SAEINDIA Collegiate Club Seminar

Automotive Industry

An Overview

Mahesh B N
Harita Infoserve Ltd

6th May, 2006, Malnad College of Engineering, Hassan

1
In the next one hour

Historical background

Automotive Industry a snap shot

Supplier OEM relationship

Future of the industry

Automotive Industry in India

Q&A

2
History of transportation.

Mesopotamian chariots
in 3200 BC

Model T, The 20th model

3
 Historical perspective
AUTOMAKERS Oil crisis in 1973
& 1979.
Trade barriers
on Finished
Permanent long Build- where- vehicle supply.
European you-sell. Overcapacity
term increase in Japanese
Boom in CKD Automakers Global Platforms.
Gasoline prices. More embark plant
Mass production assembly in emerge as global Generic Assembly
Verticalization construction in
Little knowledge techniques players. Shift towards
overseas the US from capacity.
needed to bring established. European smaller cars and component
markets. 80s. Modularization.
out cars in the GM and Ford Automakers worldwide and in outsourcing.
By 1925, Ford Mergers and System Integration.
market. Eg. produce of follow American US.
has 36 CKD JVs between Acquisitions by Supplier
Newspaper Automobiles sold offshore
plants. Motor Vehicle US and Automakers. consolidation
reporter started a in US. investments.
Nationalistic production Japanese Modernization Entry into Big-
automobile
Elimination of sentiments Trend towards soared from 300K Automakers. of plants. Emerging markets.
company.
small imposing small cars in in 1960 to 11 Mil Suzuki, Toyota, Number of Design concentration
Automakers regulations Europe. in 1982 in Japan. Isuzu. Plants double in core location

Challenge of Vertical Internationaliz European Emergence Restructurin Increased Consolidation,

Bringing out Integration ation of Automakers of Japan g of US Globalizatio Platform
Car as a Vertical
by Major Automotive in World as a Global Automotiv n consolidation,
Globalization Consolidation
Product Integration
Automakers industry Arena player e Industry Mergers and Supplier
Acquisitions Consolidation
1890 1910 1910 1920 1920 1930 Post w-war II 1970 1980 1980s 1990s Present day
.

Technically Weakened Centralized Local sourcing Big challenge More Closure of 11 Risk sharing by
sophisticated suppliers supplier base rose to 67% for to suppliers. Verticalization US assembly Suppliers.
supplier base. manufacture to all Global and component and Metal Global Supplier
Automakers markets. outsourcing. fabrication network catering to
Supplier
specifications. GM acquires operations by Global needs of
participation in
EDS and forms Automaker GM. Automakers.
Resolving
JV with Fanuc. Spin-off of Modularization.
Engineering
Delphi, Visteon, Integrated System
issues .
SUPPLIERS Lean
manufacturing Hughes suppliers
sets in. electronics etc Supplier
consolidation
Design concentration
in core location

4
Industry structure
Integral
IntegralProduct Modular
Product ModularProduct
Product
Vertical Industry Horizontal
Vertical Industry HorizontalIndustry
Industry

Niche Technical
Niche Technical
Competitors
Competitors Advancement
Advancement

Supplier market
High Supplier market
High power
Dimensional power
Dimensional
complexity
complexity
Pressure
Pressuretoto Pressure
Pressuretoto
Dis-Integrate Integrate
Dis-
Dis-Integrate Integrate
Proprietary
Proprietary
Organizational
Organizational system
Rigidity system
Rigidity profitability
profitability
Delphi
Visteon
EDS

5
OEM Brands Automotive Industry today
Chevrolet
Saab Global Automotive Industry is $ 1.3
Saturn
Hummer trillion in size

Toyota Growing at 3% annually

Aston Martin
Jaguar More than 64 million vehicles are
Land Rover made annually
Volvo cars

Audi More than 850 million vehicles are

Bentley plying on the roads worldwide
Skoda
Seat
More than 250 models of passenger
Dodge vehicles every year
Chrysler
Jeep
Mercedes-Benz
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OEM and Supplier relationship
Vehicle
Manufacturer
Component
Manufacturing

Tier 1 Supplier Tier 1 Supplier

Subassembly
Manufacturing
Tier 2 Tier 2 Tier 2

Tier 2
Systems
Manufacturing

Systems
Integration

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OEM Brands Tier 1s and Tier 2s

Chevrolet
Powertrain
Saab
Saturn Chassis and Steering
Hummer
Electronics & Electrical
Toyota Interiors
Body Systems and
Aston Martin
Jaguar Exteriors
Land Rover
Vehicle Engg &
Volvo cars
Assembly
Audi
Bentley Safety & Security
Skoda Testing Services
Seat
Entertainment &
Dodge
Connectivity
Chrysler
Jeep
Mercedes-Benz
8
Current Trends
Automakers are offering more models than
ever to target specific customers
110,000
106,819 New Models
Annual Sales per model

100,000 277
33% increase in 10 years
90,000
208
198
80,000

70,000

60,000 48,626
50,000
1990 2000 2010 (est)
40,000
1985 1990 1995 2000 2004
Total number of light-vehicle models (cars and trucks)
by year
Year Source: AutoPacific, Automotive News, Autodata Corp, Detroit News research

Sales per model (in $) New Model launches

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Consolidation eg Metaldyne

DC New castle
DANA - Greensboro

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 Metaldyne contd

Increase value content.

Centralization of Design activities

11
Consolidation

Less than 30 suppliers

by 2010 from the
existing 800 odd

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Targets for Financial measures

13
Targets for Operating Performance

14
Strategies - OEM

15
Strategies - Suppliers

16
Cost & Risk sharing pressure on tier-1 suppliers

Past Ongoing trend

System
R&D integration
Purchasing Testing
OEM
OEM
Assembly Car assembly
cost
Supplier risk
pressure
management sharing

Systems supply
Tier-1
Tier-1 R&D on systems
Suppliers
Suppliers Module assembly
Component manufacturing
Purchasing/sub-supplier
management cost
pressure

Tier-2
Tier-2
Suppliers
Suppliers

Component manufacturing

Source: Roland Berger & Partners-Automotive supplier

trend study

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Automotive sector: Regions of growth

30% growth in Asia, Eastern Europe

and South America

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In Car Application

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More and More electronics & SW will be added in
vehicles
Software and Electronics Innovation
100%
90%
It is estimated that 90% of innovation by 80%
2010 will be electronics related, and 80% Electronics
70%
(Non-software)
of that is in the area of software. 60%
Innovation
50%
Software
40%
Innovation
30%
20%
10%
60%Software and Electronics Value 0%
1970 2000 2010
50%

40%
Electronics The value of electronics and software is
30%
Software expected to grow to 35-40% of the vehicle
20% value by 2010.

10% As the shift to fuel cell engines occurs, it

is expected to reach 50%
0%
1970 2000 2010 2020

Automotive electronics & software development costs are expected to rise 12% annually for the next 5 years

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Indian Automobile Industry
Category Nos. Size $Bn Category Market
M&HCVs 211,143 Share
LCVs 138,890 6.59 Two-Wheelers 78.6%
CVs 350,033 Passenger
Passenger Cars 960,505 Vehicles 13.4%
Utility Vehicles 181,778 Commercial 4%
12.00
MPVs 67,371 Vehicles
PVs 1,209,654 Three-wheelers 3.9%
Scooters 986,208
Motorcycles 5,193,752 Growth Estimate:
6.69
Mopeds 346,587
Passenger Vehicles-
Two Wheelers 6,526,547
2 mn by 2010
Three Wheelers 374,414 0.53 3 mn by 2015
Grand Total 8,460,648 25.81 (CAGR 2005-2015 MUVs 6%, PVs 11%)

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 >$ 20 BB 15%
CAGR

Japan Quality

3.3 MM km of Road
55 JVs by OEM
More than 220 JVs by Suppliers
150 International Purchasing
offices
>$ 1.5 BB of Auto
100% foreign equity
component exports
participation
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Typical Product Development

Styling Software Process Simulation

CAD and CAE SW SW

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Computer Aided Design

Styling FEA PDM

Alias Nastran SMARTEAM
Rhino Patran Team Center
ICEM Abaqus Proe Intralink
Fluent
Star CD PLM
Modeling:
Windchill
Catia Manufacturing ENOVIA
UG Simulation
Proe DELMIA
IDEAS Technomatix

Process Simulation
Moldflow
Magma
Autoforge

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Spoke and hub model

25
 Current Status of AEDS in India
AEDS in India IT services Vs AEDS
Global Drivers:
IT AEDS
Reducing vehicle development cycle time
Less # of Platforms & More # of models Size of projects Large Small

IT services capability + Autocomponent Degree of Core Low High

manufacturing knowledge transfer
from client
US automotive industry meltdown
Value Proposition Fixed Variable
Cost pressure
Cost Reduction: cost cost
Size ~ $0.3 Billion
7000 Professionals
New Product
Programs Current AEDS activities in India
Sub system
CAE Analysis
Interface with Vendor

design

VAVE
CAD / CAM / CAE
Complexity

KBE, Preproduction tooling

Solid Modeling FEA/CFD Automation

Product Data Management (PDM)

Analysis

Design detailing,

2D/3D drwgs
Layouts
Dim Managements Knowledge Based Engineering (KBE)
FEA Meshing CAD conversion
Embedded Software Systems
Illustrations &
Publication development & testing
Type I Type II Type III Type IV Applied R&D
Task Complexity
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To Summarize

Automotive Industry will continue to dominate in the manufacturing

sector
Center of gravity will change
India, China and other developing countries

Future technology will be driven by:

Environmental regulations
Depletion of fossil fuel
Safety and
Increased competition

India will emerge as a R&D hub for the global automotive industry
Possible challenges for India are:
Skilled Engineers
Automotive Domain expertise

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Q&A

28
Thank You

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