How does zero based costing for the automotive industry work for ICE and EVs?
Vaibhav Kumar: There are three aspects to controlling this cost. First is understanding the direct material cost of the bought-out subsystems in order to be able to pay a fair price for it. This is where we see the largest gap between what should happen and what is happening. We have seen customers paying 2.5x to 25x of direct material cost. Second is to understand the cost drivers and the best practices used by competitors, both locally and globally. Third, is to identify vendors for localisation of specific parts in India and knowing the cost of that part if produced in India for a specific volume.
We work with our customers in these areas using our own xcPEP software platform which has a powerful zero based costing engine. We also have perhaps the most elaborate and accurate supplier database in the country to support such activities.
There is a lot of downward movement in cell prices due to internal competition between Chinese companies. This is likely to have a significant positive impact as well.
EVs pose a unique set of challenges. How are you able to help in these areas?
Pratik Kumar Shukla: These are two areas in which we have worked extensively in the last four years. Our ability to map detailed PCB data, identify the components on it and conduct a multi-scenario zero based costing in high detail provides our customers with insights on how to reduce their cost both from an engineering as well as procurement perspective. There always was and still is a high level of ambiguity on how electronic components, especially PCBs of all sorts are priced. Our work brings transparency here to a fair seller-buyer conversation.
With time, in house design capabilities of many OEMs have improved a lot when it comes to BMS. They will eventually be able to bring the cost down with their own IP and outsourced manufacturing.
Are you doing work with charging infra?
Pratik Kumar Shukla: With EV charging systems, the vertical integration is not mature enough and is moving relatively slowly. We work with component suppliers in benchmarking and multi scenario zero based costing of these products as inputs to their engineering and business decisions.
EV batteries come with various chemistries. Which are the areas that can be optimised?
Pratik Kumar Shukla: Cell chemistry customisation is something that is not feasible for most OEMs in the country. Our work in this area is also limited. Once, Indian players come up with large scale efficient manufacturing of proven chemistries, this area of study will become more relevant.
How easy or difficult is it to work in an evolving landscape?
Vaibhav Kumar: Since EVs have been around for a much smaller duration than ICE vehicles, best practices are still evolving. We work in benchmarking of these practices to accelerate the learning absorption and its implementation. Scope of refinement in these areas is quite high from a cost perspective.
For a battery charging set-up, what would you do to improve it, given the fact that they have been designed by top notch experts in the first place?
Vaibhav Kumar: A few generations of design and refinement is required for any new category or products for best practices to converge. Charging stations in today’s context are still in their early phase. Our benchmarking and zero based costing helps our customers with knowing the decisions taken by other manufacturers and their relative cost impact when compared to our customer’s products. These studies usually generate a wealth of insights and we have seen cross functional participation in these workshops where designers, procurement and cost engineering teams have actively participated.