Key Challenges for the Auto Industry in 2021

The Auto Industry suffered gloom during the years of 2018 n 2019. 2020 was spent being in lockdown and under restriction due to the Pandemic. And the Pandemic continues to affect 2021 too.

The major challenges that would have to be met in 2021 are :

#) Regulations:

Government regulations will play a key role in defining the growth prospects.

For example, in India, the government has made it mandatory, since 2020, for all vehicles to meet the BSVI norms on emission. This has meant the manufacturers investing in Technology and also discontinue some of the older but popular models in their portfolio.

Due to the introduction of BSVI norms; and hence newer technologies, the prices of vehicles increased from 6 to 20% of the initial cost. Some models like, Tata Nano/HM Ambassador had to cease production.

The Government has plans of implementing more rigorous fuel efficiency norms from April 2022, this could entail more spends on technology up-gradation and hence cost of products to end customer. A fine balance between cost and affordability needs to be crossed again.

#) Alternative Fuels Vehicles:

To reduce carbon emissions, the Government has been encouraging other technologies including Hybrid Fuels and Electric Vehicles. Attractive subsidies and plans are being announced for the transition to these technologies at the cost of ICE (Internal Combustion Engines).

The rapid increase in fuel prices, of late, too has been playing a dampener on the ease of possessing an ICE vehicle.

#) Brand Building:

The Auto industry, in times of pandemic crisis and inconsistent demand, is seeing consolidation,

And with the conventional modes of brand building taking a beating due to Pandemic norms: social distancing and minimal personal contacts, companies have had to work very ingeniously on Brand Promotion.

The customer interaction in this case is virtual and fleeting. Many conventional Auto Players, especially those working in the Rural Space, have had to reinvent themselves as their customers too transition to the digital interaction.

A lot of spends is happening in Digital Media. However, the medium is evolving in India, and measuring its impact accurately is in the initial stages. Digital Media is also costlier and more competitive, what with everyone competing for eyeballs.

#) Choosing the correct technology:

India has seen a very rapid shift in technology due to Government norms and other factors.

For example, the share of Diesel Vehicles, which had touched 60% in 2012 has now dropped to hardly 17% in 2021 – in less than a decade. A lot of Automajors had made big investments in Diesel Engine Transmission then and have had to face huge loss of return on investments.

Now the Alternate Fuel Technology looks promising and derails the huge ICE technology. But the transition from ICE to Alternate Fuel would mean giving up leadership positions in that technology as also uncertainty in achieving similar success in Alternate Fuel Technology.

#) Consolidation:

Increasingly, the same technology is being provided in diverse markets across the World as Governments across the World start uniting on having similar norms across the World.

This has meant upgrading the models and planning obsolescence too will be the same, across the World. This could offer fewer options for Auto Majors to extend the Product Life Cycle of individual products, on a case-to-case basis.

The number of Vehicle platforms in operation will get optimized.

#) Supply Chain:

With governments insisting on the right practices across the entire product cycle, the up-gradation of technology across the supply chain to has been mandated.

Volkswagen, Audi, and many others have already set in motion processes that involve up-gradation in technology at their supplier's end too, across the World.

This is more tricky and complicated than technology up-gradation at the Manufacturer’s end only.

#) Customer Interaction:

The Pandemic has forced the Automajors to reduce direct interaction with the customers. The digital platform is being increasingly used for experiencing the vehicle and the other commercial aspects too.

This has meant introducing a lot of checks and measures to allow an experience that as close as possible to the real thing. Checks and measures need to be made for ensuring that the Digital Platform is not used for the invasion of privacy and frauds.

And what to do when things get back to normal but both the buyer and the seller have got used to interacting without interaction??