New Delhi-based PPAP Automotive, a manufacturer and supplier of automotive sealing systems and interior/exterior injection moulded parts to all major passenger vehicle OEMs, has recently bagged its first-ever business order(s) from India’s second largest carmaker – Hyundai Motor India. While the business from Hyundai has come to PPAP as part of a pilot project, the supplier is hopeful about getting more business orders from the carmaker in the future.
PPAP Automotive, a prominent supplier to Maruti Suzuki, Honda Cars India, Tata Motors, Toyota Kirloskar Motor, Renault-Nissan and others, was scouting for business from the Korean carmaker for almost seven years.
Speaking to Autocar Professional on bringing its latest strategic customer on board, Abhishek Jain, chief executive officer and managing director, PPAP Automotive (pictured below), says, “Traditionally, our focus was to cater primarily to the Japanese OEMs who were setting up their manufacturing units in India. This was due to the Japanese technology partnership and our high dependence on them for any technology requirements. Over the years, we have learnt the technology and now we are capable of servicing customers with our own designs and can meet their entire development requirements with the infrastructure and the capability that has been built in house.”
“In plastic automotive sealing systems, PPAP enjoys a leadership position with all the Japanese car manufacturers. In the past few years, we have been able to add one of the local manufacturers as our long-term customer. The only customer missing was Hyundai (Motor India). We have been trying to make a strategic entry into Hyundai for the past 6-7 years and have been continuously approaching them locally as well as in Korea. Our breakthrough came this year when we got an opportunity from Hyundai to localise its existing part as a pilot project. They evaluated our capabilities and we passed all their requirements. By the end of Q3 FY 2017-18, we will start our supplies to them. We are hopeful that after achieving success in the pilot project, more opportunities from Hyundai will be on the way,” he adds.
The supplier will be localising some existing parts for Hyundai’s most affordable hatchback, Eon. According to SIAM’s industry data, Hyundai had sold 59,489 units of Eon model in FY2016-17, thus averaging monthly sales of close to 5,000 units last fiscal. During April- October 2017, Hyundai has sold 34,524 units of the Eon, thus continuing with the similar monthly average.
Forging its new-found alliance with Hyundai and forecasting further business (domestic and exports) in the future, Jain says, “PPAP has bagged orders from Hyundai to localise parts for its current running model Eon. As this is a pilot project, the annual order is less than 1 percent of our annual sales but over the coming years, we see Hyundai contributing a major pie to our sales.”
Eyeing business from Kia Motors
The Tier 1 supplier also has Kia Motors in its sights. Kia, which has committed investments worth US$ 1.1 billion in setting up a greenfield plant in Andhra Pradesh, is in its initial phases of setting up India operations. Kia plans to commence production at its proposed plant in the second-half of 2019, thereby hitting the market with its passenger vehicles.
PPAP Automotive is to supply parts for the Eon under a pilot project.
Speaking in this context, Jain reveals, “Currently, our focus is on establishing our relationship with Hyundai. At the same time, we are also discussing the plans for Kia Motors and keeping our eyes and ears open for any opportunities. Kia is looking at establishing a facility with a capacity of 300,000 cars per year. From that perspective, it is going to be an important customer for everyone in the industry.”
According to Jain, for PPAP Automotive, which reported a consolidated turnover of Rs 368.20 crore in FY2016-17, Maruti Suzuki (including Suzuki Motors, Gujarat) contributes 50 percent of the company’s revenues. “Honda Cars India contributes 28 percent to our annual revenues, followed by Nissan (9 percent), Toyota Kirloskar (7 percent) and Tata Motors (2 percent) in that order. Others contribute the remaining balance to our turnover,” he clarifies.
PPAP is fast expanding its production capacity along with setting up new plants closer to its customers. The company is setting up two greenfield facilities during this fiscal – one each at Ukhlod in Gujarat and Vallam Vadagal near Chennai.
Jain says that these two new facilities are aimed at serving customers based in those regions effectively. “We already have an operational facility (under rented premises) in Chennai. The new facility will be commissioned by the end of Q3 FY2017-18. The facility is ready for operations and we are awaiting customer approvals. While the rental premises has already started production, the PPAP-owned facility in Gujarat is expected to commence operations by the end of Q4 FY2017-18,” he adds, disclosing the planned timelines for both the sites.
Assembly line at one PPAP's six plants in India.
The company has commissioned investments worth Rs 15 crore each for both the upcoming plants in Gujarat and Chennai (excluding the cost of land). “Apart from this, we are also doing brownfield expansion in our facility in Pathredi (Rajasthan). We have an existing facility in Pathredi, a greenfield facility that originally commenced operations in 2014. We have added a new factory at the same location to meet the increasing requirements of our customers. We have invested close to Rs 5 crore in this phase of expansion,” says Jain.
All the upcoming facilities are expected to commence operations during the ongoing financial year. PPAP had invested Rs 30 crore in FY2016-17 as capital expenditure.
A company warehouse.
“The total capex plan for FY2017-18 is pegged at Rs 40 crore. This amount shall also cover the maintenance capex requirements. Out of the total Rs 40 crore, we have already invested over Rs 25 crore in the first half of the ongoing fiscal (H1 FY2018),” he states, while highlighting capex details.
Furthermore, PPAP Automotive is also setting up another greenfield facility under its joint venture company – PPAP Tokai India Rubber (also referred as PTI) – for an investment of Rs 22 crore.
The company currently operates from six manufacturing plants, of which two facilities are located in Noida and one in Surajpur (Delhi NCR). “After the completion of the ongoing capex program, we will have a strong presence in all the key passenger vehicle manufacturing hubs across the country,” underlines Jain.
PPAP’s product portfolio can be broadly classified in two categories – automotive sealing systems and interior/exterior injection moulded parts. Under the first category, the company designs, manufactures and supplies products that are used as sealing systems in passenger vehicles. These sealing systems also contribute in terms of enhancing the aerodynamics of the PVs. While PPAP’s expertise lies in producing plastic-based polymer sealing systems, its JV company PTI makes rubber and TPV sealing systems.
Elaborating in this context, Jain says, “The products covered under this category are made using the extrusion technology. We are capable of extruding up to four different hardness materials in the same profile according to customer specifications. The company can design and develop these products based on customer specifications.”
Some of the key products supplied under this vertical are outer/inner belt moulding, trim door opening, windshield moulding, roof moulding, skirt air damper, slide rails, glass run channel, door seals, trunk seals, hood seals and other special profiles.
PPAP is also known for its capability of manufacturing interior/exterior injection moulded products with the complete assembly. “We are pioneers in the manufacture of injection moulded parts like partition and gas-assisted body side protectors. We have some of the best injection moulding machines to manufacture both gas assist as well as non-gas type injection moulded parts. We have also set up robotic-based assembly processes to ensure defect-free and cost-effective assembled parts to customers. The company has the capability of processing engineering plastics like PVC, PP, AES, PBT, POM and TPO,” adds Jain.
Under this business vertical, it supplies products such as door lining, trunk lining, FR-pillar, CTR-pillar, under-hood and in-cabin products and others.
PPAP Automotive is enhancing its design capabilities to harness growth in the future
According to Jain, for the plastic sealing system, the content per car stands in the range of Rs 1,200-Rs 1,500. “However, if we add the rubber parts, which are made by our JV company, then that adds about Rs 1,500-Rs 2,000 per vehicle. For injection moulded parts, our content stands at Rs 1,000-Rs 1,500 per unit,” reveals the top boss at PPAP.
According to him, the company’s current supplies to Honda stands close to Rs 6,000 per car as additional business. “Due to the strategic location of our injection (moulded components) plants, we do about Rs 6,000 per car additional business only for Honda,” he reveals.
New business from LCVs, 2-wheelers
Although PPAP Automotive primarily caters to the passenger vehicle segment, it is now making attempts to manufacture and supply products for the growing light commercial vehicle (LCV) and two-wheeler (2W) segments to drive its business. “We are now associated with SML Isuzu in the LCV segment and Suzuki Motorcycle in the two-wheeler segment. Currently, this business contributes less than 1 percent of sales,” cites Jain, who is hopeful of bagging more business in the two segments.
“As part of our focus to add new customers and new products, any OEM manufacturing either a two-wheeler or CVs is a potential customer for us. We have recently added Suzuki Motorcycle (India) as a new customer on board. We will continue to focus on adding more customers as long as it is profitable to do so,” he mentions.
On the export business front, PPAP’s products are currently shipped to Japan, Mexico, South Africa, Venezuela, Brazil and other markets. “Our parts are sourced by our OEM customers as part of their CKD kits to service the needs of their respective sister plants across the world. This (export) revenue contributes about 5 percent of the company’s total sales,” estimates Jain.
Impact of BS VI & Electrification
The incoming legislations, specifically the implementation of BS VI emission norms from April 2020, are expected to drive weight reduction and downsizing of components across the board. Jain predicts that several existing parts made by PPAP will see design changes in an attempt to make them lighter and smaller.
“All cars, whether propelled by petrol, diesel or powered by batteries will require the products made by PPAP. Every car has to be sealed from water, air, dust and noise. Every car needs to look attractive from inside. Therefore, they will need parts like door lining and others that are currently produced by the company. However, the designs of these parts will undergo drastic changes due to the change in legislations specially when it comes to fuel efficiency. We are continuously engaging with our customers to deliver them lighter, smaller, efficient and attractive products,” he believes.
Plant II at Noida.
“As part of our strategy to add new products and new customers, electrification of vehicles is going to be a big opportunity. We are exploring the opportunities that may be available to us,” Jain signs off.
All in all, this proactive supplier is well positioned to harness future growth. By catering to all vehicle segments of the auto industry with its expansive range of products, it is both well placed to capitalise on demand and also protected should demand dip in some vehicle category.
(This article was published in the December 1, 2017 issue of Autocar Professional)