Rapidly evolving regulations governing emissions and safety, as well as technological disruptions such as connectivity and e-mobility, could lead to increased demand for electronics in the automotive sector. In India, the electronics content is expected to account for nearly 45 per cent of the total cost of an automobile by 2030.
By the ComConnect Consulting research team
India is the fourth largest automotive market in the world and the seventh largest automotive manufacturer (Figure 1), according to an India Brand Equity Foundation (IBEF) report. It is expected to emerge as the world’s third-largest auto market (source: IHS Auto Market) by 2021. In the last seven years, the country has increased its annual production of vehicles by 1 million units, resulting in an output of 4 million vehicles last year. However, considering the rapid economic development, the ongoing urbanisation, a burgeoning consumer class, and supportive regulations and policies, the 5 million milestone can be reached within the next five years. The market is expected to become even stronger with respect to domestic demand and exports, backed by the presence of established domestic and international original equipment manufacturers (OEMs).
According to the IBEF report, automobile exports in India grew 20.78 per cent year-on-year during April-November 2018. They are expected to grow at a CAGR of 3.05 per cent during 2016-2026. Manufacturing for the Indian automotive industry (including component manufacturing) is expected to reach ₹16.16-18.18 trillion (US$ 251.4-282.8 billion) by 2026. The industry is also targeting to increase exports by five times during the period 2016 to 2026.
The unprecedented growth of the Indian automotive sector is mainly supported by four factors — favourable policies, growing demand, rising investments and marketing opportunities. The Indian government’s Automotive Mission Plan: 2016-26 indicates a clear vision for this sector. The government aims to develop India as a global automotive manufacturing centre.
Moreover, India has significant cost advantages that can lead to savings of around 10-25 per cent on operations for manufacturing units based here, vis-à-vis those based in Europe and Latin America.
Two-wheelers and passenger vehicles dominate the domestic Indian auto market. Passenger car sales are led by small- and mid-sized cars. Two-wheelers and passenger cars accounted for 81 per cent and 13 per cent, respectively, of the over 24.97 million vehicles sold in FY18. Overall, automotive exports reached 4.04 million vehicles in FY18. Two-wheelers made up 69.7 per cent of the total exported vehicles, followed by passenger vehicles at 18.5 per cent, three-wheelers at 9.4 per cent and commercial vehicles at 2.4 per cent.
Green mobility – the game changer
Continuous regulatory pressures to curb the environmental damage linked to emissions from internal combustion engines (ICEs), coupled with the advanced technologies for electric power trains and storage systems (like batteries), are ensuring better functionalities and an enhanced demand for electric vehicles (EVs) worldwide.
According to Reportbuyer, the global electric vehicle (EV) market is growing at a compound annual growth rate (CAGR) of 21.27 per cent for the forecast period of 2017-2026. The market is driven by the urgent need to cut CO2 emissions and other greenhouse gases, the availability of low cost lithium-ion batteries, and various government initiatives that are encouraging the public to use electric vehicles.
The Indian automotive sector is also shifting its focus to electric vehicles. India could be a leader in shared mobility by 2030, providing opportunities for electric and autonomous vehicle makers. Innovation is likely to intensify in the engine technology and alternative fuel domains. The Indian government aims to build India into an R&D hub by setting up incubation centres for startups working in the EV space.
According to a McKinsey report, global sales of pure battery EVs (excluding hybrids) grew by approximately 45 per cent in 2016. Most car manufacturers have started moving beyond their legacy ICE product ranges, and are introducing new EV models.
The increasing role of electronics
The world is seeing electronics permeate all areas. The automotive industry is no different. In India, the current penetration of electronics in the automotive market is low due to limited scale, and imports address around 65 to 70 per cent of the OEM demand. But by 2030, the automotive electronics content is expected to account for nearly 45 per cent of the total cost of the automobile in India. Rapidly evolving regulations governing emissions and safety, as well as technological disruptions such as connectivity and e-mobility, could lead to a higher demand for electronics at an OEM and customer level. For instance, it is expected that the implementation of BS-VI standards will lead to a spike in demand for components like catalytic convertors, electronic fuel injection systems, oxygen sensors and intelligent battery sensors.
Electric vehicles need a higher number of motor controllers. Each EV has at least a charger and a battery management system on board, both using power electronics. Moreover, all EVs need electric suspension with a higher involvement of power electronic devices and components, including power management semiconductors, etc.
The key electronic components used in electric vehicles include microcontrollers, rectifiers, analogue gate drivers, EEPROM memories, protection devices, voltage regulators, power MOSFETs, IGBTs and ICs for the power management system, and battery monitoring systems.
Besides this, complete solutions are required for electric traction and energy recovery, power steering, automated manual transmission, the cooling system, pumps, and power management. This leads to an increase in the overall electronics content of the car.
Innovative automotive applications like intelligent power switches for anti-lock brake systems, the micro-electromechanical systems (MEMS) inertial sensors for automotive airbags, and the telematics microprocessors are also witnessing demand.
The EV market will also help drive the growth of the insulated-gate bipolar transistors (IGBTs). IGBTs have long been in demand in the switch power supply market, and they comprise the largest portion of the EV power systems market. Vehicle electrification involves voltage levels between 12V and 400V and requires high-power IGBT modules for drive and traction applications.
Another area of application is wheel management. Wheels may soon generate electricity, and hybrids may have thermoelectrics on exhaust systems, with turbines in them — both generating useful kilowatt level power. Hence, wheel management will also require electronics.
The desire for longer drives between charging points, faster battery charging periods, and increasing demand for connectivity and infotainment, safety and security may drive the use of in-vehicle electronics beyond just power or wheel management.
For example, the need for electric active suspension for a better ride and for fuel economy will involve more electronic components and devices. Car entertainment systems with near-field communications technology (NFC), car access, in-vehicle networks, and all features related to secure connected mobility will further increase electronics content within vehicles.
Moving forward
Industry 4.0 is enabling innovative processes, digital manufacturing and automation. It has the potential to disrupt the industrial value chain and push the automotive sector to rethink the way it operates.
These shifts could also modify the typical job profiles required by auto component manufacturers. For example, instead of a manual worker in the production line, companies might need an exception handler or an operator in an automated workflow. The role of a supply chain planner could evolve from merely planning the logistics of supply in a segmented approach, to someone owning a fully integrated supply chain, from order to delivery.
Besides, stringent regulations are evolving so rapidly that the automotive sector might need to rethink its operational processes to comply with regulatory and other guidelines related to emissions (enforcement of BS-VI norms by 2020; the push towards EV adoption; discussions on methanol, CNG and fuel cells, etc) and safety (mandatory ABS on cars, buses and two-wheelers, cabin safety, and roll-over protection systems).
