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Diego Graffi

Managing Director & CEO

Piaggio Vehicles

3 Ratings

AUTOMOTIVE INDUSTRY The more reliable alternatives you have, the more you are ensured of manufacturing continuity

Aug 31, 2021

…says Diego Graffi, Managing Director & CEO, Piaggio Vehicles – a 100% owned subsidiary of the Piaggio Group and a manufacturer of commercial vehicles & two-wheelers – in this tête-à-tête with Juili Eklahare. He unfolds how the industry requires a new clarity of rules, how the company is investing in digital technologies specifically in its sales & marketing department and how all the people involved in the automotive sector need to take advantage of the government incentives. Excerpts…

2020 was clearly a tough year for everyone, including Piaggio. Can you highlight the lessons learnt from the last year and the corrective measures taken that made 2021 a better year for your business?

In terms of lessons learnt, I would say that we have definitely had to put in a lot of efforts to maintain a certain level of production, mainly for two-wheelers. In fact, one of the biggest actions that we have taken is to initiate a stronger programme of localisation of parts that we were previously buying from outside of India, especially China. We also had to pay a lot of attention to cashflow management. In addition to that, we have also streamlined a programme for cost reduction, which the entire automotive industry has been doing, eliminating that that was not absolutely necessary for supporting the business growth. Besides this, we have initiated training & coaching programmes for the management line of our company. Our management line has gone through a certification of design thinking, and it will help us to improve our operational efficiency.

What kind of digital technologies & solutions helped your company to streamline the manufacturing and other operations?

We have been investing in digital technologies for sure – not so much in our manufacturing processes as much as in our sales & marketing. We have introduced a lot of tools to our dealers, where they all have invested in digital, and we have initiated our e-commerce web-portal for sales of line for our vehicles – both commercial vehicles & two-wheelers.

Instead of digitalisation, we have initiated a programme for automation for our manufacturing processes like welding, etc, to improve the efficiency & quality of the final product.

How are you working on reducing your dependency on a single vendor and restrategising your procurement processes with more alternatives?

For many important components, like engine manufacturing, we traditionally had a single source. And for some important parts, due to the lack of availability of certain technologies in India, we have to rely on overseas sources, mainly coming from China. For example, for aluminium, casting wheels, crankshafts & other engine components, we were buying completely from China. The strategy that we have been putting in place, even before COVID-19 came along, was to go completely local as much as possible. So, we have initiated a strong programme for scouting in India. The level of localisation for parts we have – both four-wheelers & two-wheelers – is in the range of 90-95%, depending on the vehicle platform. The plan is to go beyond 98% of full localisation of parts by the year end. We have also initiated a programme for insourcing of some important parts. The strategy that we have decided on is localisation in India and at the same time, avoiding dependence on a single vendor – one of the lessons that we have taken out of COVID-19 is that the more reliable alternatives you have, the more you are ensured of manufacturing continuity.

What do you think of the scrappage policy by the government of India? Besides boosting automobile sales, do you think it will help decrease the raw material cost?

The scrappage policy will definitely help remove highly polluting & unsafe vehicles from the roads of India. The availability of raw materials will definitely increase pan-India and at a more affordable cost, depending on the capacity of the creation of the network for a scrappage centre.

What is your 2021 plan for EVs? Where do you see the circular car economy path heading?

Our strategy is to be as much powertrain-agnostic in our entire two-wheeler portfolio as possible. Going forward, I feel that EVs are definitely a potential revolution in the two-wheeler space in India. As for the circular economy, all the people involved in the automotive sector need to take advantage of the incentives, programmes and efforts given by the government, both at the local and central level, in order to improve efficiency & proficiency. The efforts coming in the form of incentives from the government, like FAME II and PLI schemes, are expected to be a big support to the automotive segment. All these factors will affect not only the revival of demand but also provide efficiency to final consumers.

As we are slowly getting towards exiting the pandemic, what is your outlook on the recovery and the growth momentum in the automobile industry in the coming months?

I think, going forward, we require a clarity of rules and a clarity of way in which business can restart pan-India. The increase of vaccination programmes will not help eliminate the virus but will help reduce its consequences. There is still a hidden fear of a third wave and its consequences in terms of another lockdown at all levels, channel network, banks, NBFC, customers and big firms. At the moment, the assumption that we can recover the business is good.

Can you tell us about the investment plans and new launches from Piaggio Vehicles in India?

In the last three years, we have had the highest amount of money invested ever seen by this company in the last 20 years, both in two-wheeler and CV portfolio. This investment has been quite relevant, not only in the transition to BSVI but also from the technical point of view. We had a clear plan to extend our product portfolio both in the two- and three-wheeler space. I would say that our product portfolio in both the segments is quite complete, is BS-VI compliant and also has a good availability of good EV solutions. I don’t think 2021-22 will call the need to invest a lot of money in terms of new products or manufacturing capacity. We will take advantage of the investments we have already made. As of now, we need to see the recovery in demand in both businesses going forward to proceed with the next phase of investment – the next phase of expansion will be in the later phase of 2022-23.

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