E-rickshaw industry in India is highly fragmented with the presence of more than 300 manufacturers, who jockey to sell their e-rickshaws. There is no dominant brand established yet.
Porter’s Five Forces Analysis of E-Rickshaw Industry
E-rickshaw manufacturers like manufacturers in other industries follow the traditional value chain business model to compete with each other. Traditional value chain is built on a linear series of activities — supplier materials (inputs) are transformed through a series of activities into a final product, which is then delivered through distribution channels to customers who sit at the other end of the value chain.
In traditional value chain, firms seek to control resources, optimize internal efficiencies, and enhance customer lifetime value in order to gain competitive advantage.
Resource Control – In resource-based view of competition, firms gain advantage by controlling scarce and valuable—ideally unmatched—assets, both tangible and intangible. But in e-rickshaw manufacturing, valuable assets such as the motor, the controller, and the battery are not produced by the OEMs and hence not controlled by them; while the other physical assets have become commodities, and are not scarce. Intangible assets such as intellectual properties across engineering, design, and manufacturing are yet to be created and brand recognition is yet to be established by any e-rickshaw manufacturer.
Internal Efficiencies – Firms organize their internal labor and resources to create value by optimizing the linear series of activities, from materials sourcing and manufacturing to sales and service. E-rickshaw manufacturers with prior experience in automobile manufacturing and other larger manufacturers possess the knowledge, expertise, and organizational structures to generate significant internal efficiencies. For example, large volume sourcing results in discounts, economies of scale leading to unit cost reduction, and good sales and marketing teams or large number of dealers give them more consumer reach. However, their high cost structure to create and deliver the products and services outweighs the benefits realized from internal efficiencies.
Customer Lifetime Value – Firms always seek to maximize the customer lifetime value (CLV). The approach by companies to maximize CLV is creating and delivering products and services meeting the customer needs and delighting them. Beyond this, the performance of the products after they are sold to customers and usage behaviours are not considered. It is so because manufacturers lack the tools and technologies to gather information about the post sale activities. Hence, manufacturers are unable to achieve the desired CLV from their products and services. The same applies to e-rickshaw manufacturers.
With the linkages between the linear series of activities more or less same for all e-rickshaw manufacturers, they pursue similar strategies to compete. The strategies revolve around two dimensions, price and performance. An enhancement in some dimensions(s) of an e-rickshaw performance leads to an incremental increase in price of the vehicle, but without giving customers a substantial advantage.
Given the existing inbuilt challenges of the e-rickshaw industry value chain, technology can bring about a change in the way e-rickshaw manufacturing business is conducted.
Technology changes all the time. Most of the technological changes are gradual; such as cars got better and better over time. However, sometimes technologies bring about change in a dramatic way. For example, smart phones dramatically changed the way we communicate and collaborate.
Similarly, digital technologies and tools such as internet of things (IoT) devices also known as digital sensors, cloud computing, and data analytics can change the way e-rickshaw manufacturers design and produce e-rickshaws, as well as create new types of value for customers and consumers in a magnitude that was never imagined earlier.
IoT devices enable companies to track products in real-time after they are sold, store the IoT generated data in the cloud, process that data using analytics to gain insights, and share it with relevant stakeholders both within the company and with the customers. The shared data can be accessed through digital devices.
Deployment of IoT devices on the e-rickshaws will provide contextual information that was previously unavailable to e-rickshaw manufacturers such as 1) Where the products are being used, 2) How they are being used, and 3) Which customers are using them at any given time. Such information will enable e-rickshaw manufacturers to shift the focus of their customer relationship from a one-time selling transaction to providing continual value, thereby maximizing CLV.
Continual value creation for customers through deployment of IoT devices in e-rickshaws
Predictive Maintenance of the E-rickshaw – Using predictive analytics, manufacturers can anticipate problems before the actual breakdown or problem occurrence in the smart, connected e-rickshaws and take necessary actions, thereby enhancing the life of the vehicles.
At present, fixing breakdowns takes a long time because the road side repair shops take time to locate and analyze the fault and fix it, during that time the e-rickshaw operators can not operate the vehicles and thereby lose revenue.
Performance Optimization of the E-Rickshaw – Real-time information from different sensors on an e-rickshaw will reveal performance of the vehicle when in use, which can be correlated with the vehicle’s expected performance. The analysis will also reveal how driver’s driving behaviour, road conditions, and vehicle operating load affect the performance of the vehicle.
Integrating Vehicle Information with Complimentary Products – Integrating the Li-ion battery performance information with that of the vehicle when in use will not only optimize the performance of the vehicle in accordance with the battery, but will also increase the battery performance and life.
Production ecosystem of e-rickshaw manufacturers can also be transformed by leveraging the IoT sensor data
Data analytics draws various inferences from the IoT sensor data fed from e-rickshaws. The software platform then feeds these inferences back into the e-rickshaws to repeat the cycle. With repeated cycles, the physical asset itself becomes better at a faster time at a lower cost, i.e., economies of product versioning will be achieved. E-rickshaws’ motors and controllers can be optimized according to Indian road conditions, driver usage behaviours, and vehicle payloads to design and produce reliable vehicles with longer vehicle lives. This will help manufacturers to lower vehicle design and development costs besides creating significant intangible asset in engineering.
Smart, connected e-rickshaws will make people, materials, energy, and plant and equipment far more productive. Real-time data flowing to and from the vehicles will allow linear activities across the value chain to be streamlined leading to optimization of internal efficiencies further with lower control and coordination costs. Coordination across product design, suppliers, assembly, cloud operation, service improvement, and customer engagement is continuous and never ends, even after the sale, leading to more and deeper collaboration and integration among different linkages in the value chain.
Connected products also improve service and efficiency of the after-sales service teams by enabling a fundamental shift from reactive service to preventive, proactive, and even remote service.
Cost implications of technology deployment
Though affordable deployment costs are required for faster adoption of digital technologies in India, however, with less volume initially, the costs will be on the higher side. As volumes increase, the price of sensors and hardware along with deployment costs will reduce. According to a 2019 report “Future of IoT” by EY and FICCI, average cost of IoT sensors globally has decreased from USD 1.30/unit in 2004 to USD 0.38/unit in 2019.
|Building Blocks of IoT|
|Chips/Modules||Embedded chipsets, IoT modules, transponders, etc.|
|Devices/equipment||Smart appliances such as smart sensors, IoT gateways, etc.|
|Connectivity||Networking equipment and devices for facilitating end-to-end connectivity of IoT devices installed in the network|
|Platform||Different software platforms for aggregating, processing, securing, storing, analyzing, visualizing, controlling, monitoring and making sense out of IoT devices/data|
|Solution and Applications||Software and domain specific applications and services that leverage IoT data|
|Integration, Operations and Services||System integration services to integrate the end-to-end ecosystem, operationalizing the services and providing managed or other services to the clients|
Most companies in any industry adopt a cautious approach when dealing with new technologies, and adapt incrementally and somewhat passively as events associated with new technologies unfold. Companies wait and watch in which direction a new technology will evolve, how it will be adopted, and whether it will become scalable.
Digital technologies have the potential to bring about a change in how business is conducted by e-rickshaw manufacturers in an order of magnitude much larger than what business is accustomed to. Such big change will break the equilibrium prevalent in e-rickshaw manufacturing and make things happen in the business that did not happen before. Manufacturers to first adopt and deploy digital technologies will have the first mover advantage to pull away from competition by disrupting the incremental performance/price differentiation, thereby establishing a brand in this highly fragmented market and gain market share.
Anindya Roy, Director – Sales and Marketing, Emobi (Bengaluru)
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