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Regulations in auto sector still evolving in India, says McKinsey

R Balaji Chennai | Updated on January 09, 2018

The propensity of fleet operators to go electric is on the rise



Is India well positioned to benefit from technological changes globally in electric vehicles, shared mobility, connected devices and autonomous vehicles? Not really, feels Asutosh Padhi, Senior Partner, McKinsey & Company Inc, USA.

India is the world’s sixth largest automobile hub and is expected to take third place by 2030.

But by 2030, the automobile industry as we know it today will have undergone a radical shift. By then, 25-40 per cent of the vehicles will probably be running on electricity. Whereas “China has worked religiously in this area for over 20 years and is a world leader. In India, the regulations are still evolving and infrastructure is physically not in place.”

Even for customers globally it is a lot more positive than in India in terms of products, specifications and choices they have, he says.

Whether electric vehicles, ride sharing or connectivity they are all inter-linked. The propensity of fleet operators to go electric is increasing.

Not just the OEMs but the component suppliers and all stakeholders need to look at their play and core business as the relevance of internal combustion engine decreases.

Customers always benefit from technological disruption but it is a challenge for industries to change. For instance, those making power transmission and the after-market will be impacted unless they prepare to change with the times.

Shivanshu Gupta, Partner, McKinsey & Company, believes, “India is missing in action and is not present in this value chain.”

Look at what happened in semiconductors and cell phones. India may use tonnes of cell phones but those are not made here, he pointed out.

The Indian automobile industry is well aware of developments in these key areas, but even they are not aware of the “pace at which this change is happening”.

The total cost of ownership of a battery powered vehicle was $1000 per kwh in 2010 which has now come down to about $ 200 per kwh and is expected to further go down to $100 per kwh between 2020-2025.

Padhi and Gupta spoke to BusinessLine recently after the launch of the McKinsey Center for Future Mobility (MCFM).

The centre brings together expertise in automotive sector, cities, freight, infrastructure, utilities, and their various points of intersection.

The objective is to provide an “independent and unbiased, fact-based perspective” on the rapid changes to support the industry, Padhi said.

Published on August 06, 2017

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