Human Capital Trends in Indian Automotive Sector

The success of Indian enterprise has encouraged foreign companies to also set up their base in India. Thanks to many Korean, Japanese, European and US auto firms for investing in India and for linking their prosperity to India’s future. All these firms, Indian and foreign, are contributing to making India an automotive and industrial powerhouse, making us a global manufacturing hub.

Amidst this phenomenal growth, there are numerous trends and developments being experienced across the human capital / resources function within the Indian automotive sector. Discussed below are excerpts of some of the available articles and editorials on this topic.

Trend 1: Reverse brain drain for Auto R&D

According to Booz Allen Hamilton, R&D spending in India has grown by 17% in 2006 whereas, comparative figures in US and Europe is only 5.2% and 2.3% respectively. With globalization, Indian corporate segment experience more and more challenges in market competitiveness and product innovation. Indian strategists are focusing on making their R&D investments judicially to get higher research output in lesser costs. Corporate India seems to have realized that product innovation is the key to survival and may serve the best competitive strategy for sustenance.

According to the Society of Indian Automobile Manufacturers, there are already over 250 Indian expatriates who have returned to work on R&D in domestic automobile companies Mahindra & Mahindra, Ashok Leyland, Tata Motors and Hindustan Motors. SIAM predicts that their numbers will double in two years.

With investments of over Rs 100,000 crore lined up in the Indian automobile industry, and European and US car majors making an aggressive push into India, Indian car companies have begun to understand the significance of R&D. Investments are small -- R&D budgets are just 1 to 2 per cent of domestic car makers' turnover -- but are expected to grow rapidly. "The return of expatriates is helping the Indian companies to overcome their human resource challenge in the field of research. The significant development of the automotive industry is now a magnetic proposition for qualified people to return and harness their knowledge," said Dilip Chenoy, director general, SIAM.

SIAM has set up a society in the US known as the Association of Scientists of Indian Origin that taps Indians working in the automobile majors there and provides access to domestic firms to identify and recruit talent in engineering and R&D. There are numerous examples.
# Arvind S Bharatwaj, for instance, took a 50 per cent cut in his salary in General Motors in the US to return to India and now heads the advanced engineering unit of Chennai-based Ashok Leyland. He has been blending the use of electronics and engineering (infotronics) in commercial vehicles to come out with new high-tech products for the company.
# Pawan Goenka, also returned after a 14-year stint with General Motors' global research and development centre in Detroit. He now heads the automotive division in Mahindra and has been the force behind the introduction of Scorpio, the most successful SUV ever launched in India. He has also prepared the blueprint to sell the Indian SUV in the US.
# V Sumantran, who was closely associated with GM's futuristic EV1 electric cars project and then played a key role in Tata Motors' small car before he quit, now advises Ashok Leyland on developing battery-operated hybrid trucks and buses.
# Raja Pant left the design development facility of Ford Motor Company in the US and is now with the body fabrication business of Tata Motors.
# Sudhir Rao, who was with General Motors engine development operations in Detroit, now works with Avtec Engines, a unit of Hindustan Motors, which supplies engines to Mitsubishi Motors and General Motors India.

Source: Business World

MY SAY
=> Although there are only few examples, more and more Indian R&D executives will come back to India.
=> As several Auto biggies have already started setting up their R&D centers in various locations of India, availability of these brains will consolidate & position India as the next R&D hub.
=> Cars in the near future will have a touch of Indian-ness in their designs.
=> After BPOs and KPOs in ITES Sector, manufacturing sector and more specifically its R&D function is going be the next BIG THING in India.

Trend 2: Auto sector in south Indian state to create 500,000 jobs

The automobile industry in Tamil Nadu in south India will be able to generate as many as 500,000 fresh jobs in the next 10 years and emerge as a 20 billion U.S. dollars industry, a study by an Indian industry chamber said Monday. The study by the Confederation of Indian Industry (CII) titled "Mapping of Human Resource Skills in Tamil Nadu - 2015" said by 2015, the auto sector will employ 580,000 people.

The southern Indian state is already home to major auto companies such as Ford, Hyundai, Ashok Leyland and components firms that employ about 80,000 people. Tamil Nadu has 30 percent share of the auto components market and 17-20 percent share of the vehicle industry in India, the CII study says, adding the sector has the potential for a six-to-seven fold increase in output.

It estimates the size of the industry in Tamil Nadu will be 15 billion U.S. dollars to 20 billion U.S. dollars by 2015. The study observes that the recent trends in the auto industry include the adoption of lean manufacturing practices, quality, shift from assemblers to contract manufacturers and techno- commercial purchases. "In product development, the auto industry needs project management and problem solving skills to identify root causes for design issues," the study says.

Source: CII

MY SAY
=> Tamil Nadu would become the Detroit of India
=> Most of the manufacturing and R&D units from Auto sector would be concentrated in this region.
=> Besides, Tamil Nadu, Maharastra is also seeing such investments and could emerge as the next preferred destination for Auto sector.

Trend 3: Stats on Market Size and HR Challenges in Indian Automobile Sector

# Growth Trend
o Auto sector could grow to $145 b by 2016
o The domestic automobile market has been growing at 14.2 per cent CAGR over the past 4 years (2000-01 to 2004-05), While the auto components market has been growing at 19.2 per cent CAGR (2000-01 to 2003-04).
o The automotive sector also offers significant employment opportunities. It employs 0.45 million people directly and around 10 million people indirectly

# HR Challenges
o Insufficient skills in certain areas, including interpersonal communication, computer literacy, and product knowledge
o Insufficient training
o Insufficient numbers of high-performance customer-facing personnel
o Difficulty securing the best talent to sales and management positions
o A low awareness of career opportunities and paths within the industry, and
o A nagging image problem for the industry exacerbating these issues
o Rajeev Dubey, president of HR and corporate services for Mahindra & Mahindra Ltd., one of the 10 largest Indian business conglomerates, says that with the exception of the relatively few managers with multinational experience, India’s homegrown managers are poorly prepared to cope with global challenges arising from mergers and acquisitions, joint ventures, and entering new markets.
o Of 50 companies in the automotive supply sector, Gaurav Lahiri, operations manager at the Hay Group India in Gurgaon, estimates that only three or four are trying out cutting-edge HR practices. “It’s a case of overpromise and no deliver,” he says. “From an intellectual standpoint everyone nods their head and says strategic HR is great. Whether leaders are engaging and motivating people on the ground is a question. We seldom come across a CEO client that loves the HR managers: They’re constantly complaining about how the HR guys are clueless on the business practices.”

MY SAY
=> I strongly feel that there is very low focus on R&D in Indian companies and thats the reason why India still lacks the ability to compete on designs and technology aspects.
=> Although we have proved to the world that we can produce the best brains yet our managers lack the experience to handle global challenges arising from M&As, JVs and globalization. However, due to the increasing investment from global auto companies in India more and more best practices would be siphoned to India that will gradually give the required exposure to Indian executives. Although it would take some time but I strongly feel that in the next 10-15 years we will see some dynamic leaders in the likes of Carlos Ghosn and Katsuaki Watanabe...

Trend 4: India the latest stop for young executives

# India has become more attractive to executives seeking a chance to test their mettle in a growing market. Some 300 new foreign executives are forecast to come to India this year, according to Kris Lakshmikanth of The Head Hunters.

# According to Evalueserve, India will need more than 100,000 expatriates by 2010. In 2002, the government reported that 13,000 expats were working in the country. Yet the need goes beyond language skills to the highest levels of management. "In India, most business is at the start-up stage, so we need managerial talent," says Sudhakar Balakrishnan, director of Adecco Consulting in Bangalore.

# Indians themselves have filled some of this shortfall, as more are staying here rather than venturing abroad - reversing decades of brain-drain. The need for foreigners remains, however, whether it is for foreign companies establishing their presence in India or for Indian companies wanting experienced Western executives.

MY SAY
=> It would eventually lead to more interaction and exposure for Indian executives.
=> Indirectly this will help in the transition of best practices to Indian corporate world.
=> More and more new executives or rather leaders will emerge from India gradually.

Trend 5: Interesting development in Mahindra & Mahindra – Search process for HR

CEOs in India went outside the HR pipeline to find executives with business acumen who could add a strategic HR perspective. For example, when the leadership team at Mahindra & Mahindra wanted strong HR leadership, they hired Yale University-educated Dubey as president of HR and corporate services. In a career path not usually seen in the United States, Dubey previously had been a CEO for two companies in the Tata Group, India’s largest private conglomerate.

“I had never been part of the HR function, but I dealt with a lot of HR issues when I was a CEO,” Dubey says. Now, he leads 150 HR professionals at Mahindra & Mahindra. “We do a lot of work that’s strategic to the success of our businesses: talent management, creating synergy, creating a culture of integration, mapping, succession planning and developing a global mind-set.”

MY SAY
=> I always feel that HRs in India lack the knowledge on actual business of their company. They are always focussed on the functions, operations and designations and totally ignore the actual requirement of competencies. This leads to the hiring of candidates who eventually prove that they were wrong hires in most of the cases.
=> This practice of picking up a candidate who was earlier a CEO is a very logical and intelligent move of M&A.
=> This offers a very logical approach of hiring i.e. depending on the main corporate strategy of the company, people in the HR function should be chosen from relevant background. This will insure that HR executives will have a clear and complete understanding of not only the human capital requirements but also the competencies required to execute corporate vision.

Trend 6: Indian tech drives autoworld

From infra-red vision in headlamps to in-car Bluetooth applications, Big Auto is turning to India for top-of-the-line technology.

Auto MNCs have been wiring back-office functions to India including supply chain management and procurement functions for their global operations. What’s new is the tech edge in the latest round of sourcing. A host of OEMs due for an India debut are looking at both component and IT sourcing as part of their regional strategy. And car makers like General Motors, Nissan, DaimlerChrysler, BMW and Ford already outsource a host of back-office functions for their global requirements.

Wipro Technologies, Satyam Computer Systems, Genpact are some of the vendors involved in auto outsourcing. Says NS Bala, senior vice-president for manufacturing solutions, Wipro Technologies, “Auto companies are focussing on managing their brands. Applications like Bluetooth in car, remote diagnostics services and new systems that seek to improve safety on roads are being outsourced to India.” Wipro Technologies has eight automobile clients and a 1,000-people team developing applications for global car majors.

Genpact’s BPO has around 1,000 people engaged in finance, accounts payable, analytics, supply chain management and procurement tasks for global auto makers.

Source: Economic Times

MY SAY
=> Its too early to pin our hopes and start projecting on this market in India due to the presence of some of the best technology companies worldwide. It would be really a tough competition for all these companies to earn a share in this market.
=> As India has an edge due to cost effectiveness and availibility of talented yet cheap labour. I foresee these companies to handle all those aspects which would be backend tools or can be outsourced.