Leading component maker Bosch has said it plans to face the current downturn in the automotive market by increasing its focus on the emerging ultra low cost car (ULCC) segment and believes it is too early to say when the automotive market will see a sustainable recovery in demand.
The company has already begun supplies of fuel injection systems, starter motors, alternators and braking systems for the soon-to-be-launched Tata Nano. According to V K Viswanathan, managing director, Bosch Ltd, “We expect substantial volumes from this project and most of the parts we supply to the Nano were locally developed by us with some parts being imported at the moment.”
Talking about Bosch's plans for this segment, Viswanathan said: “We have been the pioneer of low price vehicle solutions in the Indian market and this segment is expected to grow substantially in the coming years. This will generate additional business for the company and hence this segment will receive high priority from us.”
He added: “We are ready with specific solutions for this segment like fuel injection systems, starters and generators, which give us the first mover advantage and allow us to offer these solutions to the new entrants in this segment.”
Discussing the overall automotive market, Viswanathan said, “While sales of automobiles have picked up in January and February this year, it is too early to say how the market will shape up and we will have to wait and see. Sustained recovery would be difficult to predict at this juncture.”
The company had announced plans to invest Rs 2,650 crore during the 2005-2010 period, and
has already spent Rs 294 crore in 2007 and a further Rs 425 crore in 2008. In the current year, the company plans to spend around
Rs 250 to Rs 300 crore.
The company also reported that its sales grew six percent during 2008 to Rs 4,541 crore, while the profit before tax was Rs 856 crore. The net profit was Rs 633 crore, which was 14 percent of net sales, compared to 14.2 percent for the previous year. The company says that significant one-time financial income from investments helped in achieving this profitability.
Announcing the results Viswanathan said, “Our growth last year was significantly below our plan and expectation, due to the sharp and sudden slowdown in the Indian economy in general and the automotive sector in particular in the fourth quarter of 2008.”
The company’s automotive technology business achieved a growth of 4.3 percent in 2008, with the automotive aftermarkets business growing strongly by over 19 percent and the petrol business up by 54.6 percent, albeit on a small base. “Product and process innovation and the low price vehicles segment will continue to receive a high level of priority in 2009 and beyond,” concluded Viswanathan.