This document discusses India's potential to become a global automotive product development hub. It notes that while India is emerging as a large manufacturing hub for small cars, it still lacks end-to-end product and process development capabilities. It outlines three paths suppliers have taken - Dependents who collaborate with OEMs, Explorers who set up design cells, and Visionaries who invest heavily in integrated design and manufacturing. It argues for increased collaboration between OEMs, suppliers, and academic institutions to develop India's automotive innovation ecosystem and testing infrastructure to global standards.

1. Growing beyond manufacturing
Opportunities in India as an emerging auto
product development hub
ACMA Annual Convention 2012
5th September, 2012

2. India is fast emerging as the one of the largest global manufacturing
hubs for small cars and other vehicles
• India will emerge as the largest producer of small cars by 2013
• Further, India’s production of small commercial vehicles (<3.5 T) has
grown at >25% in the past five years; faster than the global average
Source: LMC, IHS
Page 2 ACMA Annual Conference: India as a product development hub

3. To achieve global industry leadership India needs to evolve as an
integrated development & manufacturing hub
Leadership position in the automotive world
Manufacturing Product & Process Innovation
Development
Vehicles and However, today there is Significant work
components limited end-to-end needs to be
manufactured in product development done in this
India are and process engineering area to improve
increasingly capability across the India’s
meeting global supply chain innovation
standards of quotient
Quality,
Reliability and
Durability
Cost and Quality (Strong Foundation)
Page 3 ACMA Annual Conference 2012: India as a product development hub

4. Rising customer expectations and increasing volumes have driven
OEMs to evolve from localization to global platform development
Start-up Respond to local market Global market ambition
- Localize and adapt - Develop India specific
products
- Build local product - Reduce time to market - Develop global
development capability - Incorporate global standards platforms
Pre 2002 2002 to 2007 2007 to 2012
Source: EY Analysis
Page 4 ACMA Annual Conference: India as a product development hub

5. OEMs and component manufacturers are responding to the
opportunity by investing in local product development capabilities
Start-up Respond to local market Global market ambition
~40 centers Upcoming /
• Arvin Meritor • Mahindra
expanding
• Continental Research
• Daimler India Valley
Comm Veh • Paccar
• Dana • Renault-
• DuPont Nissan
• Faurecia • Sharda
~20 centers • Hyundai Motor
• SKF
~ 10 centers •Eaton • John Deere •Eaton • John Deere
•GM • Visteon •GM • Visteon
• Bajaj • Maruti • Bajaj • Maruti • Bajaj • Maruti
• Bosch • Mercedes • Bosch • Mercedes • Bosch • Mercedes
• Caterpillar • Tata • Caterpillar • Tata • Caterpillar • Tata
• Cummins • TVS • Cummins • TVS • Cummins • TVS
• Delphi • Delphi • Delphi
Pre 2002 2002 to 2007 2007 to 2012 2012 -
The number of engineers employed in product development centers in
India is estimated to have grown from <1,000 in 2002 to >25,000 in 2012
Source: EY Analysis
Page 5 ACMA Annual Conference: India as a product development hub

6. Organizations, who have invested into R&D in India, are taking up
greater product development roles for local and global markets
Illustrative List
OEMs Suppliers
Developed End-
to-End product
and process
design Development of Development of Engine Low cost
capabilities Eeco, New Alto Pulsar, Discover components condensers
Development of
Global
Platforms XUV5OO Ace, Nano Development for Ownership of global
global markets market products
Developed
Global Centers
of Excellence in Global centre of Development of 3 One of the global Global Centre of
excellence for virtual cylinder diesel product Excellence for gear
India testing and analysis engine development hubs pumps
Source: Primary research, Secondary research, EY Analysis
Page 6 ACMA Annual Conference: India as a product development hub

7. Our analysis of global suppliers identifies 2.5X returns by companies
who are investing a higher percentage in R&D
R&D/sales* and EBITDA Margin*
EBITDA
< 9%
EBITDA
9% to 12%
EBITDA
> 12%
Median 18.5%
EBITDA Margin
Median 7.3%
R&D/sales
* R&D/Sales and EBITDA numbers are averaged over duration of 4 years (2008-2011)
Source: Primary research, EY Analysis
Page 7 ACMA Annual Conference: India as a product development hub

8. Analysis of Indian suppliers during our research reveals three paths
adopted in developing capabilities across the design value chain
Design value chain (From Infancy to maturing )
Testing
Basic and
Process Proto- Problem & Product Program
QFD applied
State Engineering typing resolution validatio design Mgmt
research
n
Initial step 1 2
Depende Current state
nts
Future state
Initial step 1 2
Explorers Current state
Future state
Initial step ACMA Annual1 2 3
Conference: India as a product development hub
Visionaries Current state
Future state
Source: Primary research, EY Analysis
Page 8

9. Dependents:
Followed OEM pull towards better engineering capabilities to
support faster product development cycles
Ecosystem enablers:
Triggers OEM/Parent Institution
► OEM pull on suppliers
1 to take up product
2
design / prototyping
Initial steps
► Identified
specific projects
Approach: to support OEM
needs
4 Future state Collaborate ► Shared financial
► Product and with OEMs risk and
system design resources Policy Testing facilities
and learn
capabilities
► Process
LOW MEDIUM HIGH
engineering
capabilities
Next steps
► Defined product design strategy
► Enhanced testing and validation
3
► Developed few products
► Increased spend on R&D to 1%
Investment
of sales •Initially shared resources as
“Collaborative learning” approach
•Increased after initial success
Source: Primary research, EY Analysis
Page 9 ACMA Annual Conference: India as a product development hub

10. Explorers:
Setup design cell to resolve design problems, understand product &
process development
Ecosystem enablers:
Triggers OEM/Parent Institution
► Entry by Global players
1 ► Increasing product
2
launches
► Global expansion Initial steps
opportunity
► Setup Design
cell for process
Approach: engineering and
problem solving
4 Future state Establish ► Setup basic test
► Product and success and facilities
system design &
Policy Testing facilities
then invest
test capabilities
► Process
LOW MEDIUM HIGH
engineering
capabilities
Next steps
► Increase spend on R&D to
1-2% of sales 3
► Strengthened process engg
► Testing and validation
Investment
capabilities •Initially low investment as “Explore and
watch” approach
•Increased after initial success
Source: Primary research, EY Analysis
Page 10 ACMA Annual Conference: India as a product development hub

11. Visionary Technocrats:
Envisioned an integrated design and manufacturing capability
Ecosystem enablers:
Triggers OEM/Parent Institution
► Leadership vision and risk-
1 taking propensity
2
► Use Indian engineering talent
► Global expansion opportunity Initial steps
► Invested in
facilities,
Approach: manpower for
understanding
4 Future state Set vision & design,
► Basic and pursue prototyping,
applied testing and Policy Testing facilities
leadership
research validation
(collaborative)
► Application of
LOW MEDIUM HIGH
India developed Next steps
tech. for global ► End-to-end product design
applications ► Program management of many
3
projects
► Risk sharing with OEMs on
Investment
specific opportunities •Planned investment in facilities and
manpower development
•Advanced testing, research labs
Source: Primary research, EY Analysis
Page 11 ACMA Annual Conference: India as a product development hub

12. The product development ecosystem in India is in its infancy and is
evolving
Industry
- Institutio
- “Effort
n Tie-Up
Policy teps, at buildin
g Industr
t has taken s ired” institute r
elationsh y–
gov ernmen vision is requ mainly by
ip, is driv
en
- “The nger term - “Institu the indus
but a lo y the te capab
ility on ap y”
tr
need s to pla on research plied
e rnment ringing focus - “Engin is still ev
- “Gov role in b eers requ olving”
D”
anchor tomotive R& ire 3 yea
rs of
au On-Job t
India’s raining”
Product Development
Ecosystem
ve
- “The “Few OEM-Suppliers ha
test started
improv ing infrastruc e
ed tu adopting a collaborativ
compa , but is still n re has product development
rable to ot
global a few
Testin standa
rds” approach, but limited to
g Inf rastru vehicle systems”
cture
boration
OEM – Supplier colla
Source: Primary research, EY Analysis
Page 12 ACMA Annual Conference: India as a product development hub

13. An expectation mismatch exists between OEMs and suppliers
on the approach to develop suppliers’ product development Product Development Ecosystem
capabilities
Government policies
Suppliers’ Expectations OEMs’ Expectations
 Explore joint development  Suppliers should build
opportunities with suppliers capabilities in basic areas
 Share resources and – Problem solving
financial risks Expectation
– Design understanding
 India specific product Mismatch – Program management
development can be best  Invest in testing facilities
done in India  Collaborate with other
 Honour commitments during suppliers to provide a
design/development phase system solution
 Provide proven products
To take advantage of affordable R&D and develop India as an integrated
hub, OEM’s and suppliers need to increase collaboration for mutual benefit
Source: Primary research, EY Analysis
Page 13 ACMA Annual Conference: India as a product development hub

14. Government policies in other automotive hubs have facilitated
and anchored a long term R&D roadmap
Product Development Ecosystem
Government policies
China Korea
Ulsan - Auto Parts
Innovation Center
Government defines Policies ensure that FDI Government funded
strategic direction for is accompanied by efforts to strengthen
future R&D technology transfer local R&D capability
Germany
Policy led to automotive innovation
Universities/Research Institutes
clusters in Bavaria, Baden-Wurttemberg
rs
Inputs
Ins
lie
titu
pp
Su
tes
Areas of basic research for country
OEMs
Indian policy needs to anchor a long term product development roadmap
Source: Secondary research, EY Analysis
Page 14 ACMA Annual Conference: India as a product development hub

15. Industry–institute tie-up is an essential part of the ecosystem,
wherein Institutes provide basic and applied research input
Product Development Ecosystem
Government policies
“Industry-Institute relationship is “Industry is ahead of the level of
more mature in Germany and UK, manpower provided by institutes;
where development, prototyping Indian engineers need 3 years of
happens. It is mandatory for on-job training as compared to 3
institutes to do applied research ” months in Germany”
Industry –
Institute
Interaction
“While few institutions have started “Pre-competitive or basic
focusing on applied research, research is happening in India
institutional R&D is piecemeal and wherein Industry and institutes
applied research is largely missing” interact for common minimum
programs”
Institutes need to be mandated and incentivized for applied research
Source: Primary research, Secondary research
Page 15 ACMA Annual Conference: India as a product development hub

16. Testing and validation infrastructure is critical to product
development in India
Product Development Ecosystem
Government policies
India’s automotive R&D testing infrastructure
• There has been an effort
towards improvement of
testing and validation
infrastructure in India
Rohtak Delhi/ NCR
• The testing infrastructure
Jaipur Lucknow Rae Bareilly
is insufficient for India’s
Silchar
product development
Indore
ambitions
Ahmednagar
Mumbai
Pune Baramati
Hyderabad Legend* • Visionary OEMs and
GOI Facilities suppliers have not waited
Bangalore
OEM/Supplier captive testing
facilities for infrastructure to come
Chennai
* Height of column is directly up, they have invested in
Coimbatore proportional to number of testing
centers own advanced testing
facilities
Source: Primary research, Secondary research
Page 16 ACMA Annual Conference: India as a product development hub

17. Roadmap for Automotive Product Innovation and Development
(RAPID) for the Ecosystem
OEM-Supplier collaboration Industry-Institute Tie-up
 Greater collaboration through  Pro-active role of institutes with
resource and financial risk sharing industry for research, skill
 Collaboration is essential to India management
achieving global industry  Progress towards applied research
leadership as an integrated  Update curriculum to improve
development and manufacturing knowledge and skills of engineers
hub
ECOSYSTEM
 Set roadmap for future technology  Enhance Government and private
leadership in specific areas e.g., testing facilities to global standards
Powertrain, Electric mobility etc.  Benchmark with test facilities
 Encourage innovation clusters required by suppliers and OEMs in
 Mandate and incentivize research other product development hubs
by academic institutions
Policy Testing Infrastructure
Source: EY Analysis
Page 17 ACMA Annual Conference: India as a product development hub

18. Roadmap for Automotive Product Innovation and Development
(RAPID) for Suppliers
Dependents Explorers Visionaries
 Identify areas of need  Setup design cell  Setup PD vision
Initial with OEM on a specific – Problem resolution – Product strategy
steps component/ product
design – Process engineering – Technology strategy
– Component design – Investment plan
 Basic testing facilities  Setup team of high  Setup PD centre
 Advanced facilities performing individuals  Build advanced test
shared with OEMs  Test facilities for facilities
Essentials problem solving and
 Access to  Hire experts for product
technology/design skills new product testing design
Knowledge and Skill Management
Tie-up with institutes for training and research
 Investment would  Initial Investment in  Investment is higher as
Investment depend on nature of R&D is not substantial manpower and facilities
product/cost of as basic facilities need to evolve quickly
technology
Source: EY Analysis
Page 18 ACMA Annual Conference: India as a product development hub

19. India can become a global industry leader, to do so it needs to
evolve as an integrated development & manufacturing hub
Leadership Provide direction, determine evolution path and invest for
A vision the future
OEM-Supplier collaboration a key enabler to
B Collaboration
build/enhance Indian model of affordable R&D solution
Suppliers and OEMs will need to inculcate and absorb an
C Culture
organization-wide design and innovation culture
Invest for the future, to achieve higher levels of
D Profitability
profitability and customer satisfaction
Ecosystem is a key enabler; need to enhance deployment
E Ecosystem
monitoring, applied research, testing facilities
Source: EY Analysis
Page 19 ACMA Annual Conference: India as a product development hub

20. The team interacted with various stakeholders from the industry
and we take this opportunity to thank all participants for their inputs
OEMs Component Manufacturers Institutions
Automotive Research Association of
Bajaj Auto Ltd. Bharat Forge Ltd.
India (ARAI)
Daimler India Commercial Vehicles
Bosch Ltd. Fraunhofer India
Pvt. Ltd. (DICV)
Mahindra & Mahindra – Automotive National Automotive Testing and
Cummins India Ltd.
Division R&D Infrastructure Project (NATRiP)
Indian Institute of Technology, Delhi
Maruti Suzuki India Ltd. Gabriel India Ltd.
(IITD)
Tata Motors Ltd. Hi Tech Gears Ltd.
Tractors and Farm Equipment
Lucas-TVS Ltd.
Limited (TAFE)
Minda Group
Hi Tech Gears Ltd.
Rane Group
RICO Auto Industries
Sharda Motor Industries Ltd.
Shiram Pistons & Rings Ltd.
Sona Koyo Steering Systems Ltd.
Subros Ltd.
Varroc Engineering Pvt. Ltd.
Page 20 ACMA Annual Conference: India as a product development hub

21. Thank you