Hot Skills Giving Auto Component Manufacturing Sector A Run For Money

Neelesh Gupta Rebecca D’Souza Jun 28, 2023

The automobile industry in India has been speeding towards new horizons, after hitting some rough spots at the turn of 2020, caused by the pandemic. This mirrors India being a bright spot in a world that’s reeling from economic uncertainty, even as it tries to recover from the pandemic. Though the auto industry’s volumes have not yet reached pre-pandemic levels for all segments, the year-on-year (YoY) volume growth is showing some green shoots. Organisational success being closely correlated with the rate of launch of new products, e-mobility, or the rush for feature-rich annual facelifts is changing the fundamental fabric of this brick-and-mortar industry.

Considering these rapid growth prospects and newly introduced dynamism, there’s a high demand for new-age talent to be invited into the fold, due to the huge demand for technology talent in the EV value chain.

When Technology and Auto Collide

Introducing tech into the talent mix has become especially important for the auto component manufacturing sector (also known as the auto ancillary industry), to drive the next wave of growth. The sector requires hardcore tech skillsets, like artificial intelligence (AI), machine learning (ML), blockchain, additive manufacturing, virtual reality (VR), and augmented reality (AR), and there is a huge dearth of these in the current auto landscape.

As the momentum of the EV wave accelerates, talent profiles like technologists and data scientists, which were usually synonymous with the Tech and IT sector, are being brought on board to revolutionise the transition to a more connected vehicular experience. This hot pursuit of talent was at its peak in 2022 and is characterised by the talent statistics highlighted below:

♦ There were 18,000 open positions for tech roles in the auto segment during the October to December 2022 period.

♦ 20,000 expected growth in jobs by Q4 of FY23. However, with the tech slowdown, talent availability is likely to increase.

♦ There’s a 15-18 per cent further spike in hiring expected by FY24, specifically for niche roles.

♦ With the dearth of internal skills and capabilities, auto companies are hiring from technology companies, consulting firms, and start-ups.

♦ An average pay hike of 30-40 per cent on the last drawn salary is being offered. This was higher in 2022 (>50 per cent for certain skills/roles) when attrition had peaked in the country, as well as for the industry.

♦ More than half (56 per cent) of new hires in 2022-23 are early career professionals (0-5 years of experience).

♦ Hiring of people trained in information and communication technology (ICT), data science, and data engineering in the automotive industry has increased by 45 per cent, as compared with pre-pandemic levels in 2019.

Understand the talent market trends; boost motivation and get great mileage.

With cautious optimism, organisations are looking at innovative ways of utilising the budget at hand. Variable pay, role-based organisation, job architecture redesign, and capability architecture redesign are some enterprise-wide changes that are being adopted by leading organisations.

Additionally:

♦ The auto component sector is projecting a 10.1 per cent increment for 2023, at par with India Inc. but 30 bps lower than the automotive OEM industry.

♦ Top performers can continue to expect 1.6x-1.9x the increments given to employees meeting expectations.

♦ Introduction of skill-based pay (~20-25 per cent of fixed pay) to achieve market competitiveness.

♦ The bell curve (for companies that use performance ratings) has shifted slightly towards the right (more high performers), as compared to the previous year.

Conscious efforts are being made to achieve a greater balance in gender diversity at the workplace (DEI), but only by the top brands in this sector. Only 41 per cent of organisations in this sector in India have adopted DEI policies, while the rest are still in the process of formulating them.

♦ There is a wide gender pay disparity in the sector and this gap is being consciously bridged by a few well recognised names in this industry.

♦ This needs to be more widespread to attract the right talent.

An unattractive bulge: Headcount and cost pyramid in the automotive component industry

♦ Most companies, very similar to the overall manufacturing companies in India, depict a bulge in the middle and are not a typical A-shaped pyramid. This can largely be attributed to tenure-based promotions at the start, which gradually slow down as we go up the ladder.

♦ Similarly, cost pyramids are also bulging at the centre with almost 39 per cent of the total cost being attributed to three grades: Experienced individual contributors (EIC), and people managers (PM1 and PM2).

♦ Such bulges in the middle also lead to wider pay ranges in mid-management levels.

Revving for the future

In a nutshell, the industry is sharpening its approach to ensure they captivate the right talent to ride the current transformation wave.

Key highlights:

♦ Companies this year are increasing salary budgets to incorporate the evolving talent scenario and rising attrition levels. While the salary increase projections are around 10 per cent for the sector, we are likely to see two kinds of auto components organisations within the industry; one that has ambitious growth plans and is aggressive, and the other which is bearish.

♦ In addition to the salary increase, this year is also likely to see correction budgets being allocated to retain and ring fence key/critical talent.

♦ Increased focus on driving a performance-based culture and increasing the variable pay component as the incentive structure (pay at risk) is a tool to be further leveraged, across levels, to create a performance-driven culture and reduce the burden of the fixed costs every year.

♦ At the very last, but not the least, there are conscious efforts to balance internal and external parity, and drive more role and grade correlation, since there could be a mismatch between grade worth and role worth in most companies. Roles of similar worth to the organisation are not at the same grade, which will result in issues of internal parity and increased cost over a long term. There is a need to formally evaluate roles for their worth and fit them into an ideal grade structure that resonates the role’s worth.

There’s much promise on this path to redefining the norm when it comes to auto manufacturing – all eyes on the road.