2012 NCR Special: Magneti Marelli's India gameplan is on track

Formula 1 made its India debut last year and among the many spin-offs has been its role in motorsports which has blitzed as a technology incubator for mass market vehicle applications. Take, for example, the automated manual transmission (AMT) gearbox which is a business stream for MagnetiMarelli (MM), the component arm of Italian carmaker Fiat SpA. The component maker is already supplying this product globally for passenger car applications. A market leader in this technology, Marelli Powertrain’s AMT gearbox (Freechoice) is used in Ferrari’s racing cars, Lamborghini and Aston Martin sports cars as also by the Chinese car manufacturer Chery.

MagnetiMarelli now hopes to introduce this product for the A, B and C passenger car segments of the Indian market by end 2013, early 2014. The D and above segments predominantly use fully automatic transmissions. Later, the AMT will also be targeted at light commercial vehicles.

Having already won several awards for the AMT gearbox in the car and SUV segments, the new product is slated to improve fuel efficiency and be five percent more efficient than manual transmissions. In terms of cost, it would be a tad more expensive than manual gearboxes but almost 20 to 25 percent lower priced than an automatic. Traditional automatic transmissions are said to reduce fuel economy by 5 to 10 percent.

An electro-hydraulic automation technology for manual transmissions, the AMT combines convenience of use with reduction in consumption. The benefit is that it will rest on the existing transmission, eliminating mechanical parts related to the clutch and leverage off the gear and hydraulic kit.

Several carmakers in India are expected to switch to the AMT gearbox for five-speed transmissions by 2013. So far, the market has ridden on the back of manual transmissions with less than one percent of the car segment opting for fully automated transmissions mainly in high-end cars.

SajuMookken, country manager, MagnetiMarelli India, says the market and customer pull has not been enough so far to warrant introduction of an automatic transmission. There have also been cost and consumption issues. However, in the last two years, automated transmissions have been finding some acceptance in urban markets and also by women drivers in order to avoid shifting gears and using the clutch while in heavy city traffic. Though priced on the higher side, the bottomline is that it would entail a one-time investment. The challenge lies in maintaining the running cost at the same or lower level to manual.

The AMT in small-to-medium engine capacity vehicles manages the gearshift and clutch movement so as to give the driver a choice of either manual or automatic transmission.

At present, the AMT is in the conceptualisation stage with the necessary infrastructure for its rollout to be built in MagnetiMarelli Powertrain India's facility at Manesar. Initially though, it will be sourced from Europe as a Completely Built Unit before moving to the CKD version and then localisation of content.

The company’s AMT has been widely accepted in Brazil and China. Magneti has a joint venture in China for AMT production with SAIC Motor Corporation. Moreover, good driving conditions as a result of better roads have helped improve the marketability of the product in China.

In Brazil, the AMT is manufactured by a 100 percent subsidiary of MagnetiMarelli Powertrain. The Italian company has entered into seven joint ventures in India for the production of various product streams since it entered India in 2007.

In the strategic partnerships it has forged, the local partner contributes its experience of the market and operational support as well as the local customer base while MagnetiMarelli brings to the table its technology and global customer relationships.

MagnetiMarelli India (MMI) has commissioned greenfield projects in most of the product lines but in the field of exhaust, since there was already some existing business, it has been brought under the perimeter of the JV. Globally, MagnetiMarelli’s strength lies in automotive lighting products, technologies for racing as well as new technologies including powertrain, exhaust, electronics systems, suspensions, aftermarket as well as plastic components and modules.

In India, the company plays a role in the entire range except plastic components and modules. The component maker has a facility for shock absorbers and struts at Pune with a new highly automated facility commissioned in end-August in partnership with Endurance Technologies. A significant volume of products from here will be exported to OEMs in Europe. So far, along with its partners, it has invested between Rs 350 to Rs 400 crore from inception on new plants and product lines in the country. Last year, it touched the Rs 800-crore mark in topline and is looking at crossing overall revenues of around Rs 1,200 to Rs 1,400 crore in this calendar from various JVs.

New plants in India

Meanwhile, plans are underway to increase the India contribution to five percent of its global revenues by 2015-16, notching between Rs 2,000 and Rs 2,500 crore. Hence, India is slated to be a significant market for MagnetiMarelli going forward.

In line with this growth plan, the Indian arm is evaluating three new plants for suspensions, lighting and exhausts as capacities are saturated in existing facilities for these products. A final decision is expected in about three months. The scales are tilted heavily in favour of Chennai and Gujarat as the next locations to be tapped as MMI does not have a presence there. It is also likely to expand operations at Pune. While the new exhaust and suspension plants will be operational by the second half of 2013, lighting will go on stream in early 2014. A major customer for lighting will be Ford India for supply of new-generation lamps. The carmaker is setting up its plant at Sanand and MagnetiMareli’s new facility could come up in the vicinity to meet just-in-time requirements.

Further, the production capacity in lighting will be stepped up by MMI from the current over half a million with potential to scale up further. Investments will be made jointly by the partners on the new plants.

At present, MagnetiMarelli, in the Gurgaon-Manesar belt, has JVs with MarutiUdyog and Suzuki for diesel and petrol engine control units, with the SumiMotherson Group for lighting, air intake manifolds and pedal assembly with another facility at Pune, with UM Electronics for instrument clusters and body computers, and with SKH Metals of the Krishna Group for hot end and cold end exhaust systems along with another Pune facility, and with Talbros for suspension systems. In addition, it has a plant for shock absorbers and struts in alliance with Endurance Technologies.

Its powertrain facility has a production capacity of one million ECUs per annum and 40 percent space at the plant can still be used for new expansion. MagnetiMarelli supplies the entire ECU requirements of diesel cars for Maruti, Fiat and Tata Motors from this plant. The plant has achieved zero ppm or zero defects for all customers in its products till now. Daily production is of 2,200 diesel ECUs in three shifts besides 500 petrol ECUs, with production totalling around 3,000 ECUs per day.

MagnetiMarelli India is expecting exports to account for 15 to 20 percent of its total revenue pie by 2015-16 from the current 10 percent. Going forward, significant numbers of shock absorbers, lighting products, electronics and exhausts will be exported with suspension systems to be added to the product basket with its latest JV with Talbros.

The partmaker is also enhancing its R&D capabilities in different product streams to compress the time to market and time to develop with application engineering and R&D teams stationed at each plant for customising technologies for India.

India as CoE for two-wheeler electronics

Mookken says the company plans to develop India as a centre of excellence (CoE) for electronics in two-wheelers with India supporting global development in certain areas of electronics at Manesar as also some global validation, development and testing work both for two-wheelers and four-wheelers.

Two-wheelers are seen as the next big growth area for the company and MagnetiMarelli is considering the introduction of fuel injection systems. It has the technology and India with its carburetted motorcycle market presents a huge opportunity. At present, all the commuter bikes are carburetted and very few sport fuel-injected tech but in future with evolving emission norms, two-wheeler OEMs are seriously contemplating use of fuel injection systems. Supplies of fuel-injected systems for motorcycles may well commence by end-2014 in India.

For MagnetiMarelli, India and China are two significant markets for two-wheelers. The company is currently in talks with two-wheeler manufacturers to translate them into business orders. The company’s decision on the product’s future localisation process or of signing an alliance with a local partner for manufacturing in India will be taken in the next few months. MagnetiMarelli Powertrain leads in petrol direct injection and flex-fuel technologies globally. Hence, the next product that it is mulling introducing in India is Flexfuel. It is already a market leader in Brazil in Flexfuel usage in electronics where it offers an ECU solution to drive different combinations of fuel such as petrol and ethanol.

Mookken also visualises an opportunity of moving into Flexfuel technology with the Tetrafuel system, all driven by a single ECU as vehicles get more environment friendly.

The Flexfuel technology could be leveraged for the CNG and LPG segments in India.

By and large, MagnetiMarelli has a full product presence in India except in plastic components and modules. Production of suspension systems was the last joint venture to kick off with the supplier having localised all its product lines in India. In China, it has more products to introduce for instance, suspensions and aftermarket components in comparison to India.Hence,MagnetiMarelli sees faster growth in India for it. Apart from Europe, it has a large presence in Brazil where government incentives have provided a major fillip to the automotive sector.