'We have a long-term outlook of India’s growing market and are beginning operations step by step.'

Germany’s Tristone Flowtech Group is a global leader in designing, engineering and manufacturing flow technology systems for engine and battery  cooling, air charge and air intake. The company has recently set up a greenfield plant at Chakan, near Pune. Guenter Froelich, president and CEO, speaks to Amit Panday on going solo with its first manufacturing plant in India, localisation of products, new opportunities under BS VI, the Indian supplier base, preparedness for future technologies and EV developments in Europe.

What are the core technologies which have been developed and supplied by the Tristone Flowtech Group?

Tristone Flowtech Group is a midsized automotive supplier, which is headquartered in Frankfurt, Germany. We are dedicated to three applications in the automotive passenger car industry – fluid engine cooling, fluid battery cooling and air charge applications. This constitutes our core business, which we do with almost all major OEMs around the world. We have nine manufacturing plants globally, situated in Europe, NAFTA, and China. We are now penetrating the Indian market with our plant number 10 – in Pune.

Our customers have been asking us to come to the Indian market and manufacture products locally. We are not new here as we had signed a technical assistance agreement with a local partner in 2012. That was later, as contracted, running out till the end of 2015.

We are beginning our operations in India step-by-step. Last year we started our sales and engineering company in Pune. We have a long-term outlook of this growing market and we have earmarked investments for our Indian operations as we go forward.

How much investment have you earmarked to set up the plant and start operations in India?

We have earmarked roughly 2.5 million euros for the initial operations in India. Part of this is already invested in setting up the plant in Chakan. The balance will be spent in capital machinery, starting production operations and other overheads over the next two years. This will also depend upon the India business.

Your erstwhile Indian partner was Bony Polymers with whom you had a technical assistance agreement. Why was the alliance terminated?

Yes, they were producing search tanks, air-charge hoses and other products under our licence. We have a good, fine collaboration. We are still business partners working together in the same industry. However, our customers had asked us to have a 100 percent subsidiary in India and ensure that we bring our product competence in technology, overall quality and performance.

I can say that our company is dedicated to product innovations. We are one of the leading automotive suppliers for battery cooling applications. Although it is not yet in demand in India but we are sure that it will come. There is a lot of discussion here about hybrid and electric cars.

We are a one-digit ppm supplier globally and this is as per our customer requirements.

What is the company’s mid-term road map for India? When do you plan to start production at the Chakan plant?

We plan to commence production in the fourth quarter next year. Meanwhile, we will have to put several other things in place including the machinery installations. We have just finished building the factory some weeks ago. This plant is rented and we had signed a long-term contract with the owner in June this year. This is a greenfield plant. We have a small management team here and our next steps are to invest further according to our customer requirements.

What products will be manufactured at the site with 100 percent localisation?

We think there is a very good market for engine cooling plastic search tanks in India. We know that our product is very good, it provides added value in term of costs, weight, durability and functionality. That’s one product along with the engine cooling hoses and air-charge hoses that we will localise 100 percent here.

Tristone works with major European OEMs and few of them are your neighbours in the Pune-Chakan belt. Are you already speaking to them in the context of India business?

Yes, that’s correct. We are discussing several opportunities for the Indian market. I won’t be able to comment any further on this. All I can say is that at the moment our products are being delivered to them from Europe, and we will localise those products here in Chakan next year.

Do you think that Tristone is late in entering India or is now the correct time as the country heads towards stricter emission norms? Components supplied by the Tristone Group go into the engine bay area and hence must withstand more heat, pressure and several other parameters.

In our business field, we have been one of the first global companies to now have a 100 percent subsidiary in India. I believe that the Indian passenger car market is a sustainable and growing market. It is one of the top five markets in the world. We don’t know about the timing as of now because you would learn about this after a few years if we were right in time or late.

However, what I would expect is more clarity from the government in India over the implementation of the BS VI emission norms across the country. It would be great if clear decisions are taken and published as laws.

Tristone is a Tier 1 supplier and you already have the Euro 6 technology with you. India now presents a massive opportunity for suppliers to team up with the OEMs in terms of building new products. Do you look at it with a similar outlook?

We are already delivering Euro 6-compliant products worldwide every day but not in India. And that is why we are here.

For localisation you have to work with several Tier 2 suppliers in India. What is your impression of that part of the value chain as far as India is concerned?

Of course, localisation is the key focus area for us. We are already working with a lot of local suppliers. We know the local supplier market very well now and we are working with them for almost a year now in close cooperation.

What is your outlook of the Indian supplier base as a whole in terms of quality assurance? Do you think they are at par with the global benchmarks?

Let me be honest – the products made in India are somewhat at par with the global benchmarks. The suppliers selected by our side are the suppliers which we will validate and develop. This is also key for our business in terms of maintaining good quality levels.

What, according to you, are the areas of improvement?

India is no doubt a big passenger car market and hence there is a large local supplier base here. There is scope in the areas of quality, logistics, and business management. But it also is not so far behind the global practices.

Are you focussing more on the global OEMs present in India or Indian OEMs with large volumes while setting up initial operations?

We are working globally with Suzuki, Daimler, Volkswagen, BMW, Ford, GM, Jaguar Land Rover, Volvo, PSA Group, RSA, Nissan, Geely and many others. Honestly, we are more focused on the global OEMs in India to start off initially. However, I am aware that the global OEMs do not have large market shares in India.

There are several technology-driven trends globally including the downsizing of engines and deployment of turbochargers. How do these trends affect the nature of components such as the ones you produce?

One of the big benefits is that we are able to provide adequate products for combustion engines. We can provide similar products for hybrid cars and similar products for pure electric cars. We are also, at the moment, delivering 21 (product) platforms for hybrid and electric cars worldwide.

While we are able to offer engine cooling applications for combustion engines, we are also able to offer similar or slightly different applications such as battery cooling solutions for hybrid and pure electric cars. This is a global trend, which is not yet a dominating trend in India.

I am sure that hybrid and pure electric cars will come to India. However, in India, the legislations are lagging behind those of developed nations; this is the biggest reason why the automotive industry has not evolved up to the hybrid or electric vehicle technologies. This is not to criticise the developments but if you would compare them with China, the penetration of hybrid and electric cars there is expected to be much higher than India in the forthcoming years.

We assume that the hybrids and EVs will come to India (with developments in full scale) in another 10 years.

While India is increasingly becoming the base of engineering centres for vehicle manufacturers and their suppliers around the world, what is the current pace of technology developments in Europe when it comes to EVs?

Thus far it was a slower demand. But what we are now seeing is that in the development departments of the big OEMs worldwide, according to statistics, close to one-third of the future projects are of electric and hybrid cars.

So while we can only speculate if these (clean technologies via EVs and hybrids) will be successful or not, it is sure that they are coming our way.

All top German (and European) vehicle makers are speeding up developments of hybrids and electric cars to catch up with the popularity and scale of Tesla, which is busy upgrading its production capacity and battery capabilities. Being a German supplier, how do you see this race of catching up with Tesla, which has spearheaded this market and has shown the world that EV-model can be commercialised too? Do you also do business with Tesla?

No, we currently are not doing any business with Tesla as we could not be awarded. I think that the European carmakers will be very close to where Tesla currently is soon – as early as within the next two-three years.

When did Tristone Flowtech begin developing technologies around the battery systems after spotting this inevitable trend?

I can say that we took suggestions in 2011. We are spending a substantial amount in development projects and solutions for hybrid and electric cars. Some of our products are also patented. We are confident that we are doing it right.

When did you enter China and how do you see that market?

We started operations in China in 2013, and we were in full-scale production by 2015. Our business in China is not so big at the moment, it is growing. The market in China is not as strong as we had expected it to be by the end of last year. Historically we have been very late in China and we would not like to be too late in India.

What was Tristone’s annual turnover for last year and what is your target for the coming years?

Last year we did 228 million euros. In 2016 we are expecting to cross 250 million euros and next year we should be around 275 million euros.

What is the contribution of Europe compared to the Asia Pacific region to the company’s annual business?

Around 75 percent of the turnover last year came from Europe, NAFTA markets contributed 15 percent and China 10 percent. If all goes as planned, then we expect to do 35 percent of sales outside Europe including India.

Lastly, what are your views on the prospects of small diesel engines in the context of incoming stricter emission norms? Is this the end of road for small diesel engines?

I understand that India has a very high share of diesel vehicles. I think diesel will have a future but, let me say, it will not be as bright as it was being seen a year or two earlier. Even though in smaller volumes, the diesels will continue to be in production. India will need SCR technology for diesel engines to adhere with emission norms. The growth will be very low – that’s our prediction.

How will this reflect on Tristone’s business?

Fortunately we have always focused on gasoline (petrol) engines. Around 90 percent of our volumes come from petrol technologies.

This interview was published in the October 1, 2016, print edition of Autocar Professional