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Changing Gears – the Impact of Digital ER&D on the Automobile Sector in India

Blog Post created by Community Moderator on Oct 26, 2018

This article is authored by K S Viswanathan, Vice President, Industry Initiatives, NASSCOM

 

Digital disruption has impacted the automobile industry in no small measure. They be, electric vehicles adoption, shared mobility gaining ground, greatly increased connectivity and autonomous driving.

 

Electrification

Particularly because of environmental concerns, Electric Vehicles or EVs can be a viable alternative.

Transitioning to EV may happen by 2030 but admittedly, the uptake hasn’t been as promising as environmentalists would have liked and a mix of pull-push strategy may be required.

  • Environmental regulations – a call for reduction of carbon emission & dependency on crude oil is much required. The drive has to be strong, even punitive measures for off-limits emission may be required.
  • High battery cost which is almost 80% of the TCO, needs to be addressed.
  • Infrastructure required for charging – both standard AC charging and rapid DC charging. Currently, grossly inadequate.
  • High up-front cost is a major deterrent.
  • Relevant stakeholders who can positively impact the adoption rate: Government (through a favourable regulatory framework); Charging Infrastructure companies; auto-makers (through changing the product mix, inducting relevant talent and improving on battery technology).  

 

A recent Mckinsey study made a stark revelation. If by 2030, EVs can replace all others, then every day the world will reduce its dependence on oil by 2 million barrels!

 

In India in the next 3 years, it can be expected that charging time can be reduced by 75%: from 6 – 9 hours to about 1.5 hours which will catalyze adoption. But, if we take a conservative estimate – say 30% penetration in India by 2030 – then the additional power demand on the grid is only about 3 – 4 % which isn’t a big stretch.

 

As per the National Mission on Electric Mobility, if the present vision of aiming for global leadership continues till 2020, then it is expected to yield 9,500 million liters of crude oil saved, which is almost Rs 62,000 crore. If India is to achieve its goal in EVs, then we need to clock an annual sales figure of 6 – 7 million units. But how realistic is this? Well, as per 2017 – 18 estimate, currently the annual sales figure stands at 100000. Clearly there’s a lot of work to be done.  

 

Shared Mobility – New Kids on the Block

Uber has been around for ~ 7 years and it already has a valuation of 70 billion USD. Didi Chuxing’s 4-year growth story is no less incredible – a valuation of 34 billion USD! Let’s look closer home. In 2013, both Ola & Uber were virtually non-existent in India. Fast forward to 2016 – collectively they clocked 13 million weekly rides in 131 cities.

 

The average annual per capita ride for India in 2016 was 3.3 which was significantly lower than China’s 17.1 (as per Bain study). But, structural causes like congestion, parking issues etc. are all factors which will contribute to exponential growth. We are also witnessing rapid adoption of app-based multi-modal transport – bikes, autos, and buses as well. Moreover like in many other countries, particularly in SE Asia, what stops these players in India to branch off into other areas like food / medicine delivery services?

 

The Power of Connectivity

Passenger vehicular sales in India (annual) crossed the 3 million mark for the first time in 2016 – 17. Bain (global figures) indicate that by 2020, 70% of annual auto sales will be digitally-influenced, which is almost 2.5 times of what it is today – a substantive jump indeed!

 

Influencers:

  • Social Media.
  • Mobile will continue to dominate the device mix. Almost 80% of  research is being done on mobile and this figure can only go up.
  • Especially the younger buyers.
  • Post purchases activities (like servicing, purchasing accessories for instance) will go up significantly, a 2 – 3x digital uptick over today.
  • OEMs in India will have to undergo substantial change in business model. Inexorably, the value chain is getting re-aligned and greater share of the profit-pool is biased towards software solution providers, component manufacturers and providers of mobility services.    
  • Dealers have been a very important part in the value chain but soon they will have to radically change their approach. Traditionally, they have influenced buyers’ behavior but today, 72% of customers have already selected the vehicle brand and 49% the model, before they step into a dealership arrangement – once again digitally influenced.

 

Software on Wheels

In 2015, hackers, Charlie Miller & Chris Valasek ominously displayed their tech capabilities by breaking into the internet system of a car and pretty much do whatever they wanted to. Through a DDOS attack (Direct Denial of Service) they were able to freeze the brakes and take control of the steering wheel. Chrysler had to recall 1.4 million vehicles (in this case it was a Jeep) and create a security patch. These guys were able to enter the car’s network through a phone (which is unsecure) when it was connected to the cellular / WiFi Network. High-end cars today have millions of lines of in-built code written. With blurring line between hardware and software, it’s not just enough to build a smart car, but are we smart enough to stay one step ahead of hackers who may be experts in DDOS attacks.      

 

When Detroit meets Silicon Valley or is it when Hinjewadi meets Bangalore

If one visits the GM website, the vision statement reads, “Re-imagining a world in 2030 with zero-crashes, no emissions or congestions.”    

 

The problem with Indian road conditions is that in most places, the traffic is unplanned, unruly and unpredictable. For autonomous vehicles to even be considered suitable for Indian roads, the technology can’t be a mere transfer of what the Teslas and Fords have done successfully in other parts of the world.

 

The advantages with these vehicles is that they have good driving practices built in their software – no instances of drunken driving, dozing off at the wheels, jumping signals, giving vent to road rage or getting distracted by phone calls. But it’s not only about following rules but also about being smart enough to read signals, signage, recognizing patterns and making quick decisions. And there’s no escaping the question – will it work in India?

 

But, make no mistake – while the speed of adoption will be relatively slower but it’s inevitable. Beta versions are already being tried in controlled environments like college and company campuses.

 

A camera functions like the human eye but it cannot do depth perception. For example, it cannot calculate the velocity of things moving around or their likely impact. Lidar (light detection and ranging) uses laser light pulses flashed from a rotating mirror to scan the surroundings. This is considered to be most accurate (for the said functions) as on date but its efficacy dwindles with poor visibility. Can you sell cars with airbags that work in summer but not in winter, when visibility is low? Adding to the challenge is of course the cost of Lidar but like every other technology, prices will fall in future. 

 

This is just a small example to highlight the level of complexity involved and how far are we from adopting autonomous vehicles. Coupled with technological challenges there are other ones as well. In the case of a crash who is to be held responsible – the vehicle owner or the car manufacturer? Including, the ethical issues involving life and death and what is often called the soi-disant problem. In the case of an inevitable accident what is the autonomous car supposed to do – save the passengers or the pedestrian on the road? Ideal situation is to avoid collision in such a way to save both but as we all know in cases of fatal accidents choices aren’t easily discernible and response time is only a fraction of a second.

 

While these answers will continue to evolve as real life replicates sci-fi but for now, the digital interventions in automobile is most pronounced and augurs well for industry-wide adoption. The landscape is changing very fast so let’s also be alert enough in shifting gears!    

 

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