INTERVIEW: Wilfried Aulbur, managing partner, Roland Berger Strategy Consultants India

Wilfried Aulbur, the managing partner of Roland Berger Strategy Consultants in India and the former chief of Mercedes-Benz India, has a swanky address now in South Mumbai. I had to walk through two layers of security to meet him in a building that houses ‘luxury residences’ with an integrated business centre. Aulbur is busy setting up the Indian team of Roland Berger, the fourth largest consultancy firm in the world.

His areas of expertise, according to Roland Berger Strategy Consultants’ website, not surprisingly, are car and commercial vehicle manufacturing, product development and suppliers.

Since that’s our common interest, I start off by asking what would be the key strategy to tap the opportunity in the Indian automotive market, especially for a newcomer.

“If you want to take the opportunity, then you basically have only one choice — that is to pay for it. I don’t think there is an entry in India which doesn’t require a certain amount of investment,” says Aulbur. His view stands vindicated by the recent announcement by Peugeot to delay its India plan in order to stabilise its business in Europe. It has to put its house in order and preserve enough cash to invest in India.

Faster growth

While Peugeot’s entry may get delayed due to tough financial conditions within the company and in its home country, Aulbur says India will have to put a firm strategy to ensure a steady flow of investments.

“I personally feel that India has the potential to grow faster than China due to two facts — India for one, at this particular point of time, has a lower base and as a consequence will be able to narrow the gap. Its aspirations will be to have at least nine percent GDP growth, and that should be our objective. We should not be satisfied with the seven percent growth. Secondly, there is a need to really get some reforms on the table, some pro-investment policies, and we need to have more transparency in government dealings,” says Aulbur. OEMs and suppliers need not be worried about the slowdown during this financial year, according to Aulbur. Those having a presence in both India and China can expect better news here in the coming years. “In China we have basically investment-led generation of wealth and over-investment in infrastructure and, as that comes to an end, we will see a slowdown in Chinese growth rates,” adds Aulbur.

A recent report by Roland Berger Strategy Consultants says it is time for foreign firms to re-evaluate their manufacturing footprint strategy in China as its low-cost manufacturing cycle is coming to an end. Given that around half of India’s population is 25 years old and the country is poised to be the most populated one by 2025, aspiration levels are bound to grow here. The manufacturing industry, which includes automobiles, has to grow at a healthy rate.

“There will be a certain amount of restlessness among a very significant part of the population if we cannot train, educate and employ them gainfully. For this to happen, we need growth rates that are 8-9 percent. Manufacturing creates a lot of jobs along the value chain for different types of people and that is where it plays a significant role,” remarks Aulbur.

While the recent 2G telecom scam doesn’t have a direct bearing on the automotive industry, it may dampen the spirit of foreign investors, feels Aulbur. “Recently we had the Supreme Court ruling. That is definitely something that is weighing on the investor’s mind, and rightly so. Because what you do is take the shareholder’s money, put it into the market in order to generate significant returns or to ensure that the competitive position doesn’t erode. In that sense, yes there is a certain concern and yes there is a certain apprehension,” he says.

Aulbur, who spent eight years of his total stint with Daimler in India, is a strong believer in the India story. He also points out the growing positive trends in the country. “I think the positive thing is that there is recognition of the middle class that they matter and there’s also recognition that the tax money that they pay could be put to better use. That’s very positive. There are also positive outcomes from the Anna Hazare movement. While that is being put in place, we need to see that the framework for business remains intact,” says Aulbur. In his current organisation, Aulbur gets to flex his entrepreneurial nature. In Roland Berger Strategy Consultants, all partners have a stake in the firm’s equity. He made the switch from an automobile industry CEO to a global ‘strategic consultant’ at the beginning of last month. His working hours more or less remain the same, perhaps a tad longer but the experience will be a very different one.

After two cups of cappuccino with Aulbur, I take my leave as he goes about setting up Roland Berger's India operations.

IN CONVERSATION WITH WILFRIED AULBUR

Do you think it’s already too late or too difficult in India for the couple for OEMs who are yet to enter this market? What kind of strategies should they use?

No. I think there are examples of how you can do that successfully. We have players who have a significant share in the market and also players who have significant visibility. What it means that you have to be willing to invest in the market at this particular point in time. That means that you put the right product on the road that meets Indian requirements.

You also have to back it up with good processes and good structures regarding the kind of organisation you set up in the country and a significant marketing investment. So yes it is possible, but it is not cheap and requires real commitment to the market.

So does it mean that perhaps if a global OEM wants to enter the market in 2012, instead of having done so in 2002, should it brace up to incur losses for a longer period now?

Your business case needs to factor in definitely the customer behaviour that you see in India in terms of value for money which will potentially have an impact on your localisation strategy and also on the contribution margin that you can expect per vehicle. You will have to factor in significant marketing investments and also significant investments in building a network in the country to make sure that you have a distribution reach, service reach and a sales reach that is adequate to sustain a fair volume.

How does a company do that, if it’s losing volumes in its home country but still has a vision of going global and wants to tap a market like India?

If you want to take the opportunity, then you basically have only one choice. That is, you have to pay for it. I don’t think at this point there is an entry in India which doesn’t require a certain amount of investment, and a long-term vision of this market. As you said, nearly everyone is here and the ones who have come late and are successful are people who have put a significant amount of money on the table. They invested in marketing, in bringing products that are attractive to consumers. There is no other way around to drive volumes.

In your new role, how can you capitalise your bullishness in India and identify some areas that Roland Berger Strategy Consultants can benefit from?

If you look at the consulting market in India, it is growing at a very rapid pace. Also, if you look at the overall size of the market, you will see that it is very attractive.

So from that perspective, India is definitely a must-have and also, as I said, there are a lot of opportunities in India. Like one, it is still possible to bring some of the companies into India and also help Indian companies with their global footprint and acquisitions, which is not always an easy game. We have examples of some that have worked and some that haven’t. Plus we have an opportunity to help Indian companies become potentially more competitive in terms of how they do business.

We still find a rather large variation in terms of process capability and quality, depending on the players. You have the state-of-the-art globally competitive companies and you have some companies that have an opportunity to become even better. Plus, you can help international players in the Indian market to exploit the market and fulfill their potential.

Are you helping any Indian OEM or suppliers in such an exercise? And also is it happening the other way around — like an international OEM or supplier looking at an Indian acquisition?

Market entry is still happening from international players in India. This is not something that has come to a halt.

Lastly, for Roland Berger Strategic Consultants, do you see any kind of alliances in India?

We have taken a partnership decision to go for an equity-based expansion globally and the partners have equity in the company. So we have the money to expand. We are quite confident that it is the right way for Roland Berger forward.

SUMANTRA BAROOAH