How German companies have transformed their business during the pandemic in India?

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LI Ping HR Director / BHS Corrugated Machinery(Shanghai) Co.Ltd

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Falk Tzchichholz Sales Manager Export / Kjellberg Vertrieb GmbH

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Rajesh Nath Managing Director / VDMA India Services Pvt Ltd German Engineering Association

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Bjoern Becker Export Sales / Jumo GmbH & Co KG

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Rene Pluss CFO, Member of the Board / Regent Beleuchtungskorper AG

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    How German companies have transformed their business during the pandemic in India?

    Mr Klaus Maier, Partner M+V Altios interviewed Mr Rajesh Nath, Managing Director of the Association of German Mechanical and Plant Engineering (VDMA), the largest association in the world. VDMA acts as a bridgehead between Indian industrial houses and their German companies. They act as the first point of contact for people who are looking to enter India. It is the largest industrial association with almost 600 members currently active in India.

    Mr Nath discussed the important learnings from the foreign companies having their offices in India during the time of pandemic were:

    1. Empathy for the workforce: German companies in India have taken a lot of initiatives towards handling their workforce. No member companies have laid off people. Also, companies are organising mass vaccination camps not just for the employees but for the families of the employees. The list of companies that are doing this includes Tata Consultancy Services, India’s largest employer in the IT sector (it employs around 400,000 people), M&M, Ashok Leyland, Sundaram Clayton JSW Group, Biocon, Vedanta Group, the Indian unit of tire and rubber company Bridgestone etc.

    2. Increasing sourcing activities out of India:Β India faced huge supply chain disruption in 2020. After China India is the most attractive market for German companies. Not only this, but many companies have established their Centre of Excellence manufacturing facility in India. They manufacture small parts of the final product and source it to different countries for further assembling.

    3. Looking out for automation: Labour shortage and slack demand have forced companies to digitize some of their operations. Heavy engineering companies are looking towards Industry 4.0 and digitalizing some of their operations.

    Adjustment of the sales strategy of companies during and after the pandemic:

    E-commerce for machine parts or machines: Because of the pandemic e-commerce will be a way forward for certain engineering products. Additionally, increase in e-commerce to buy spare parts and small components from sourcing from tier 2 and tier 3 cities.

    India is a cost-sensitive market. General awareness for improvement in quality and production is happening. On the contrary, India is not a mass-market production, companies can make customized products suiting the requirement of European companies and their market.

    Will there be a third wave in India?

    The only way to reduce the impact of the third wave is by vaccinating the workforce. Thus, India has ramped up its vaccination drive. To vaccinate 75% of the population by end of December 2021, we need 8 million vaccination per day.

    Way Forward:

    Make in India 2.0 will help develop the manufacturing sector. The onset of schemes like Aatmanirbhar Bharat and Production Linked Incentive Scheme will give a boost to the sector.

    India’s role in the global supply chain is quite limited. For that, they have to import certain raw materials to make a complete exportable product and German companies have cutting edge technology that will fit perfectly into the Indo-German partnership.

    We will see an increase in the domestic market and exports from India. Estimated growth in India in 2021 is at 8-10% and in 2022 10-12%. Additionally, we will see foreign companies expanding their presence in India.

    With a majority of employees have got their first Covid-19 jabs, companies are looking at vaccination as key to gradually returning to a routine as the second wave of the pandemic tapers off.

    While many companies continue experimenting with the WFH model, significant part of the workforce will eventually return to an office. Accordingly to one with a different environment, to comply with the new social distancing norms. From 80 sq. ft. of space per employee earlier, the requirement has now increased to 120 sq. ft.-130 sq. ft.

    Moreover, Office occupancy rates will increase in September which will depend on the speed of the vaccination drive and the Covid-19 virus not mutating further.

    There is a downfall of 6%Β  in the movement of goods during the lockdown period in India. An exception to this is the Month of April 2020, which was a dry month as there was a complete nationwide lockdown announced. In the coming quarter of 2021, a three times increase in movement of goods is expected as compared to the last quarter of 2021. Major growth is expected in the automobiles industry especially commercial vehicles, spare parts & Aftersales. Other promising sectors are the Agriculture sector, Food processing sector, Electronics and Electricals and Automation sector.

    M+VΒ offers support to foreign companies looking to enter the Indian market or expand their existing business in India.

    We would be delighted to engage in a one-on-one conversation and discuss some cases where we have supported our clients which might help you to deal with your organizational issue.

    If you want to know more about the session you can watch the interview of Rajesh Nath, moderated by Mr Klaus Maier.