Automakers turn to frugal engineering

Domestic automakers may increase their focus on frugal engineering to sustain volume growth and ensure stable profit margins, owing to slowdown in sales growth and rising costs.  

Th use of common parts and platforms across various models and companies, lowering vehicle weight, and increasing engine efficieency will help automakers counter challenges such as increasing raw material prices, higher interest rates and rising fuel costs.

After having recorded strong double-digit volume growth over the last two years, the auto and auto components industry may face strong headwinds in 2011-12 leading to a moderation in growth, ICRA said.

"While the industry has made big strides over the last decade towards improving internal efficiency and, thereby, partially offsetting input cost pressures, going forward efficiency gains alone may be insufficient to combat cost headwinds."

This may require industry players to incur greater investments. The longer term benefits and resultant structural changes could alter the automotive design paradigm, change the cost drivers and provide greater value to customers.