Interview with Garel Rhys
How do you view the growth of the Indian auto sector and how is it different from China?
India's automotive sector is very different from the one in China and I would say it is fundamentally very sound since it encourages competition and ensures that companies operating in it have a solid foundation.
On the other hadnd, the Chinese encouraging a form of 19th Century hard capitalism where only the strongest survive and as a result a lot of car companies may not survive in the long run. Look at your big auto companies like Mahindra * Mahindra or Tata Motors - they are as big as any major Chinese company and very competitive in terms of cost and quality. So I am quite optimistic about the prospects for India's automotive sector.
Gross output is not the only way in which you should measure the growth of your car sector vis-à-vis China. You should also look at issues like quality, sustainability and corporate responsibility and in these areas the Indian companies are doing a commendable job.
Do you think India should aim at becoming a global small car hub?
I think it's dangerous when the government says that the local car industry should specialise in a particular kind of product like the small car. the government should realise that the market has a mind of its own and ultimately car buyers will dictate what types of cars the industry will produce and their numbers.
Also, I feel that by announcing these kind of things the government is actually restricting growth by focusing on only one segemnt, when in fact other segments like, for example, midsize cars might prove more popular in the long run.
What do you believe are the urgent priorities facing the global auto sector?
The biggest and most urgent priority is for carmakers to come to terms with society's concern for the environment. In fact the industry is slowly realising that while people will continue to buy cars, they are genuinely concerned about the impact cars are having on the environment, particularly the impact on climate change.
Facing these isuues is a real challenge for the industry, but I think that the debate is also becoming more mature as it moves from passionate environmentalits to the auto industry. After all, nobody is going to buy an experimental car or one that isn't very practical and efficient, offers good value, and has a good resale value in the used car market.
I think the auto industry can do this as it deals with the hard facts and is rooted in commercial realities. In Europe diesels are extremely popular, while in the US it is hybrids. If you ask me, I would say that diesels are more efficient and a good solution for the time being, while hybrids are an economic dead-end as they are very expensive to produce.
Diesels are perfect for India due to their cost-efficient operation. Looking to the future of course, we will have hydrogen cars bu that is still over the horizon.
What are the big opportunities and threats currently facing the Indian auto sector?
Well, in terms of threats, I would say that not completely opening up your market is something that will stifle growth. Why, for example, are the tariffs for importing cars so high even now?
You need to understand that in order to attract more investment from glbal carmakers, your economy has to be open, attractive and a 'must do' place for carmakers. Ultimately the money will go to the countries that are most attractive in terms of ease of doing business.
As for the strengths, the massive potential of the Indian market is certainly your biggest strength. I would say companies like Tata Motors are very good at what they do especially in making low-cost and easy-to-service commercial vehicles, which are perfect for less-developed markets like Africa, Malaysia and other countries. This will also rub off onto the passenger car range, so there is a huge export opportunity.
Should Indian carmakers aim for greater automation?
Not necessarily. your manufactures should use more labour compared to western manufacturing plants, since it is much cheaper over here. Too much automation would also increase the cost of setting up plants, which could prove uneconomical.
