Costs are key in driving safety: Aulbur

The Indian auto industry is gearing up for a new phase of safety and emission norms. The Centre is also working on a scrappage policy to replace old vehicles. Wilfried G Aulbur, Managing Partner India, Chairman Middle-East & Africa and Head Automotive Asia of Roland Berger, discusses these issues.

How will a vehicle scrappage policy help India?

If you look at what other countries have done across the globe in reducing the impact on the environment, they have come out with cash for clunkers scheme where old vehicles were replaced by new ones with better fuel efficiency and emission norms. Western governments have supported local industries with scrappage and other stimulus schemes. It is a very good move proposed by the Indian government both from the perspectives of employment and a cleaner environment.

Could you elaborate on the employment part?

The automotive industry is very employment-intensive. In Japan for every person in an auto factory, at least 5.5 additional jobs are created in the upstream or downstream along the value chain. This will be possible only if you create volumes.

The Indian automotive market is one of the most competitive in the world and in a favourable position to become a global production hub. To create high quality employment, it is extremely important for thegovernment to find ways to drive volumes for the auto industry. Otherwise finding 100 million jobs for Make in India will not happen.

How can the issue of recycling old vehicles be handled?

This is one area where the concerted efforts of industry and government are necessary. But looking at it from another perspective, if we recycle the vehicle, it simply means that we keep raw material in the country and do not need to import scrap. Scrapping old vehicles will result in less environmental pollution and it makes sense to have a scrappage policy. We need to put our minds around it and drive it further.

How important is planning for the auto sector?

The automotive industry is a complex product with lots of assets in terms of production, R&D, distribution and after sales. It needs lead time for these functions and visibility on the time horizon. It also has to work with stakeholders to understand issues.

If I take European solutions for safety and emissions, it means that I am putting about ₹1-1.5 lakh more into a car. So, the price of the entry level car will increase to ₹4.5 lakh which is detrimental and could hit volumes. We need to develop indigenous technology to make this happen at reasonable price points and this may take some time.

Is India moving into the right direction in improving vehicle safety?

Even on safety, the key is cost-effectiveness. If vehicle prices are hiked considerably due to more safety content, our market will shrink. Employments and taxes will fall too. So, how can we find a solution that allows us to protect people and at the same time safeguard volumes?

There is a need for constructive discussions with all stakeholders and ensuring that end users are protected while driving volumes, taxes and jobs. We see the government moving in the right direction in terms of infrastructure expansion and hope that the execution will be rapid.

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