The economy has entered a prolonged period of unprecedented turbulence and uncertainty which isn’t simply a fall-out of the great recession. The problems of global trade imbalances, unsustainably high levels of debt, and a severely damaged banking sector have not yet been resolved. While the long-term growth story for India remains intact, the journey is unlikely to be smooth.
Addressing CII’s 4th edition of TN Manufacturing Summit with the theme “Tamil Nadu 2023 – Driving Growth through Manufacturing” held in Chennai, Mr. V. Narasimhan, Executive Director, Brakes India Ltd. Foundry Division, said the economic crisis has been an accelerator for change. Industry is experiencing a dramatic transformation. Understanding the structure, the customers, the technology, the people and their skills and how they evolve are of prime importance. This crisis will not last forever. Recalibration of the value chain is on, and industry is moving closer to the biggest source of new customers and demand centres.
He explained that inefficient low volumes per platform would lead to reduction in the number of platforms and common parts. Growth opportunities would depend on suppliers’ value addition. Cost cutting would play a significant role, and outsourcing of machining and even engineering capabilities would be the order of the day.
High investment would be needed in the supplier end to participate in growth opportunities. OEMs would look for global footprints of the supplier to increase the local content. Consolidation in the supplier industry will need clear positioning on competence and cost in future, leading to structural changes with the number of suppliers being halved.
Mr. Narasimhan further observed that suppliers’ value in the vehicle would increase roughly by 25 per cent across the value chain from pre-development, series development, module manufacturing, module assembly and vehicle assembly. Maximum opportunities will arise in electrical systems and electronics. What is to be noted is that the growth will not be due to the market but due to shifting value creation to the suppliers.
Business systems would graduate to customer value driven system from the present function/process driven model. Therefore, the value chain itself would have to be reconfigured, he added.