Despite being a late entrant, Renault has grown fast to become one of the best-selling European automobile brands in the Indian automotive market. Sumit Sawhney, CEO and Managing Director, Renault India, shares with The Dollar Business the operational philosophy of this France-based auto major apart from discussing the road ahead for the brand.

Ahmad Shariq khan | March 2017 Issue | The Dollar Business

TDB: Renault has been operating in India since 2008. How has the journey panned out so far and what are your immediate goals?

Sumit Sawhney (SS): India is a priority market for Groupe Renault and plays an important role in our international growth. In a short span of time, Renault has grown its presence exponentially, becoming one of the youngest and fastest growing automotive brands and the No.1 European brand in India. Over the last few years, we have had a single-minded focus on establishing a strong base in India – thanks to that our journey is taking flight. We are on track with a 4.5% market share in 2016, achieving a robust 146% growth over 2015. Our near-term goal is to achieve a 5% market share.

This year, we will work towards building upon our growth journey, reflecting our long-term commitment to the Indian market. Over the next five years, we plan to launch at least one new product a year. As we have done in the past, whatever be the product from Renault it will be a game changer that will redefine the segment, or create a sub-segment. In terms of our network reach, in 2016, we grew from 205 to 270 service facilities, making it one of the fastest ramp ups in the automotive industry.

We will continue to do the same this year, with strategic measures to make our cars more accessible to customers across the country. Also, we will consolidate our position in India, with strategic measures across all key business dimensions, ranging from product and network expansion to several innovative marketing initiatives that will ensure customer delight.

TDB: Renault India seems to have embraced the ‘Make in India’ initiative. Renault's KWID, which is being manufactured in India, has crossed sales of 1,10,000 units since its entry into the market in October 2015. What's your take on the initiative?

SS: We believe that it is a great initiative. With further reforms and favourable policy intervention, we are certain, the 'Make in India' initiative will attract more FDI into the country.

The successful culmination of the second year of the ‘Make in India’ programme and a strong emphasis on the ‘ease of doing business’ have made India the 6th largest manufacturing country in the world. If the country’s economy has to grow, the manufacturing sector has to grow and the automobile industry is one of the major drivers of this sector.

Concurring to this, the Government of India aims to make automobile manufacturing the main driver of the ‘Make in India’ initiative. But, the government needs to support the industry by providing a conducive atmosphere that facilitates growth. The Indian automobile industry is the 5th largest and one of the most dynamic industries in the world. And as a major employment generator and GDP contributor, the automotive industry is instrumental in shaping the country’s economy and is regarded as a sunrise sector under ‘Make in India’. This sector deserves all the support that the government can afford.

Speaking of Renault, KWID is one of the biggest ‘Make in India’ success stories in the compact hatchback segment, making Renault one of the fastest growing automotive brands in India. Renault has already started exports of KWID to SAARC and African countries, taking the excellence of Indian manufacturing and engineering to the world.

To celebrate the first anniversary of the ‘Made in India’ KWID, Renault embarked on a historic drive from Delhi to Paris, travelling through 13 countries covering 18,996 km and passing through extreme climatic conditions. With this historic drive, KWID proved that it is truly a game changer and a car of global repute. This also highlights our continued thrust and commitment towards the government’s ‘Make in India, Make for the world’ approach.

TDB: What are Renault India's export plans for 2017?

SS: As I said, we are a firm believer in the government’s ‘Make in India, Make for the world’ philosophy. We are committed to making the country a manufacturing hub. In the near future, we plan to increase shipments from our Indian facility to many destinations around the world. We are already exporting our popular models – Duster and KWID – to Sri Lanka and Nepal. And soon these models will be exported to Bhutan and Bangladesh. I think, this year, you will see Renault India's increased thrust on expansion in many African markets as well. The Renault KWID is also going to be launched in Brazil very soon. In case of Brazil while the car will be manufactured locally, certain components for the car will be supplied from India.

TDB: An India-focused localisation strategy seems to be the way forward for most auto majors manufacturing in India. How significant is this strategy for Renault and how do you plan to employ this in new launches from Renault’s stable?

SS: With the success of Renault KWID, we have been able to launch a global product on the new CMF-A (Common Module Family-Architecture) platform with 98% localisation. We have understood that the localisation strategy can go beyond four metre cars. There are a lot of opportunities in the sub-4 metre, under Rs.7 lakh range, as this segment has a significant share in the Indian automotive market. The CMF-A (KWID) platform is very versatile and we can use it for a lot of body styles – we are looking at products that best suit the Indian market.

Renault has formulated an aggressive product plan for India, clearly demonstrating that India is one of the key markets in Renault’s global expansion plans. Currently, we are working on multiple products on the CMF-A platform. This platform, which can be used to make cars up to four metres in length, will be used to roll out innovative products that we expect to be game changers.

Starting this year, our aim is to launch at least one new product every year for the next five years. Additionally, with SUVs being our forte, we will stay strong in this space – whether you are talking about cars above four metres, or below four metres. We have started this process with the KWID by giving an SUV DNA to the design of the car.

TDB: What are your views on the Union Budget 2017. What have been the hits and misses?

SS: The government has succeeded in ensuring that the Indian economy is buoyant despite the prevailing uncertainties and global headwinds. The overarching focus of the Budget 2017 has been on reviving market sentiment and economic growth in a non-inflationary manner while attempting incremental fiscal consolidation. With the agenda of transform, energize and clean India, the Union Budget has paved the way to create sustainable growth and generate employment. Control over fiscal and revenue deficit are encouraging signs.

A clear focus on rural development and a thrust on infrastructure and poverty alleviation while keeping fiscal prudence in mind is a difficult act. The Rs.10 lakh crore allocations towards agricultural credit is a big win, and it will provide the necessary impetus to the rural economy. That said, as the Indian economy moves from good to great, we had expected a more aggressive Budget to enable our economic transformation.

A ten-fold increase in skill centres, as proposed in the Budget 2017, will increase the availability of skilled workforce across industry segments. However, there was an expectation of a pro-business policy for job creation in the manufacturing sector, including automobile industry, which is a key pillar of the economy.

Having said that, there are some proposals in the Budget that the automobile industry can benefit from. The focus on infrastructure development, including that on rural road development, will lead to faster and more effective mobility. Also, synergistic investments in rail, road and riverways will ease supply chain operations and will benefit logistics-heavy segments like the automotive industry and hopefully bring down logistics costs. The boost to national highways, coastal connectivity and ports is a big step to bolster last mile connectivity for the manufacturing sector and will also aid exports sector.

Another positive is the abolition of the Foreign Investment Promotion Board (FIPB), a great step in the direction of ease of doing business and making India investor friendly. This will definitely help attract more FDI.

One of the key decisions that our sector was looking forward to from this Budget was the Goods and Services Tax (GST) roll-out and how differently vehicle categories will be taxed. Another area which deserved attention was vehicle scrappage policy. A clear roadmap on the policy would have given a boost to the industry. Although the Budget 2017 didn’t have much for the automobile sector, we are hopeful for some pro-business policies on a continual basis that will benefit the industry going forward.

TDB: What in your opinion are the major operational or policy hurdles for the Indian automotive sector?

SS: From the macroeconomic point of view, the biggest challenge currently being faced by the industry is the government’s decision to move to BS-VI emission norms by 2020 directly. This will require a significant technology upgrade and additional investments by the automobile industry. The government wants us to do it in four years, what Europe took 11 years to do – moving from Euro IV to Euro VI. We have moved to Euro IV, but Euro IV fuel is still not available in all parts of the country. The success of this new emission standard depends on fuel availability. The fact is that a BS-VI vehicle can run only on BS-VI fuel but a BS-IV vehicle can run on BS-VI fuel.

The lifecycle of cars in India have reduced in recent times, creating a new challenge. The Indian customer wants the latest and the best offerings at the lowest cost. It is a combination which is very tough to create. If we go back in time, say some 7-8 years, the life cycle of a product was 5-6 years. But now you have to bring in changes every 2-3 years. If we have to bring something in India, it has to be innovative, it has to be a game changer. First it was Duster, now it is KWID. Many more will follow.

Other than these, there are some policy decisions, like the end of vehicle lifecycle policy, implementation of GST and proactive measures to give a fillip to the automobile industry that we are looking forward to overcome the challenges that the industry is faced with.

TDB: The automotive industry in India is one of the largest in the world, yet it’s said to be plagued with many infrastructural inadequacies. What is your advice to policymakers?

SS: Going forward, to help the sector, besides addressing infrastructural handicaps, the focus needs to be two-pronged – driving domestic demand and pushing exports. To uplift domestic demand, the key growth triggers for the upcoming year can come in the form of moderate fuel prices and a stable interest rate regime. Apart from stable interest rates, other measures that are required to spur domestic demand include fostering a stable and supportive regulatory environment led by GST roll out, encouraging enviornment for research and development, reducing supply chain cost and ensuring cost competencies.

For boosting exports, the government certainly needs to address infrastructural inadequacies. Further, emphasis should be on increasing the number of FTAs apart from investing in port infrastructure. Creation of coastal economic zones covering multiple states, ports and special economic zones and bringing them under a uniform policy will also help.

TDB: Experts say, most of the FTAs that India has signed have not resulted in desired benefits for Indian auto manufacturers. What is your take?

SS: Well, there is a bit of truth in this. Currently, we need better FTAs with Europe, UK and the ASEAN countries. Australia and Middle-East have stopped manufacturing cars and everything they buy is imported into their country. Africa is another big opportunity. Also, India has the potential to be a big base for component exports. There is a lot of capacity in our country and if we have favourable FTAs, this can be optimised for exports.