Rajesh possesses 17+ years of experience across diverse financial functions. He has been associated with KOSTAL Group for over 14 years now, prior to which he handled the Cash Operations for ICICI Bank and associated with Audit firms in Chennai.
Post the COVID pandemic, although the automotive manufacturing industry witnessed a slump of around 30-40 percent, it has now recovered exceptionally and is at a better phase than before the pandemic. However, today, in order to maintain competitive pricing in the market, the automotive manufacturing industry is forced to reduce overall manufacturing costs by reducing imports and focusing on localization by using locally available resources.
The inventory that was piled up during COVID can be utilized in a better way now to reduce production costs, enhance profitability and be successful in the industry. Additionally, the industry must focus on lean manufacturing, which includes the effective use of labor to enhance productivity and decrease costs. Also, standardizing the components for all the products right from the design and development stage enables organizations to utilize their full capacity and significantly cut down their manufacturing costs. Furthermore, given the extremely volatile nature of the market today, it is crucial for manufacturing companies to have better supplier negotiation in order to save costs. Lastly, with the widespread adoption of digitization, manufacturers must integrate automation technologies such as AI in whichever process possible within their manufacturing setup. This will not only reduce the overall manufacturing costs but also improve efficiency, increase production times, and significantly reduce errors.
"Validating the products using the right methods with the right development time goes a long way in reducing product failure and quality costs."
Currently standing at around 0.5-0.7 percent, the failure costs in the automotive market are a very crucial aspect every manufacturer must pay close attention to, as it is just lost as liquid cash. With the increased adoption of EVs and the rapid growth of the e-mobility sector, the cost of quality has increased significantly. This is because since the products are in the development stage, there is always trial & error and chances of unexpected things to turn up. For such aspects, I personally suggest companies concentrate on some of the key factors during the developmental phase itself as a preventive measure in order to reduce the cost of quality during the mass production stage. On the other hand, there are high chances of failure costs whenever any new product is introduced into the market. To summarize, validating the products using the right methods with the right development time goes a long way in reducing product failure and quality costs.
Due to the constantly changing market dynamics and customer expectations, cash flow management has been a very important aspect for all organizations in recent times. Today, consumers are looking at the kind of advanced technology featured that they will have access to in their cars. In light of this, the dashboards in most of the cars today are completely filled with touch-sensing switches, which was not the case five years back. Today, most automotive OEMs are developing sensory touch panels in the steering wheel itself. However, developing all these tech advancements requires a lot of investments but gives back a low ROI, which is a major challenge for automotive manufacturers today. Thus, most OEMs are rolling out these features in a step-by-step manner. Some of the other factors that have caused major setbacks to the automotive manufacturing industry in recent times are the global recession, the Russia-Ukraine war, and similar other geopolitical crises.
A few of the primary responsibilities of the automotive industry are to play its part in the growth of our country’s economy, create employment opportunities for the people and also contribute towards ESG. Additionally, there are many regulatory frameworks being put into action by the government that make contributing towards ESG mandatory for all companies, irrespective of their industry. Being one of the biggest contributors to environmental pollution, the automotive industry is putting in a lot of effort lately to reduce its adverse effects on the environment. Some of the key steps taken by organizations in this regard are having efficient energy management systems in place, contributing towards green energy consumption, smart usage of water and many others. Although incorporating all of these steps requires a lot of capital investment and does not promise any fixed ROI, it is important for organizations to keep in mind that the investment that the investment that they will be making in terms of ESG will bring long-term benefits while simultaneously enhancing the brand image as an eco-friendly and sustainable company.