovation does not mean complexity
  18. 18. Cost Innovation does not mean complexity
  19. 19. Cost Innovation may require changing rules of business Passengers 6 Speed 430 kts Range 3000 km 5 400 kts 2600 km Full FADEC turbofans Yes Yes High Efficiency turbofans Yes Yes Composite fuselage No Yes All Glass Cockpit No Yes Advanced Flight Controls No Yes Price USD 7 million USD 2.5 million
  20. 20. Cost Innovation may require changing rules of business Cessna CJ1+ Cockpit • • • • • Two pilot cockpit configuration Warning lights for alerts Analogue and Digital equipment Potential for information loss due to minimal redundancy architecture Independent controls • Cost of aircraft: ~$7 million Cessna Mustang Cockpit • • • • • • • Owner driven single pilot configuration Glass cockpit equipped with all traditional avionics functions Two 10“ Primary Function Display & One 15“ Multi-Function Display Dual System for essential functions Built-in redundancy of system Integrated cabin pressurization system Cost of aircraft: ~$2.5 million
  21. 21. Cost Innovation is aided by minimalism
  22. 22. Cost Innovation means defining the requirements clearly Euro-4 European CRDi System • 4 cylinder -- 2 bank concept for injectors • Exhaust Gas After treatment System • EGR Control • Turbo charger • CAN • FR4 PCB • Glow Control • High End Microcontroller • Cost approx. 800 Euros Euro-4 Indian Low-cost CRDi System • 2 Cylinder – 1 bank concept for injectors • No ExhaustGas After Treatment • No EGR • No Turbo charger • No CAN • CEM PCB • No Glow Control • Low End Microcontroller • Cost estimated at 150 Euros
  23. 23. Cost Innovation can mean intelligent re-use
  24. 24.  New Rules  New Thinking  Re-Use  Minimise Complexity  Challenging Goals  Downsizing  Requirements Driven
  25. 25. Recognition “Frugal engineering is achieving more with fewer resources. The cost of developing a product in the West is high since engineers there use more expensive tools. In India, they achieve a lot more with fewer resources," "They understand frugal engineering, which is something we aren't as good at in Europe or Japan," - Carlos Ghosn
  26. 26. Recognition “ As a group, we have said that is strategically important for us to be in the low-cost vehicle market and there are two reasons for this: Firstly, you cannot just transfer technology X from Europe to a low-cost vehicle. You need new engineering, the intelligence to make things simple and adapt it to low cost markets. Secondly, this is valuable for our engineers who could down the line bring these ideas back to the low-end of the European market. “ – Bernd Bohr, Bosch
  27. 27. Hinduja Automotive Landscape Exhaust System Technology Foundry Business Engines & Gensets Medium & Heavy CV Defence Mobility Buses Bus Engineering Manufacturing and Enterprise Services Transmissions Construction equipment LCVs 30
  28. 28. Jan-Bus : Cost Effective Flat Floor BRT Bus
  29. 29. Changing LCV cost of ownership
  30. 30. 35 Copyright 2012 © Defiance Technologies Limited 24 October
  31. 31. Technology driving cost advantage Competition Weight Cost Lighter Cost Effective
  32. 32. Philosophy and Inspiration “ Engineering is a combination of Brains and Materials………. Charles “Boss” Kettering
  33. 33. Philosophy and Inspiration “ Engineering is a combination of Brains and Materials………. …. the more the Brains, the less the Materials” Charles “Boss” Kettering
  34. 34. Thank you

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