The influx of trends like electrification of the powertrain, connected cars and self-driving cars is ushering in changes at a pace the Indian auto sector has never seen before.
Tata Technologies, a pioneer in automotive technologies is poised at a spot that makes it unique in the Indian automotive space – it provides turnkey support from concept, all the way through to production and launch.
The auto-tech major has, at the moment, eight electric vehicle programs around the world. Tata Technologies is now competing with American, Japanese and German companies.
The man at the helm of Tata Technologies, Warren Harris, Managing Director & CEO, paints us a picture of the auto sector in 2020 and beyond. We touch upon critical challenges faced by the sector, roadblocks, and best practices to follow before embarking on the journey towards autonomous driving.
Could you throw some light on Tata Technologies' focus on electric vehicles. What are the current roadblocks in the Indian market?
The development in the EV space has seen the industry develop a much bigger appetite to outsource the development of the mechanical product.
If you look at the Chinese market, most of the new electric vehicle companies are much more interested in the connected experience and investment in software, when compared to investment in the mechanical product.
We're now finding ourselves increasingly responsible for things that until 3-4 years ago, were the exclusive responsibility of OEMs. This is a trend we've observed globally as well as in India.
The constraint in India is the price point at which products are being sold. If you look at individual components, the biggest cost in an electric vehicle is the battery. Although we've seen an exponential reduction in battery prices over the last five years, it's still a very expensive part for the Indian market.
The appetite shown by China, the US, or the Scandinavian countries has not been seen in India because of the price point.
However, the government has signaled the importance of electric vehicles and some of their procurement decisions made over the last couple of years reinforced their commitment to EVs.
Additionally, a lot of industry consortia are coming together to talk about infrastructure challenges and how that's going to be addressed.
The government will have to help in terms of incentives and the industry has got to work hard to make the pricing of electric vehicles competitive with that of IC engine-driven vehicles.
Additionally, the availability of natural resources like lithium will impact the cost of electric vehicles. If you see how global politics has played out around oil, I think we'll see the same thing with regard to commodities like lithium.
And that's why I don't think we can bet on the fact that lithium ion is going to be the pervasive standard around which electrification is driven, although it looks like this is where everybody is investing.
How has supply chain evolved in the automotive space?
If you look at the industry today, there's an evolution from the traditional OEMs and vertically-integrated supply chain. Traditionally, the OEM used to make the decision and the suppliers would be be challenged to fulfill that decision.
Today, the responsibility for the value chain is being disaggregated, and so the OEMs are influencing their supply chains, but not controlling them. So organizations like ourselves are being given much more responsibility to exert ownership over the delivery of product to the market.
Now this requires that we upskill in terms of our capabilities, and to be much more ambitious in what we can do.
“About 60 percent of the ER&D spend is still focused around mechanical products, the rest is on software. By 2022, the ratio will flip and stand at around 70:30. For us to be relevant and useful to the industry, software will have to play a much more important part”
How is the Indian startup space influencing automotive trends?
India is seen as resource pool for very talented people. It is seen as a resource that could be leveraged for innovation and IP capitalization. We are committed to grow our business not just through adding headcount, but through complementing our services with investment in IP and with the investment in capabilities that we can package.
And the startup community is most certainly a source for that. What's coming out of incubators and startups is really transforming the paradigm around which mobility is being viewed.
We have to now ensure that the decisions that we take in terms of skills and capabilities around what we support in the future are aligned with where the industry is going. It's an opportunity for us to get access to IP and thought leadership.
For instance, we spotted a new entrant that has developed a material, which under pressure, generates electricity. And so we looked at the potential for using the material for car seats. At the moment, the industry uses fairly expensive sensors that signals whether or not the seatbelts have been fastened. We could use the new material to replace the sensor. The same thing can be done for aircraft seats as well.
What's the focus on the software side of connected cars? It'd be great if you could compare it vis-à-vis the focus on the mechanical side.
We've observed that about 60 percent of the engineering, research & development spend is still focused around mechanical products, the remaining is on software.
But by 2022, that ratio is going to flip and stand at around 70:30. For us to be relevant and useful to the industry, software will have to play a much more important part.
Also, akin to the way the smartphone space has evolved, some auto OEMs will look to develop a very controlled ecosystem, while others will be much more open and inclusive.
Quite recently, we saw a leading manufacturer having to recall over 22,000 cars. What do automotive manufacturers need to do to ensure that recalls can be kept to a minimum?
It's about getting the design right first. It's about making sure that the product development process and the testing and validation of vehicles - both offline and physical testing - are maintained at a very high standard.
A lot of traditional manufacturers are under tremendous pressure with emerging OEMs demonstrating their ability to develop products faster.
They have also demonstrated their ability to respond to the market in a much more agile way. Traditional OEMs are trying to play catch up.
Take the example of what's happened with Tesla - there are great innovations, there are wonderful products that have been launched in the market, but when it comes to manufacturing at scale, Tesla struggled. It's very hard getting this right.
The automotive space, globally, is working very hard to reduce carbon emissions and meet regulations. What is your take on tackling climate change?
Countries are putting a lot of pressure on manufacturers through stringent regulations, as a result of which IC engines have now become much more efficient and much cleaner.
I think it's very regrettable that the US has signaled, over the last six months, that it is going to soften expectations in terms of transitioning the industry towards being environment-friendly.
It sends the wrong message at a time when we all need to be taking responsibility for climate change. It's a driver for the industry, and it's going to be constant till the time electric vehicles are pervasive.
With connected cars coming to the forefront, there is growing concern around cybersecurity challenges arising from connected components. How serious is the problem?
I cannot overstate how serious the issue is and how seriously the industry is taking it. If I were to go to a CIO of an OEM 3-4 years ago, they would talk about productivity and optimization. If you talk to a CIO of an OEM today, their top priority is cybersecurity; everything else comes after that.
We, at Tata Technologies, are packaging cybersecurity solutions into products and we are developing capabilities around system integration and testing, and the validation of those solutions. With cybersecurity, you're always playing catch-up.
Tell us about Tata Technologies' focus on autonomous vehicles. Is there something the industry might be overlooking before hopping on to the autonomy bandwagon?
Tata Technologies is working on some really exciting projects with very progressive customers. We're working with a number of OEMs around the integration of LIDAR (Light Detection and Ranging) and the sensor systems. We're also packaging the software for this.
However, one of the things that is not always recognized with the move to autonomy is that the product itself will fundamentally change. The utilization of passenger vehicle averages at around 5 percent.
With the move towards autonomous driving and shared mobility, the utilization will grow at a rate between 50 - 70 percent. So the product itself will have to be much more robust - this is impacting the way in which the mechanical structure is put together.