The 600,000 wheel rims to PSA Peugeot will be supplied over the next five years. SSWL is also set to be the supplier of wheel rims for the French carmaker when it starts its Indian operations, most likely by the end of 2012.
Close on the heels of the Peugeot order, SSWL has bagged another one from Renault for approximately 1.2 million wheel rims to be supplied over the next five years. That will translate to around 20,000 wheels per month once ramp up is complete.
Capacity ramp up
The new orders means that SSWL will have to ramp up its own production capacity. A company spokesperson told Autocar Professional that SSWL will invest Rs 170 crore over the next two years to increase production capacity at its Chennai plant and set up a new one in Pune. He also said that the company is already in the process of investing Rs 59 crore by the end of this financial year in its Jamshedpur plant. Currently, SSWL has capacity to produce 12.5 million wheel rims annually. The company’s plan is to hike capacity to 19.5 million units by 2013-14. There will be an additional expansion of two million units in its Pune plant (to be operational in 2012-13) to take the total annual production capacity to 21.5 million units.
SSWL’s plant at Oragadam, near Chennai, which also supplies to Nissan, will see the maximum ramp up with its capacity more than doubling from 2.5 million units currently to six million units by 2013-14. The recent sale of equity stake to Sumitomo Metal Industries, Japan (5.73 percent) and GS Global South Korea (2.54 percent) will help fund the expansion plans. SSWL already has equity participation from Tata Steel (through its wholly owned unit Kalimati Investment Company).
Exports drive profits
Like in the case of OEMs, exports offer better profits for SSWL too. Currently, 12 percent of SSWL’s revenue comes from exports. The company says this is likely to touch 17-18 percent in the coming years. In terms of volumes, 10 percent of SSWL’s production is exported and the company plans to increase it to 15 percent next year.
With additional orders and growing volumes in the domestic market,
SSWL expects its sales revenue during 2010-11 to be in the region of Rs 700-750 crore, as against last year’s net sales of Rs 418.5 crore. Also, with SSWL’s single largest customer – Maruti Suzuki –- setting up two new plants, its domestic sales volume is set to grow significantly.
With the increased focus of OEMs and suppliers on lightweight materials, SSWL is "exploring the option" of setting up an aluminium wheel rim manufacturing plant, a company official told Autocar Professional. SSWL’s R&D division, which is recognised by the government of India’s Department of Scientific & Industrial Research, is also in talks with major steel suppliers for development of high tensile steel (upto 780 mpa), which would help in wheel weight reduction.
Innovative technology will be as important as enhanced production capacity to get more customers and retain existing ones. Currently, SSWL has companies like Maruti Suzuki, Tata Motors, Mahindra & Mahindra, Honda, Volkswagen, GM, Renault, Peugeot, Nissan, BMW, Eicher, International Tractor, New Holland, John Deere and Piaggio in its list of clients.
There are ample opportunities but increased competition too. Other players like Wheels India and Asia MotorWorks (components division) are also getting more aggressive. For example, AMW has set up a 15 million unit plant, making it the world’s single largest wheel rim manufacturing plant.
There’s still short supply of wheel rims in the Indian market. With the automobile industry set to continue its growth story in the near future, companies like SSWL can hope to have more blockbuster months like January in the coming years. In fact, we hear it is
set to bag another order from a foreign OEM soon.