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How Mercedes and BMW made Indian cars better and safer

business Updated: Sep 12, 2016 10:38 IST
Sunny Sen

For most part of Maruti Suzuki’s 30-year-old history in India, it sold ‘basic’ small cars, which were without many features, and would fail American and European safety tests.

But as consumer behaviour changed and luxury auto companies began sourcing more from India, carmakers took a different road.

Maruti changed. Others, such as the Ambassadors and Premier Padminis (owned by Fiat), who could not, perished.

In January, Maruti launched airbags (only as an option) and left-side rear view mirror in all Alto 800 variants – its entry-level car, which has sold more than three million units since its launch 16 years ago.

“Thirty years ago cars were only about mobility. With every passing decade the customer has changed, and so has his aspiration with respect to design, quality and technology… Regulations, too, have changed, in India and globally,” says CV Raman, head Maruti Suzuki’s engineering and R&D function.

Many of the features — rain sensing wipers, digital and touchscreen infotainment panels, auto headlamps, rear parking assist, anti-lock braking system and automatic transmission — that Maruti and its biggest rival on Indian roads, Hyundai Motor, offers today in its compact cars were meant for the rich, who could buy luxury cars made by Mercedes-Benz, BMW and Audi.

But this was not the picture till some years ago.

In 2014, Maruti’s Alto and Swift, Hyundai i10, Ford Figo, Volkswagen Polo and Tata Nano failed safety tests conducted by New Car Assessment Programme (NCAP), the global organisation for car safety. It was worrying. After all, India is the fifth-largest producer of cars globally.

But then things started changing as Indian component makers increased supply to luxury carmakers. In 2015-16, luxury carmakers sourced almost half of their components locally, shifting from fully imported units until six years ago.

And India’s auto component business is a hugely untapped market. With $39 billion in revenue is 2015-16, its more than Libya’s gross domestic product — a measure of total goods and services the country makes. Its exports to global carmakers have grown more than five times to over $10 billion in the last six years.

Mercedes-Benz was one of the first global majors to tap this market. “The local supplier base develops with us,” says Roland Folger, CEO and managing director of Mercedes-Benz India.

“High-end technology is used first in luxury cars. Suppliers then give it to other manufacturers,” adds Wilfried Aulbur, India head of Munich-headquartered consulting firm Roland Berger.

Rival German luxury car brand BMW, too, agrees. “We are confident that through our partnership with Indian auto component suppliers, we will set higher benchmarks in quality standards and supply chain management,” says a BMW spokesperson.

Since 2007, as BMW increased the number of its locally produced car models, it partnered with Indian component suppliers, including Force Motors, ZF Hero Chassis, Draexlmaier India, Tenneco Automotive India, Valeo India, Mahle Behr and Lear India, for local sourcing.

“Global carmakers bring in very strong processes and systems… Many features that are used in luxury cars are now used in a budget car,” says Pankaj Mittal, chief operating officer at Motherson Sumi, India’s largest component maker and a supplier to Mercedes-Benz.

For example, mirrors with blinkers that have electronic folding were only available in luxury cars. Logo and puddle lamp were Jaguar Land Rover’s exclusive features till a few years ago. Door trims were cheap plastic, but not anymore. Airbags, too, cost less.

Rakesh Srivastava, head of sales and marketing at Hyundai India, says brands that bring in global platforms also bring in better features. The rear air-conditioning vent that Hyundai put in the i20 and Xcent was once available only in its high-end cars. “Once you spread the price of technology over many units you can enjoy economies of scale… That happens with exports as well,” says Srivastava.

In a nutshell, global cars, especially those in the luxury segment, have over the years changed Indian cars. “The gap between European and Indian cars is decreasing,” says Raman.