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Autonomous Vehicles: Moving Closer to the Driverless Future

An Uber self-driving car was reported getting into an accident in Arizona last month. But as the saying goes “any publicity is good publicity”, this also holds true for autonomous vehicles. The news sparked a discussion and shed some light on potential challenges the technology may face before it becomes available for commercial use. At the same time, it spread awareness about the level of safety testing being done to improve the technology before it is rolled out to the public. We are taking a look at what’s potentially in store for users waiting to see streets flooded with driverless vehicles.

Autonomous self-driving vehicles have been the talk of the industry for some time now, with some of the initial attempts to create a modern autonomous car dating back to 1980s. However, major advancements have only been made during the last decade, coinciding with advancements in the supporting technologies, such as advanced sensors, real-time mapping, and cognitive intelligence, which are perhaps the most crucial to the success of any autonomous vehicle.

Early advancements in the segment were led by technology companies which focused on developing software to automate/assist driving of cars. Some prime examples include nuTonomy, which has recently partnered with Grab (a ride-hailing startup rival to Uber) to test its self-driving cars in Singapore, Cruise Automation (acquired by GM in 2016), and Argo AI, which has recently received a US$1 billion investment from Ford. These companies use primarily regular cars/vans that are retrofitted with sensors, as well as high-definition mapping and software systems.

However, software alone is not capable enough to offer self-driving driving functionalities, therefore, automotive OEMs are taking the front seat when it comes to driving advancements in autonomous vehicles segment. New cars/vans, which are tuned to work seamlessly with this software, are likely to adapt better with the algorithms and meet stringent performance and safety standards required before they can be rolled out commercially. California-based Navigant Research believes that with its investment in Argo AI, Ford has taken a lead among such automotive OEMs in the race to produce an autonomous, self-driving vehicles.

Advanced levels of autonomy still to be achieved

In a nutshell, there are five levels of autonomous cars. Levels 1 through to 3 require human intervention in some form or other. The most basic level comprises only driver assistance systems, such as steering or acceleration control. Most common form of currently prevalent autonomy is Level 2, which involves the driver being disengaged from physically operating the vehicle for some time, using automation such as cruise control and lane-centering. Tesla’s current Autopilot system can be categorized as Level 2.

Level 3 involves the car completely undertaking the safety-critical functions, under certain traffic or environmental conditions, while requiring a driver to intervene if necessary.

Most OEMs developing autonomous cars target launching their vehicles in the next three to five years. Tesla is probably the closest, with its Model 3 car with Autopilot 3 system expected to be unveiled in 2018 (however, this depends on whether the regulations are in place by then). Nissan, Toyota, Google, and Volvo plan to achieve this by 2020, while BMW and Ford have set a deadline for 2021. Most of these companies are working on achieving cars with Level 3 autonomy, with a driver sitting behind the steering wheel to take over from the car’s programming as and when required.

Level 4 and Level 5 vehicles are deemed as fully autonomous which means they do not require a driver and all driving functions are undertaken by the car. The only difference is that while Level 4 vehicles are limited to most common roads and general traffic conditions, Level 5 vehicles are able to offer performance equivalent to a human driving in every scenario – including extreme environments such as off-roads.

Some OEMs, Ford in particular, are against the practice of using a human as a back-up, based on the understanding that a person sitting idle behind the wheel often loses the situational awareness which is required when he needs to take over from the car’s programming. Ford is planning to skip achieving Level 3 autonomy and target development of Level 4 autonomous vehicles instead.

Google is currently the only company focusing on developing a Level 5 autonomous car (or a robot car). The company already showcased a prototype that has no steering wheel or manual controls – a prototype that in true sense can be the first autonomous car. Tesla also plans to work on achieving the highest level of autonomy and plans to fit its cars with all hardware necessary for a fully-autonomous vehicle.

High costs continue to be challenging

While the plans are in place, one massive roadblock that persists in the development of these cars of future are costs. There are multiple sensors used in these cars, including SONAR and LIDAR. The ongoing research has helped to reduce the costs of sensors – Google’s Waymo has managed to reduce the costs of LIDAR sensors by 90%, from about $75,000 (in 2009) to about $7,000 (in 2016) – but they are still very expensive. The fact that a driverless car requires about four of these sensors, makes the cars largely unaffordable for consumers, and that puts off any discussion of feasibility of commercial production at this stage.

EOS Perspective

The first three months of 2017 have been particularly eventful, with several prototypes launched or tested. This activity is expected to increase further as companies try to meet their ambitious plans to roll out self-driving cars by 2020.

Initial adoption is likely to come from companies investing in commercial fleet, particularly those focusing on on-demand taxi or fleet, similar to what Uber or Lyft offer. Series of investments by large bus manufacturing companies, such as Scania, Iveco, and Yutong, also indicate how this technology will be the flavor of the future in public transport.

It is too soon to comment how and when exactly these autonomous vehicles can be expected to impact the way people choose to travel and how they may redefine the societies’ mobility. It is likely to depend on how the regulatory environment evolves to allow driverless cars in active traffic. Current regulatory environment for driverless cars is still at a nascent stage and allows only for testing of these cars in an isolated environment. Some states in the USA, particularly California, Arizona, and Pennsylvania, have opened up to testing of these cars in general public. However, recent accidents and cases of autonomous cars breaking traffic rules have put pressure on authorities to reconsider their stance until the cars become more advanced and tested to handle the nuances of public traffic. We might need to wait another decade or two before driverless cars are a reality in many markets. As things stand, endless efforts continue to go behind the curtain, as companies strive to win the race to develop highly autonomous and safe vehicles.

by EOS Intelligence EOS Intelligence No Comments

Tata’s Tamo Breaks with Convention, but the Fight Lies Elsewhere

Will the new Tamo sub-brand be able to change Indian consumers’ perception of Tata Motors?

Tata Motors is out to regain its place in the Indian automotive market, where it continues to suffer from a lack of trust among consumers.

Launched in February, Tata Motors’ future mobility sub-brand, Tamo, is intended to act as an incubation center of innovation’ to push new technologies for developing future mobility solutions…

Read our article published on Automotive World.

by EOS Intelligence EOS Intelligence No Comments

India Union Budget 2017: Implications for the Auto Industry

Due to various macroeconomic factors, the Indian automotive industry has not achieved its full growth potential during the last 12-18 months.

In addition, the government’s recent demonetization policy has impacted consumer spending and created an unfavorable environment for the auto industry on the whole.

Amid these challenges, key stakeholders within the auto industry were hoping for a favorable budget which could revive consumer demand and catalyze growth in the industry.


What was expected

The auto industry had a fair bit of expectations from the Union Budget 2017 (annual budget of India). Many industry players expected last week’s budget announcement to offer reductions in existing tax structures, various incentives for R&D expenditure and promotion of hybrid and electric vehicles (EVs), and lower interest rates on auto financing. Some of the key items on the industry’s wish list were:

  • In order to support and boost government’s ‘Make in India’ program aimed at encouraging companies to manufacture their products in India, the industry expected some impetus in the form of lower taxation and other financial incentives

  • To increase vehicle sales, the industry expected lower interest rates on auto financing and larger fund allocation for the development of mobility infrastructure

  • EV and hybrid carmakers hoped for various tax exemptions and subsidies under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME) scheme

  • OEMs expected the government to continue its 200% weighted deduction on R&D expenses

  • Industry players hoped for further clarifications with regards to incentives, timeline, etc. for vehicle scraping policy

What was received

  • Slashing 5% of corporate tax for enterprises with turnover under ₹500 million (US$7.4 million). This will benefit tier-2 and tier-3 auto components manufacturers and help them in further expanding their business as well as their R&D capabilities

  • The government earmarked ₹1,750 million (~US$25.9 million) in funding for the FAME scheme, which will further enhance the promotion of eco-friendly vehicles in the country


EOS Perspective

Although there were no substantial announcements in the budget that could directly benefit the auto industry, it surely has provided growth opportunities for it. Firstly, the government has increased its fund allocation by 11% to ₹640 billion (US$9.5 billion) for the development of national highways. In addition, 2,000 km of coastal roads are planned to be developed to improve the connectivity of ports and remote villages. These measures are expected to fuel demand for commercial vehicles in the coming years. Secondly, the income tax deduction of 5% for individual tax payers earning under ₹500,000 (US$7,425) is expected to boost personal consumption and spur demand among first-time buyers of passenger cars. Furthermore, the budget focused on boosting rural consumption by allocating more funds through various schemes. It is projected that these schemes will stimulate the demand for farming vehicles as well as two-wheelers in rural India.

For now amid no significant changes, all eyes are on the goods and services tax (GST) implementation expected to take place in July 2017. Industry experts anticipate that the rollout of GST will not only help to standardize various tax aspects, but it will also reduce costs across the industry’s entire supply and value chains. Therefore, a significant share of the impact will be seen only after the implementation of GST. Given the current scenario, we anticipate growth in the industry to rebound largely driven by government’s strong focus on enhancing consumer consumption and infrastructure development.

by EOS Intelligence EOS Intelligence No Comments

The Return of Consumer Credit – What Does It Mean for Algerian Passenger Vehicles Industry?

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(This post, along with recently published article on auto financing in Nigeria, formed a mainstay of a broader coverage article titled ‘Affordable auto financing essential for OEM success in Africa’, contributed by EOS Intelligence to ‘Guide to the automotive world in 2017’, Automotive World’s annual publication covering a gamut of articles by leading global automotive industry analysts and consultants. The report was published in January 2017)

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Banned in 2009 in order to curb the national import bill as well as the level of household debt, consumer credit was reinstated in Algeria in early 2016 to encourage the consumption of national products. In the local automotive industry, Renault Symbol is the only passenger vehicle currently available on auto financing, since Renault is the only locally assembled vehicle in Algeria. Can the return of consumer credit along with other policies provide the much needed boost to the nation’s passenger vehicle industry?

With a total population of approximately 40 million, Algeria is the second largest automotive market on the African continent. For the past several years, the country’s automotive industry has relied heavily on imports from Europe and Asia, importing nearly two million cars between 2012 and 2015. Today, the industry continues to be heavily dominated by imported vehicles, which account for approximately 85-90% of the total market. Passenger car manufacturing is limited, with Renault Algerie being the only domestic manufacturer (the Renault Algerie production plant is an assembly unit that builds the Symbol model from completely knocked down production for the Algerian market).

In 2009, all consumer loans were abolished by the government in an effort to reduce import bills as well as the level of household debt. However, in 2016, under the Executive Decree No. 15-114 of May 2015, consumer loans were made available on selected goods manufactured nationally. Under the scheme, car loans are available only on Renault Symbol, since it is the only locally-assembled vehicle.

Unlike in Nigeria and in several other African countries, where accessibility and affordability of car finance remain an immense challenge, in Algeria, a considerable part of the population can qualify for loans based on their monthly income level. As a result, major Algerian banks have seen a rapid surge of car loan applications. Although access to consumer finance has boosted car loan applications over the second half of 2016, this is not likely to significantly impact the industry growth, since consumers have no choice in selecting either brand or model. In addition, Renault’s current production volumes are very limited (25,000 vehicles per annum) and cannot meet the total local demand. However, due to the recently introduced reforms, the industry dynamics can be expected to change in the next few years.

EOS Perspective

The current economic environment, along with the implementation of licensing system and import quotas are likely to have a negative impact on the passenger vehicles industry in the short term. New vehicle sales can be expected to witness a decline to some extent in 2017. But the recent developments are also likely to push automakers to invest in setting up local production facilities. The arrival of major OEMs and their production projects is expected to serve as a growth catalyst for the local automotive industry over medium to long term. Once these projects become operational, local production volumes might increase significantly, which will provide consumers with more buying options. In addition, the ease of consumer lending could accelerate household spending, leading to increased bank lending in the automotive industry. As competition between banks intensifies, more innovative and affordable car financing solutions are likely to be available to consumers in Algeria, which can in turn attract many consumers across segments to buy new cars. The rising and young middle-class Algerians are likely to consider shifting from entry-level segment to the luxury segment, as they can spread their payments over a longer period of time (e.g. up to 60 months).

All of these efforts combined together – the recent industry reforms, auto manufacturing projects in the pipeline, and auto lending – can be expected to fuel growth in Algeria’s passenger vehicle industry.

by EOS Intelligence EOS Intelligence No Comments

Affordable Auto Financing – The Key to New Passenger Vehicle Sales in Nigeria

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Since the announcement of the National Automotive Industry Plan in 2013, the Nigerian automotive industry has witnessed an increased interest from several global automakers. As a result of the Plan as well as recent reforms made by the Nigerian government, PwC predicts Nigeria has a chance of becoming Africa’s auto manufacturing hub by 2050. However, the passenger vehicles market in Nigeria remains heavily dominated by imported second-hand cars, mainly due to the various industry challenges, including lack of access to auto financing. Could affordable auto financing schemes drive growth in Nigeria’s new passenger vehicles market?


This post formed a mainstay of a broader coverage article titled
Affordable auto financing essential for OEM success in Africa’, contributed by EOS Intelligence to ‘Guide to the automotive world in 2017’, Automotive World’s annual publication covering a gamut of articles by leading global automotive industry analysts and consultants. The report was published in January 2015.


Nigeria’s new passenger vehicle sales are far behind sales in countries such as Egypt, Algeria, and Morocco, despite the fact that Nigeria is the most populous country in Africa. With a giant share of nearly 80%, Tokunbo vehicles (local name for imported used vehicles) heavily dominate the Nigerian passenger vehicles market.

Although there is a plethora of industry challenges that range from lack of cohesive government policies to poor infrastructure, one of the major growth constraints at present is the lack of affordable auto financing. Due to the limited accessibility and expensive financing options, new vehicles remain out of the reach for most Nigerians.

Nigeria Affordable Auto Financing

Nigeria Affordable Auto Financing

Currently, the cost of auto financing in Nigeria is exorbitant. Amid current economic environment and credit criteria, only a small segment of the population can obtain auto loans. Therefore, most Nigerians either buy used cars or save money over period of time to buy new vehicle for cash, stalling the new vehicle sales – retail customers accounted for less than one-third of all new cars sold in 2015.

This shows how lack of financing options is holding growth in a market segment with the highest growth potential. According to Lagos Business School’s research, an affordable vehicle finance scheme could boost Nigeria’s annual new vehicles sales to one million from 56,000 units at present.

Nigeria Affordable Auto Financing

Nigeria Affordable Auto Financing

EOS Perspective

Although the National Automotive Industry Plan and recent government reforms managed to attract some FDI in recent years, the Nigerian passenger vehicles industry still remains heavily reliant on imported used cars. As the government plans to curb the country’s auto imports, as a first step, the industry stakeholders should plan policies that can make new vehicle ownership more attractive to mass consumers.

The current credit facilities offered by banks are unattractive to many consumers due to cost and credit terms. In order to fuel growth in local vehicle manufacturing and new vehicle sales, the industry, along with the help of CBN, should develop more affordable vehicle credit purchase schemes targeted at the mass middle class population.

Further, as majority of consumers simply have little or no credit history, the current lending models are not going take the industry growth any further. By leveraging on alternative credit data such as payment data from utility and telecom companies, lenders should look beyond credit scores to segment a new customer base of creditworthy consumers.

For vehicle manufacturers and dealers, there is a tremendous opportunity to move up the value chain by setting up in-house financing with the help of the right partners. By offering innovative auto finance solutions, they can push the demand for new vehicles, especially among millennial and emerging middle class first-time buyers.

Whether Nigeria is capable of becoming the next auto manufacturing hub for Africa, only time will tell, but with better financing options, it can surely boost new car sales and help the local automotive industry to progress.

by EOS Intelligence EOS Intelligence No Comments

Pick’n’mix: The Evolution of Automotive Materials

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The article was first published in Automotive World’s Q2 2016 Megatrends Magazine

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The increasing demand for fuel efficient, lighter, and safer vehicles is re-shaping the global automotive industry landscape. Significant pressure from regulators and customers is driving vehicle manufacturers to focus on design efficiencies using advanced technologies and materials. These factors have made vehicle material composition a vital part of every OEM’s overall manufacturing strategy.

Evolution of Material Composition over the Last Three Decades 1-Average Material Composition

The ongoing evaluation of the vehicle materials performance as well as continuous enhancements in the material composition of vehicles have always been on the agenda for automakers as vehicle weight has direct implications on driving dynamics and fuel consumption.

Due to the changing industry dynamics, automakers face growing pressure to develop lightweight vehicles that would on the one hand ensure lower environmental impact, and on the other hand provide safety and desired performance. This has led the material composition of passenger vehicles to evolve constantly over the past three decades.

In recent years, the increased regulatory and user pressure on auto manufacturers and materials suppliers to discover better and lighter materials has resulted in an increased use of plastics, with the declining role of metals in vehicle manufacturing (though metals are expected to still account for more than half (55%) of the vehicle materials composition in 2020).

Key Drivers of Material Composition Evolution

2-Evolution of Material CompositionRegulatory Reforms

Stringent CO2 reforms such as corporate average fuel economy (CAFE) in the USA as well as EU CO2 emission targets for 2021 are forcing OEMs to make their vehicles more energy efficient.

These reforms have fueled R&D efforts as well as investments in vehicle lightweighting. According to Ducker Worldwide, a US-based research and consulting firm, by 2025, an average vehicle in the USA will have to reduce approximately 181kg of its total weight to achieve an average fuel economy that enables passenger vehicles to drive at least 54.5 miles per gallon of fuel. Clearly, as lightweight materials are a significant factor in meeting these rigorous regulations, OEMs are re-thinking their vehicle material composition.

In the coming years, one can expect the material composition to evolve further as these compliance deadlines approach nearer and OEMs begin to feel the pressure of monetary penalties for non-compliance. For example, in Europe, OEMs will have to pay at least €95 for every gram of CO2 above the set limit (95g) multiplied by total cars sold in 2020. This could translate to approximately €1 billion for Volkswagen and €300 million for Hyundai in penalties as per estimates by PA Consulting.

New Market Entrants

The entry of new players, such as Tesla and the Silicon Valley 3D printing start-up Divergent Microfactories, is transforming traditional vehicle manufacturing processes and technologies. By leveraging new materials and technologies, these companies have developed new vehicle models that offer better design and performance. This is encouraging traditional players in the industry to learn and adapt their designs and material composition choices in their upcoming vehicle models to can help them to achieve better design and fuel efficiencies.

Consumer Demands and Expectations

Over the years, consumers’ demands with regards to their cars have changed considerably, with expectations of improved fuel economy, safety, as well as driving experience through technology and functionality enhancements. These factors have driven the R&D, design, and material teams in the industry to innovate to satisfy the evolving consumer demands. As the tech-savvy consumers of ‘Generation Z’ (born post 1995) and the generations after ‘Z’ are surely going to be more demanding, one can expect the passenger vehicles to continue on the innovation path, which is likely to also consist of more advanced grades of plastics and composites as materials used for construction of these vehicles.

Technology Advancements

Improvements in materials as well as production technologies in the automotive sector have come on in leaps and bounds in the last 20 years. According to ArcelorMittal, a multinational steel manufacturing corporation, only five grades of steel were available to the automotive industry in 1960, while today, the industry has more than 175 grades of steel at its disposal for design optimisation. The current grades of steel, such as advanced high strength steel (AHSS) and ultra high-strength steel (UHSS) are much stronger, lighter, and processing friendly for various vehicle manufacturing applications.

The emergence of 3D printing, new design, testing, and processing tools is transforming automobile engineering. By leveraging technology and advanced manufacturing techniques, along with the strategic use of various materials, auto engineers today are designing body-in-white (BIW) structures that are far lighter than the ones in 1990s.

Current Trends in Material Composition

There is no single approach to material composition that applies across each passenger vehicle segment. In fact, material composition choices vary across regions, OEMs, vehicle type, manufacturing volumes, and target customer segment. For example, a pick-up truck in the USA uses far more aluminum than similar truck in Europe (138kg versus 59kg), while OEMs in Europe use more aluminum in their premium car segment than their US counterparts. At present, BIW material composition of an average passenger vehicle consists of a mix of various grades of steel, aluminum, iron, and plastics, while at the upper end of the market, the use of carbon fiber and composites is more prevalent.
3-Current BIW Material Composition

While there has been a lot of talk about rapid uptake of advanced composites in vehicle production, integration of these materials creates significant challenges in designing, simulation, and parts processing. Besides these challenges, the industry still lacks good understanding of these materials at the engineering level for vehicle manufacturing applications. Current barriers range across issues in forming, joining, and corrosion, paired by high cost and limited supply of such materials. Therefore, the use of composites, especially in mainstream structural components, will remain very limited in the near future.

OEMs are also exploring nanomaterials and nanotechnology that can provide OEMs with better weight-to-strength ratios and help them with vehicle lightweighting. In addition, companies are looking into other advanced metals such as titanium and nickel-based alloys that offers high strength, low density, and superior resistance to corrosion and oxidation, thus make them ideal for use in vehicle manufacturing applications. However, these research projects are still in nascent stages with most of them in laboratory testing phases.

The Future of Material Mix

For OEMs, any material switch requires significant investments in R&D, production processes and equipment, repair infrastructure, securing material supply, staff training, etc. Many OEMs have already made significant investments in their existing production infrastructure that supports steel. Amid the current global economic environment and cost pressures that majority of automakers face, they are likely to refrain from making new capital investments. Therefore, steel is expected to continue its dominance in the near future due to its cost effectiveness and design flexibilities. Further, due to the consumers’ limited willingness to pay for weight reduction, the uptake of advanced lightweight materials will remain limited within the mass market segments of passenger vehicles.

Steel and aluminum are expected to be the two key materials that OEMs will use for their BIW components over the next four to five years. According to some industry players such as Jaguar Land Rover and Kaiser Aluminum, between 2016 and 2020, the use of aluminum in overall material composition is going to surge. According to Doug Richman, Vice President of Engineering and Technology, Kaiser Aluminum, the average vehicle in USA and Europe will constitute of 14% aluminum (kerb weight) by 2025, up from around 10% at present. This is primarily due to the fact that advancements in steel processing have nearly reached the tipping point that limits further massive weight savings. Additionally, aluminum is the easiest switch for the vehicle production line, compared to plastics, magnesium, and carbon fiber.

The pressure to change and improve the material composition to achieve regulatory compliance will work as a double-edged sword for OEMs. On the one hand, it will create opportunities for industry players to innovate by creating new designs using advanced materials and manufacturing techniques. This can help them to outperform their peers by enhancing their product and brand value proposition. On the other hand, integrating these materials will create more manufacturing challenges for OEMs and require them to pour more investments. This will not only lead to higher capex and opex, but it will directly impact their profit margins.

As vehicle design optimization remains the largest leverage available to vehicle manufacturers to satisfy regulatory compliance, there is no doubt that material composition will be an important part of every OEM’s fuel efficiency optimization strategy in the coming future. Going forward, automakers are likely to focus on component specific materials that will use different materials for different structural components. They will combine materials to take the best advantage of what each has to offer. Although the complexities at present are enormous, OEMs that will master the art of efficient manufacturing material mix will enjoy a huge competitive advantage.

by EOS Intelligence EOS Intelligence No Comments

Driving Growth in Kazakh and Uzbek Passenger Vehicles Markets

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The past two years have brought a mixed bag of experience for both Kazakh and Uzbek automotive industries. Passenger vehicles sales volumes witnessed growth, however at a varied rate, affected by internal as well as external macroeconomic disruptions and regional developments. Amid these conditions, 2016 is likely to be an uncertain year for the automotive industries in both countries. Although growth is likely to be challenging, by re-thinking its current focus along with the help of the right government policies, growth prospects over the long term are promising.

While the Kazakh and Uzbek economic and automotive industries scenarios differ to quite an extent, and both countries have witnessed a varied growth in recent years, their macroeconomic and sector dynamics have continued to remain under a strong impact of the global slump in oil prices, volatile economic and political environment in neighboring regions, as well as currency devaluations. While Kazakhstan automotive industry, with sales volume CAGR of 67.8% during 2010-2014, was one of the fastest growing auto markets worldwide, the country’s GDP was witnessing a fluctuating y-o-y growth ranging from 7.5% in 2011 to 4.4% in 2014. At the same time, while Uzbek’s economy posted strong and steady GDP growth at around 8% annually between 2011 and 2014, its car sales volume grew at a mere CAGR of 1.4% during 2010-2014.

1-Fluctuating Economic & Automotive Industry Growth

Uzbekistan’s automotive industry is currently around twice the size of the industry in Kazakhstan, however its sales volume growth has recently stalled putting a question mark on Uzbek industry future growth dynamics. Kazakhstan might soon be seen to be catching up, with more than healthy sales volume growth rate, much of it supported by recent government reforms to boost local production and sales.

2-Automotive Industry Landscape

3-Industry Challenges & Opportunities

4-Industry Challenges & Opportunities


EOS Perspective

With Russia’s economy still struggling to recover amid Western sanctions, banking on vehicle exports is unlikely to take Kazakhstan and Uzbekistan any further. Passenger vehicles sales and production figures in most likelihood will continue to be impacted by internal as well as external macro-economic factors in 2016. In order to grow in the current environment, OEMs will have to look beyond their status-quo. Automakers will have to start focusing on domestic markets, which are still underserved with rapidly increasing demand for new cars.

The governments will have to work together with industry participants to create consistent as well as comprehensive industry policies that can attract more investments and stimulate growth. Measures such as financial incentives, special land allotment, creating SEZs, and various other schemes can significantly boost investor (both local and foreign) confidence. At the same time, reforms such as increasing local content requirement will drive more local producers to enter the industry. This might be a great help to the overall vehicle manufacturing and auto components industry in its development and growth trajectory.

5-What Can Drive Growth

With automakers trying to scale down their operations in Russia and Ukraine, growth opportunities are ripe for region’s manufacturers to capture and fill the market gaps in neighboring regions such as EEU and CIS. By leveraging their strategic location and proximity to European, CIS, and Asian markets, Uzbekistan and Kazakhstan could potentially attempt to reinvent themselves as the region’s next automotive export hub.

by EOS Intelligence EOS Intelligence No Comments

Emerging Markets Take Vehicle Safety Standards Seriously (At least on Paper)!

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The article was first published in Automotive World’s Q3 2015 Megatrends Magazine

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Across emerging and frontier markets, most car buyers have generally focused on pricing, maintenance cost, and fuel economy, thereby ignoring the very important aspect of safety. The governments in these countries have also not given due importance to this aspect, as basic safety features such as air bags and ABS are not compulsory as per regulations. Taking advantage of this nonchalance of both customers and governments, OEMs have for long compromised on safety features, which are a critical part of all cars sold in developed markets.

In recent years, however, with customers becoming more aware and global safety organizations cajoling for higher safety standards, some emerging countries have introduced increased safety measures, which in turn will require significant changes in the cars sold by leading OEMs. While this is expected to affect the bottom-line of OEMs in these price-sensitive markets, not abiding to the changing environment is likely to prove equally costly, if not in the immediate term, but surely over the medium-to-long term.

Existing Safety Standards

Among the key emerging and frontier markets, vehicle safety standards in South Korea match the levels in Europe, while China has also shown immense progress in adopting the standard safety requirements in automobiles. But other developing countries, such as Mexico, India, and Brazil, lie far behind. As per current car safety standards, Mr. David Ward, Secretary General, GNCAP (Global New Car Assessment Programme) rates China-7, Brazil-5, and India-3 on a scale of 10. “This rating is based on three key factors – the state of legislation, level of penetration of different technologies in the market place, and consumer awareness levels.” However, with India and Brazil initiating the implementation of several safety-standards in recent months, they are likely to match global standards at least for crash testing. Crash prevention, on the other hands, continues to be a long term goal.

It was a big blow to India, when GNCAP conducted tests on some of its most popular entry-level variants (Maruti Suzuki Alto 800, Hyundai i10, Ford Figo, Volkswagen Polo, Tata Nano, Maruti Swift, and Datsun Go) and awarded zero-star adult-protection rating to all of them. This, in addition to having the highest number of road fatalities globally, instigated the government to commit to introducing regulations for mandatory safety standards. As per new regulations, by October 2017, all new cars will be required to pass frontal and side crash tests, whereas the deadline for new versions of existing models would be extended to October 2019. To pass this test, cars will need to have reasonable body shell strength and be equipped with airbags and other standard safety features. For conducting the test, the government plans to develop two crash test facilities, which are expected to come online in 2015/2016. In addition, the authorities plan to launch its own NCAP. India is also creating a vehicle recall policy, which will encompass testing for manufacturing defects. However, this legislation is yet to be passed.

As safety standards gain priority in India, it is a cause of concern for car manufacturers in the country, which have for long focused on only pricing and fuel efficiency in the market. From the manufacturing infrastructure and technology front, OEMs may not require many changes to adapt to these proposed changes in safety standards. This is primarily because most car models do offer basic safety features (such as airbags and ABS) in their higher variants and they also use India as major export hub for their cars destined for Europe and the US. However, this will definitely erode a fraction of the bottom-line for car manufacturers as India is an extremely price sensitive market. Moreover, a large portion of the audience in the country is not very mature and still does not put a high value to the safety factor, thereby restricting the price tag carmakers can attach for these features.

“The first reaction of the OEMs is that they are not very happy, since it will make their cars more expensive. But in the longer term, they will adapt to it as they have done in other countries. People will become aware and ask for safety. OEMs focus will be to meet the safety standards at affordable prices. For example, child support restraints are not made in India and are imported. OEMs can ask the government for concessions on these imports.” says Rohit Baluja, Director, Institute of Road Traffic Education, India.

Several leading OEMs have criticized the government’s call to boost safety standards in India. An engineer working with a leading car manufacturer in India stated, “At this moment, there are no talks about any changes being introduced to the body. These matters are handled at a very strategic level. Nothing has been discussed on this aspect as of now. In India, safety can’t really become a USP right now. Price is and will continue to remain the main selling point. If we talk about metro cities, the demand for frontal airbags has increased. So yes safety has become more important. But this is the case in metro cities only.”

It also seems that the government has succumbed to pressure from the OEMs and has softened down several of the safety standards. As per the regulations, India will be following China’s footsteps and introducing crash testing at a speed of 56km/hour instead of 64km/hour, which is followed globally (while China started testing at 56km/hour in 2006, it also increased its speed from 56km/hour to 64km/hour in 2011). Moreover, the authorities plan to conduct only ‘head impact’ tests for Indian pedestrians against the ‘head and leg impact’ norms adopted by Euro NCAP. It has further slashed the requirement for the use of child dummies for some side impact tests, which is a global standard. Decisions regarding mandatory safety belt alarm, child alert alarm, pre-tensioners, and airbags are also pending.

While several leading OEMs, have not been very supportive of the Indian government’s decision of mandatory crash tests, the ones which have preemptively incorporated these features in their cars have been the winners. Toyota, which made airbags mandatory in all its models in October 2014 in India, has seen sales surge by 34% between October 2014 and April 2015. Volkswagen, which also made airbags a standard feature in all its Polo hatchbacks, has seen the sales of its entry-level variant rise, since the decision was made in February 2014. Post its poor performance in the crash test held by GNAP, Nissan Motors has also worked on strengthening the body shell of its Datsun Go by using higher-grade steel (having a tensile level of 520 mega pascal compared with the earlier 320 mega pascal) and adding side beams on both sides to enhance the strength and rigidity of the vehicles.

Thus the way forward definitely begins with OEMs embracing the introduced changes. It is not incorrect to say that the consumers continue to be price sensitive, but that is because they are not well informed about safety. Thus, to see an actual shift towards safety, both the government and car manufacturers have to work together in changing the mindset of the consumer and promoting vehicle safety as an equally important factor in purchase decisions.

“It’s a shared responsibility of government and manufacturers to inform the consumers and move the market forward. Our project of testing cars has also helped build awareness and get media attention. We will do more testing end this year and get results beginning next year. The combination of government action on regulation, the response of individual manufacturers and the work done by NCAP will improve the whole situation in India.” says Mr. Ward of GNCAP

Brazil has a similar story, where the cheapest models of few most selling cars, such as Volkswagen Gol Trend, Fiat Palio, Chevrolet Celta, Ford KA, Peugeot 207, and Fiat Novo Uno, received only 1 star when crash tested by Latin-NCAP. Moreover, Chinese car, Geely was awarded zero stars in a similar test. This was underpinned by the absence of basic safety features such as airbags, lack of body reinforcements, lower-quality steel, weaker weld spots to support the vehicles, and outdated designs of car platforms. As a result of this, the Brazilian government mandated air bags and anti brake locking systems on all cars in 2014. Like India, this regulation faced much criticism from automakers and was at the verge of being postponed as it leads to an increase in the prices of basic models and also results in a layover of several employees in the case of few models being discontinued. However, the government pushed ahead with the regulations as decided, but offered lower import tariffs for key safety equipment to subdue the expected price rise.

In addition, the government is considering making electronic stability control a standard in all cars; however, it is still in the future. Moreover, the government plans to launch a US$50 million independent crash test center by 2017. While the center is expected to run as a government body, OEMs may provide part of the funding for its operation and even use the center; this raises concerns regarding the autonomous working of the lab. Moreover, since the regulations lack a ‘conformity of production’ clause (which requires automobile safety performance to be spot checked for the entire time the model is produced), the car models are only required to meet the crash test requirements once. Companies can also send a car of their choosing. These factors further may compromise on the credibility of the testing.

The Case of China

Unlike India and Brazil, the upgradations in China’s vehicle safety standards are stemmed from the country’s CNAP (China’s New Car Assessment Programme) initiatives. While the Chinese government has only mandated the use of seat belts and frontal airbags, the number of airbags in vehicles in China is reaching the same level as in Europe and the US. This is primarily due to the aggressive promotion of CNCAP’s safety assessment by the Chinese government, which has encouraged the country’s population to value car safety as an important aspect. “We undertake a lot of promotional initiatives such as advertisement and highway hoardings to promote safety features among consumers. This has really helped in making consumers aware regarding the importance of safety.” says Mr. Guo from CNAP. Furthermore, CNCAP has upgraded its test protocols to match its European counterpart and is expected to be at par with their standards by 2018. CNCAP has also started focusing on accident research and plans to include a test for pedestrian protection in future vehicles. It has also been considering including test scenarios for automatic emergency braking systems that will further help mitigate pedestrian collisions.

Even in case of China, the pricing of the vehicles increased with the addition of safety features but the entire price is not passed down to the consumers, especially in the base-level cars.

However, one of the key reasons why China has upped its vehicle safety standards is to build a good reputation for exports. As Chinese cars gain traction due to competitive pricing and design, they suffer a poor reputation when it comes to quality. Thus, they have consciously increased focus on safety norms to meet global standards. While they are on the right lines, they still have a long way to go in achieving global standards with regards to safety.

Safety-Standard Levels across the Major Emerging Automotive Markets

Safety-Standard Levels across the Major Emerging Automotive Markets

Thus, as safety-standards improve across emerging markets, the onus now lies on OEMs to adapt to these changes. While this will definitely impact the bottom line of the companies, it also presents an opportunity for the carmakers to gain a strong market foothold by offering these safety-features at a minimal pricing. Moreover, although these changes are happening primarily in India and Brazil right now, companies must be prepared for similar regulations to come in Mexico and other Latin American countries in the coming years.

Apart from crash testing standards, there are a lot of talks going on regarding crash prevention technology, the most important being electronic stability control (ESC). While, this has already become a standard in several countries, such as Australia, Canada, EU, Israel, Japan, South Korea, the Russian Federation, Turkey, and the USA, the Global NCAP is working towards making ESC a mandate in all cars manufactured by 2020. “Our overall priority is to ensure that all passenger cars, irrespective of where they are produced, must have the appropriate minimum crash test standards and the most important crash prevention technology (i.e. ESC) by 2020. To achieve this, the most important countries to act are China, India, and Brazil.” states Mr. Ward. With crash test standards becoming a ‘standard’ also among key emerging markets, the introduction of ESC also does not seem far from reality. In fact, Brazil and China have already begun considering making it mandatory. The OEMs that anticipate this and work towards it will have an advantage.

While it has taken several key emerging and frontier automotive markets time to realise the importance of vehicle safety, both for drivers and passengers, and for other people on roads, it is a welcome change with governments introducing several policy measures in recent months to bring about this change. The implementation of regulations and the variation in standards that exists across these markets is a cause of concern, and aspects that OEMs might use to their advantage by bypassing certain global standards. It is important that consumers also make it a point to make safety a priority when purchasing a vehicle, which would force OEMs to ensure that global standards are also followed in emerging and frontier markets. Brazil, China, India must lead the way, and demonstrate that it is possible to make safety a standard, so that OEMs follow this as a standard operating procedure across other emerging and frontier markets.

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