Indian Armoured Vehicle Market 2012 - 2022

TABLE OF CONTENTS

About the research…………………………………..….............. Capabilities and requirements…………………………............ The Asia market in perspective………………….…................ Appendix A……………………………….…………….…………. Appendix B………………………………….……….……..…….. About Defence IQ…………………………….….….……………. Armoured Vehicles India 2012…………………….……..……..

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ABOUT THE RESEARCH

69%

31%

Commercial Military

This report will explore how the future of Asia’s armoured vehicle market is likely to evolve over the next decade. The report is based on a survey of 144 senior executives and professionals within the armoured vehicle domain, which includes both commercial and military respondents. The analysis of the survey data has been supplemented with proprietary interviews and desktop research. The majority of survey respondents were from the commercial sector, accounting for 69% of total responses. Military personnel form the remaining 31% (Figure 1), which includes ranking Colonels, Lieutenant Colonels, and Captains. Looking at the chart below, the United States had the highest representation in the survey (19%) followed by the UK (13%). A significant number of respondents are based in Asia with India having the highest proportion (12%) followed by Australia (8%) and Singapore (5%). Other Asian countries represented include Indonesia, South Korea, Pakistan, the Philippines, Vietnam and Cambodia.

19%

13%

12%

8% 5%

43%

Figure 1: Breakdown of respondents by country and type

USA UK India Australia Singapore Other

69%

31%

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Commercial Military

CAPABILITIES AND REQUIREMENTS

Countering the IED threat is the most important armoured vehicle attribute for Asian requirements according to survey respondents, with 54% revealing that blast protection is “critical.” However, taking the top two responses together from Figure 2 (i.e. respondents specifying “critical” and “important”), protection from small arms ballistic attack is generally considered to be the main design requirement for 83% of respondents. Based on this analysis, IED protection then dramatically falls into third place with 79% behind reliability in second, which 81% of participants specified as being “critical” or “important.” For a direct comparison on what respondents think India specifically will be seeking most for their armoured vehicles please see Appendix A.

13%

10%

7%

12%

6%

7%

8%

8%

11%

5%

11%

36%

27%

16%

23%

16%

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14%

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41%

36%

42%

48%

33%

39%

38%

43%

54%

15%

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43%

42%

37%

Ballistic protection

Blast protection / counter-IED

Mission range

Adaptability

Mobility

Transportability

Cost (affordability)

Reliability

RPG protection

Figure 2: Analysis of key armoured vehicle attributes in Asia

Unimportant Necessary Important Critical

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In Defence IQ’s Armoured Vehicles 2012 Report released earlier this year, 57% of respondents identified ballistic protection as a critical attribute (Figure 3), which is significantly above the 43% looking specifically at the Asia region. There is a similar contrast with blast protection – 78% in the global report compared with just 54% in this one – although the IED threat will be explored in greater detail later in this report. This perception gap suggests Asian customers are less concerned with protection and instead consider secondary or tertiary factors, such as cost and mobility, to be more relevant than their counterparts in the West or those currently engaged in combat and combat support missions. This is further evidenced when looking at the disparity with reliability, which with 55% of respondents identifying it as a critical attribute it’s 13% up on the 42% in the global report. Even more stark is mobility, which twice as many respondents thought to be critical for Asia (36%) compared to the global market (18%).

7%

7%

4%

8%

9%

12%

4%

19%

5%

17%

24%

12%

59%

32%

42%

57%

78%

18%

55%

33%

Ballistic protection

Blast protection / counter-IED

Mobility

Reliability

Cost (affordability)

Figure 3: Global* analysis of key armoured vehicle requirements

Unimportant Necessary Important Critical

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*Taken from Armoured Vehicles 2012

Why does the Asian market put less emphasis on the protection component of armoured vehicles and give more credence to a wider range of attributes than other regions do? One answer could be that it has been some time since an Asian country was deeply committed to a war on foreign soil. Simply, if you’re not being shot at the need for ballistic and blast protection understandably diminishes. Looking at Figure 4, however, the assumption that Asia compromises on protection is soon put into perspective when respondents were asked to prioritise armoured vehicle capabilities. (For a direct comparison on what respondents think will be the most important capability for India specifically please see Appendix B). Figure 4 highlights that survivability (55%) is more than twice as important as reliability (26%), and nearly three times that of mobility (19%). While this shows that, in accordance with Figures 2 and 3, protection, reliability and mobility respectively line up as key attributes, it is only when respondents are asked for the key attribute that survivability is prioritised. When considering armoured vehicle capabilities, Asian customers and end users look at a number of different options. However, when asked what the priority should be, protection is the obvious stand-out attribute.

19%

55%

26%

Figure 4: The most important capability for

Asian countries

Mobility

Survivability

Reliability

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The consensus leads to protection being the dominant design requirement for armoured vehicles over the next ten years. When thinking about the standard Performance Triangle for armoured vehicle engineers (seen below left), the focus on protection needs to be considered in the context of its high priority. It could be redesigned to look similar to the figure below:

PROTECTION

WEIGHT COST

SURVIVABILITY

PERFORMANCE

PROTECTION

WEIGHT COST

Standard Updated

Figure 5: The Performance Triangle

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Confirming the data analysis in Figure 3, the graph below highlights that the IED is considered to be the most significant threat that Asian procurers of armoured vehicles should seek to protect against. A comfortable 18% margin sits between IED/blast (78%) and the next most potent threat, small arms ballistic attack (50%). That seems a fairly decisive result. However, compared to the response from the global report, the emphasis on IEDs is noticeably reduced; 95% of respondents identified IEDs as the key threat for global requirements, which is 17% more than for Asia alone. With NATO nations bogged down in Afghanistan where the IED threat has increased in frequency and lethality, the requirement for innovative counter-IED technologies has been the primary driver for industry. The need to protect against IEDs is directly proportional to the frequency with which a nation is likely to face the threat. In Asia, that prospect is considerably lower than for the United States military for example.

“Protection can be offset by mobility. It is the mobility with which we can overcome the protection requirements … we need to have light armoured vehicles with high power-to-weight ratios and high mobility, which is the only way I think we can achieve better protection.” Brig. Gen. C.P. Mohanty, North Kivu Brigade Commander, MONUSCO Mission to the DRC, United Nations

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Asian countries adhere closer to the judgment of Brig. Gen. Norbert Huber, Head of Fire Development Division at the Austrian MoD, who said at a recent industry conference that: “IEDs are important, but they are certainly not the only threat we should consider in the future … We always try to win the last war without giving much consideration about how to win the next.” One survey respondent also said: “The Western emphasis on counter-IED protection will be largely irrelevant to Asian customers.” But how true is that? Lt. Gen. Michael Barbero, the Director of the U.S. DoD’s Joint IED Defeat Organisation (JIEDDO), recently declared that: “The IED will be the focal point for any future conflicts.” Lt. Col. (Rtd.) Jim Storr, an independent defence analyst and specialist in the field of military strategy, agreed with Barbero: “Wherever we are going we are not going towards another Cold War … the future threat landscape will include IEDs.” We might find that the true answer lies somewhere in between. Jon Hawkes, Senior Analyst at IHS Jane's DS Forecast, provides a satisfying interpretation: “As has been clear for a while now many countries which do not require significant IED and mine protection are nonetheless purchasing equipment which has significant capability in this area as they are very much ‘in fashion’ and a highly desired symbol of being a modern military.”

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With just 14% of respondents identifying CBRN (Chemical, Biological, Radiological and Nuclear) as a threat in Figure 6, it’s clear that few within the industry are concerned about the potential risk it poses to armoured vehicle personnel. Is this direction sensible? Or is this an area that needs to be addressed now in preparation for the future threat landscape? The IED wasn’t considered to be a significant threat to the survivability of vehicles pre-Iraq and Afghanistan. It is always difficult to predict and prepare for the “next” threat. In which case, shouldn’t we (armoured vehicle manufacturers, the military, governments) at least start think about the possibility of an upturn in offensive CBRN capabilities?

CBRNSmall arms

ballisticattack (up

to 7.62mm)

HMGballisticattack

(STANAGLevel IV

andsimilar)

Blast /IEDs Directed

energysystemsattack

RPGUnfamiliar

and difficultterrain /climate

14%

60%

46%

78%

22%

58%

37%

Figure 6: Overview of the most significant threats

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Lieutenant General Sir John Kiszely, Former Director of the UK Defence Academy and National President of the Royal British Legion, certainly thinks so, calling chemical warfare the “hidden threat” of the future. He warned of the dangers of only acquiring equipment relevant for today’s battlefield: “Counter-insurgency is the flavour of the moment … (but we) have to focus on what is the character and future of conflict,” Kiszely said at an industry conference in the UK in February. “Unpredictability and uncertainty must be two of the major factors,” when considering current requirements.

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Looking at Figure 7, the majority of respondents (76%) believe armoured personnel carriers (APC) will be in highest demand in Asia over the next ten years while light armoured vehicles closely follow (69%). The interesting thing to note here again relates back to the global armoured vehicles study conducted in January where this statistic was in the reverse. There, 69% identified the light armoured vehicle as the top vehicle with the APC following on 63%. The role reversal is indicative of the Asia-specific requirements. Less likely to be used in a combat situation, the real demand from the Asian armoured vehicle customer is for logistic support. General Sir Peter Wall, Chief of the General Staff at the UK Ministry of Defence, said as much in a recent speech: “The role of the tank has shifted subtly ... (in the future) tanks will be used primarily in support of troops.”

0%20%

40%60%

80%

Armoured personnel carrier

Light armoured vehicle

Reconnaissance vehicles

Main battle tanks

Unmanned ground vehicles

Figure 7: Overview of most in-demand armoured vehicle for Asian

requirements

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While only 27% of respondents thought Unmanned Ground Vehicles (UGVs) would be in demand over the next ten years, the fact that it’s only just behind the main battle tank (29%) demonstrates a substantial leap forward in technological advance and mission relevance in itself. Ten years ago the main battle tank was still considered to be a highly valued and useful military asset; in contrast, unmanned vehicles were still the pipedreams of scientists. There is no doubt that UGVs will continue to develop at a rapid rate and in another ten years time the demand for them will soar.

“The IED will be the focal point for any future conflict.”

Lt. Gen. Michael Barbero, Director, Joint IED Defeat Organisation, Office of the Secretary, U.S. DoD

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India is the heartbeat of the APAC region as it continues to invest in its defence industrial base and build a world-class military force. Looking at Figure 8, 70% of respondents agree that India is the number one target market for growth over the next decade, almost double that of its closest rival China on 41%.

0% 10% 20% 30% 40% 50% 60% 70% 80%

India

China

South Korea

Australia

Indonesia

Pakistan

Singapore

Vietnam

Malaysia

Philippines

North Korea

Japan

Sri Lanka

New Zealand

Bangladesh

Figure 8: Analysis of Asian countries presenting greatest

potential for growth over next 10 years

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THE ASIA MARKET IN PERSPECTIVE

In a recent address to delegates at an industry conference, Lt. Gen. (Rtd.) Dalip Bhardwaj, the former Director General of Mechanised Forces in the Indian Army, said: “In India, the aerospace and defence market is growing at an unprecedented rate and is emerging as a key participant in the Asia-Pacific region.” But India isn’t just the principal growth market in Asia; it is globally too. In January, 57% of respondents identified India as the top potential market in the world for growth in Defence IQ’s Armoured Vehicles 2012 report. In his 2012 New Year message, Indian Prime Minister Dr. Manmohan Singh, said: “Our Army, our Navy and our Air Force require modernisation and upgradation of personnel and systems. Ensuring this will remain my most important task as Prime Minister.” It’s little wonder India is viewed as such a captive market: Earlier this year Stockholm International Peace Research Institute (SIPRI) announced that India was the world's largest arms importer, receiving 9% of the volume of international arms transfers during 2006–2010. At the time Siemon Wezeman of the SIPRI Arms Transfers Programme said: “Indian imports of major conventional weapons are driven by a range of factors. The most often cited relate to rivalries with Pakistan and China as well as internal security challenges. As an importer, India is demanding offsets and transfers of technology to boost its own arms industry, and, in order to secure orders, major suppliers are agreeing to such demands.”

“Against the complex nature of future threats and challenges, in the elongated spectrum of conflict, the Indian Armed Forces are committed to delivering security. Strategic transformation based on a judicious mix of a capability and threat-based approach against the backdrop of anticipated technology and fiscal development is exciting. The moment has arrived when India is on the threshold of economic and technological surge.” Lieutenant General J.P. Singh (Rtd.), Former Deputy Chief of Staff, Indian Army

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“The global defence industry is now truly at an inflection point. It is moving East, towards China, the Middle East, and to India. In India, the aerospace and defence market is growing at an unprecedented rate and is emerging as a key participant in the Asia-Pacific region. India’s defence forces are on a modernisation overdrive and are hence one of the largest military spenders in the world.”

Lt. Gen. (Rtd.) Dalip Bhardwaj, PVSM,VSM, Former Director General of Mechanised Forces, Indian Army

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Singapore comes in a lowly seventh place which is perhaps surprising. The country has a booming defence industry and a number of Singapore-based companies, such as Singapore Technologies Engineering and its land vehicle arm ST Kinetics, are players on the world stage. For example, in 2008 the firm beat off competition from UK MoD darling BAE Systems to win the £150 million contract to supply an all-terrain vehicle. The company’s Bronco armoured vehicle was renamed the Warthog by the British, who ordered over 100 under an Urgent Operational Requirement (UOR). At the time, Simon Cox, the Programme Manager at the UK MoD, explained how the Singapore firm had exceeded expectations. “We appreciate the close, flexible and constructive working relationship with ST Kinetics. They are a great company to work with and the Bronco has exceeded our expectations in terms of quality, capability and performance. We are delighted with their product, attitude and the progress jointly made in a very short time indeed.”

“Indian imports of major conventional weapons are driven by a range of factors. The most

often cited relate to rivalries with Pakistan and China as well as internal security challenges.

As an importer, India is demanding offsets and transfers of technology to boost its own arms

industry, and, in order to secure orders, major suppliers are agreeing to such demands.”

Siemon Wezeman, Senior Fellow, SIPRI Arms Transfers Programme

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Where will Asian customers procure their armoured vehicles from over the next ten years? According to the survey data (Figure 9), those that do not manufacture the vehicles indigenously will predominantly acquire them from North America and Western Europe with nearly half of all respondents indicating these two regions would be targeted by Asia. 41% of respondents think Asian countries will procure their armoured vehicles from their own country over the next ten years. Is this truly the case? Or would a 20 year timeframe be more realistic? For example, India is known to be building up its infrastructure and has designs on becoming a self-sufficient military power in the near future. However, analysts predict that infighting, bureaucracy and corruption are currently blighting India’s efforts to become a self-sufficient defence behemoth and this is unlikely to change for at least the next five years. Projects such as the $20 billion MMRCA (medium multi-role combat aircraft), for which Dassault’s Rafale has been preliminarily chosen, will spur foreign companies to sell to India, but what about investing in India? The Indian government restricts foreign investors from owning more than 26% of any company based in the country. It’s a much maligned law and one that many feel is in desperate need of a rethink if India is to rapidly develop its own defence industry and security infrastructure. There is an increasingly vocal lobby calling for private sector reform in India and the belief is if these problems can be resolved then India could become the haven for investors it has long promised. At the moment, it is merely promising to be one.

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Africa only resonated with 16% of respondents but the defence industry is developing apace in the region. In a recent interview with Defence IQ Ivor Ichikowitz, the founder of South Africa’s Paramount Group, explained how his company is innovating within the defence and aerospace industry and what it will take for Africa to be taken seriously as a military power. “My personal goal is to be able to grow a world-class, global defence and aerospace business out of Africa,” said Ichikowitz. “I’m a great believer in the fact that no country or continent can emerge from a developing economy to a developed economy without a strong aerospace and defence industry. My goal is to prove that that’s possible.” One considerable step in achieving that goal will be taken towards the end of this year when Paramount unveils its AHRLAC (Advanced High-performance Reconnaissance Light Aircraft), a versatile unmanned aerial vehicle and the first aircraft to have been entirely conceived and built in Africa.

0%

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30%

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50%Own country (indigenous)

East Europe

North America

Africa

West EuropeOther Asia

Middle East

Australasia

South America

Figure 9: Analysis of which regions Asian countries will procure from

over the next decade

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Aside form North America and Europe, the Middle East was the other notable region, seen by 28% of respondents to be a viable armoured vehicle market. A number of firms are gaining significant traction in the global marketplace, including the Streit Group, who have recently opened a base in Pakistan to supply the Asian market after already having an manufacturing site in Mumbai, India. “The UAE is a very well located country geographically … you have access to Asia, Africa, Europe and the other Middle East countries … you’re connected to all the world,” Guerman Goutorov, the Chairman of Streit Group, told Defence IQ in an exclusive interview. In April the firm opened the largest armoured vehicle manufacturing site in the world in Ras Al Khaimah, UAE. At 1.4 million square feet and a cost of $21.8 million, the company looks well placed to supply demand in Asia.

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When considering the supply and demand for armoured vehicles over the next decade the global economic crisis must also be factored in. While the West continues to cite it as a ‘global’ crisis, many in the East think of it as the ‘North Atlantic economic crisis’ as economies in the APAC region expand. Will the economic woe in the West affect procurement in the East? With defence budgets declining in North America and Europe, the Asian market is seen as the key region for armoured vehicle manufacturers and suppliers to expand into. BAE already has a Joint Venture with India-based Mahindra – called Defence Land Systems India – and now other primes and second tier vendors are swiftly following suit. What are the challenges for vendors looking to gain traction in Asia? The three key issues are understanding and awareness of the tenders available; overcoming bureaucratic issues and maintaining full transparency throughout the process; and, as is often the case, communication problems. To overcome these challenges perhaps the traditional approach will have to change. Rather than remaining armoured vehicle integrators and continuing to control the process from a base in the region, one respondent suggested that companies should become ‘Design Houses’ by supplying the Asian market with advice and transferring their IP to partners in the region.

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APPENDIX A

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55%

19%

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34%

16%

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43%

32%

0% 20% 40% 60% 80% 100%

Ballistic protection

Blast protection / counter-IED

Mission range

Adaptability

Mobility

Transportability

Cost (affordability)

Reliability

RPG protection

Unimportant Necessary Important Critical

Thinking specifically about India, in terms of the country's key armoured vehicle requirements over the next 10 years please rate the following attributes on a scale from 1 - 4 (1 = unimportant, 4 = critical).

QUESTION

APPENDIX B

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Thinking specifically about India, which of the following is the most important armoured vehicle capability over the next ten years?

QUESTION

16%

52%

32%

Mobility

Survivability

Reliability

ABOUT DEFENCE IQ

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Defence IQ is an authoritative news source for high quality and exclusive commentary and analysis on global defence and military-related topics. Sourcing interviews and insights directly from senior military and industry professionals on air defence, cyber warfare, armoured vehicles, naval defence, land defence and many more topics, Defence IQ is a unique multimedia platform to discuss and learn about the latest developments within the defence sector. So join over 60,000 defence professionals to access all the exclusive video interviews, podcasts, articles and whitepapers that are available and updated on a daily basis. Join today for free by signing up on our website: www.DefenceIQ.com Connect with us through social media too, just follow the links below:

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ARMOURED VEHICLES INDIA 2012

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DISCLAIMER

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Andrew Elwell is the Editor-in-Chief of Defence IQ. He has previously worked as a survivability specialist for a provider of ballistic and blast armour systems. Andrew holds a BA in History and American Studies from the University of Nottingham. He can be reached on andrew.elwell@iqpc.co.uk. Connect with Andrew on LinkedIn Follow him on Twitter: DefenceIQ and @AJElwell

About the author

This report is provided for information purposes only. This report may not be reproduced, published or distributed by an recipient for any purpose. The company accepts no responsibility whatsoever for any direct or indirect losses arising from the use of this report or its contents. Images courtesy of U.S. DoD and Indian Army.