‘India can become one of the growth engines of the world.’

Germany’s Schaeffler Group has committed an investment of 100 million euros in its India operations, and aims to double its business by 2020. Dharmesh Arora, president, automotive, Schaeffler India, reveals how this can be achieved, riding the growing popularity of automatic transmissions in India, and catering to two-wheeler OEMs. An interview by Amit Panday.  

What is your perception about the new government at the Centre and its first year of operations?
We see positive sentiment in India, triggered by the reforms prime minister Narendra Modi is putting in place. Since he came to office, the mood has changed. It is now about implementation. Sustainable changes take time. This may take years.

As a family-owned business, the Schaeffler Group has always taken a long-term view on India. On that basis, we want to take part in this important change process.

What is India’s growth potential and how important is the Indian market for the Schaeffler Group? Are you looking at expansion?
I am convinced that if India succeeds in unlocking its human capital and its vast manufacturing potential through the reforms that prime minister Modi has put in place, it will become one of the growth engines of the world.

There is a lot of work necessary to achieve that objective. Clearly, investment in infrastructure is critical. For us as a global automotive and industrial supplier with superior technology, I see significant potential in India.

With our strategic concept ‘Mobility for Tomorrow’ and the way we are set up in the country, we are well positioned to seize the upcoming opportunities. Already today, India plays a key role in the development of two-wheelers and smaller horsepower tractors for global requirements.

As part of the Schaeffler Global Technology Network, Schaeffler’s location in Vadodara has been awarded certification as a Schaeffler Technology Centre (STC). STCs are local centres of technical expertise in the regions. With highly qualified engineers and a defined range of services, Schaeffler is pursuing its requirements for offering the same high standards of customer support worldwide.

In the past few years, Schaeffler India with its subsidiaries FAG, INA and LUK has locally managed double-digit growth. In 2014, we grew by 15 percent. I think it is doable to continue with such growth in the coming years or, to say it differently, we have the potential to double the business in the next five to six years. (Schaeffler’s India turnover for 2014 stood close to Rs 3,500 crore).

For that, we will invest approximately 100 million euros (Rs 764 crore) in the coming three to four years. We also plan to double the R&D headcount to over 300 engineers.

One of our first initiatives was to rearrange our set-up in Asia Pacific. We established Greater China as a separate region and carved out the region called Asia Pacific which includes Japan, South Korea and the South East Asian markets.

Given the experience that we had, it does not make any sense to steer and govern, as we had done before, India out of Shanghai. So India was clubbed with the region Europe with its own regional CEO. This helps us to focus and allocate resources better than before.

Schaeffler with its theme ‘In the region for the region’ has a focused regional growth perspective. With our quest to be amongst the top strategic suppliers both for the automotive and industrial business divisions within regions, we have a strategic investment plan to improve our operations, product portfolio as well as local competency footprint.

There are some megatrends which reflect where the global automotive market is headed. What new opportunities do you foresee?
While things like connected cars and autonomous driving will clearly emerge, the role of the conventional combustion engine will remain strong for quite some time.

From our point of view, alternative powertrain concepts like hybrid and electric cars will emerge. However, if we want to reduce CO2 emission in a sustainable manner, it is critical to further optimise the combustion engine in terms of fuel efficiency. The Schaeffler Group with its LuK, INA and FAG product brands is perfectly positioned to offer solutions for all powertrain concepts, both in the automotive and industrial division.

Going forward, what type of transmission systems will gain popularity in India – AMTs, ECMs, DCTs, CVTs and ATs?
We have witnessed in the past that select OEMs had offered four-speed automatic transmission systems (Grand i10, Xcent, Ritz, Dzire) even in the B- and C-segment cars but with very little success. Recently, however there has been a gradual upshift for demand of transmission automation specially after the launch of an AMT in February 2014 (Celerio). Since then, we have seen the launches of a few A- and B-segment cars with AMT solutions (Celerio, Alto K10, Nano GenX and Zest). Other OEMs have also begun providing CVTs (Micra) and DCTs (Polo) in B- and C- segment category passenger cars.

As a result, amazingly, all possible transmission automation technologies have been launched in India. In our opinion, each automatic technology will find its space as per end consumer preferences and willingness to pay for it as per the vehicle segment category.

We have recently concluded a concept clinic research primarily to understand the most optimum transmission automation technology for India, driven by the fact that the Indian market and consumers do pose very challenging requirements to strike equilibrium between three dimensional criteria namely – fuel economy, total cost of ownership and comfort.

Schaeffler has a strong footprint with all these technologies and through our strong network we can provide most optimum solution to OEMs in India. To act proactively, we launched in February 2013 a demonstration vehicle, ‘Schaeffler India Concept Car’ equipped with an affordable ECM (electronic clutch management) technology for smaller vehicle segments.

What are the various transmission components that Schaeffler makes in India and the ones it plans to make in India soon?
Schaeffler has technologies both at the front end and back end of the transmission, and most of these technologies are provided through a local manufacturing footprint. Products in the front end of transmission are clutch release bearings, clutch release systems, clutches. Moving towards gearbox (back end), we potentially supply needle bearings, ball bearings and shift system (shift tower) locally.

We do also have localisation plans for synchronizer rings which currently we supply through imports. So, we have a wide range of offerings to work with OEMs for manual transmission development. Besides that, through our strong global network, we can also support sturdily in the development of components, sub-systems and systems for transmission automation right from ECMs to ATs.

Is the company a supplier to two-wheeler OEMs? What does it supply and who is the biggest customer in this space?
India is the second largest global market for two-wheelers with an annual production of over 16 million per year. Of this number, more than 90 percent are below 150cc. There is a requirement for high performance with benchmark cost. Schaeffler India offers a comprehensive INA, FAG and LuK product portfolio to cater to this sector.

With the development of an engineering hub for motorcycles below 150cc, Schaeffler is working on a concept bike with new products such as wet clutch, one-way clutch and low friction ball bearings. With mobility for tomorrow as a theme, Schaeffler is arguably present in all segments of mobility. In India, we enjoy a potent presence even in the two-wheeler business segment, strategically present with all two-wheeler and three- wheeler manufacturers, both local as well as global OEMs who have operations in India.

How is the aftermarket division faring for the company?
In the automotive segment, we cater to both OEs and organised aftermarket requirements. With a strong distribution network, even in remote locations in and around India, we are able to drive awareness of genuine parts. However, still counterfeits are a concern and we need a stronger regulatory framework to eliminate it.

Proximity to customers is one of the crucial requirements in aftermarket. A strong dealer and distributor network will help us grow in India.

In order to meet the growing bearing requirements of MSMEs, we also launched our rural and retail initiatives. Our aftermarket dealership network covers over 200 distributors across India (72 automotive and 136 industrial). We also offer regular technical training sessions to our dealers to upgrade them on technology.