Plastic Omnium sees heavy business for lightweighting in India

Plastic Omnium Varroc has recently bagges the order to supply bumpers for the Skoda Rapid

Autocar Pro News DeskBy Autocar Pro News Desk calendar 19 Dec 2011 Views icon5156 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Plastic Omnium sees heavy business for lightweighting in India
Barely 10 minutes into our meeting, Gagandeep Singh, head of Plastic Omnium Varroc’s (POV) base near Pune, excuses himself for 45 minutes. A German OEM located close by has called him to a meeting. After all, there’s a lot of scope for business from the German group, which recently gave the business for bumpers for the recently launched Skoda Rapid saloon from its group company Skoda Auto India to Plastic Omnium Varroc.

While Singh and his team try to bag new orders, they are also working on some aggressive growth plans. “We are looking at some acquisitions for which we have earmarked Rs 200 crore,” says Singh.

There could be more than one acquisition of plastic exterior maker/s by POV. “Not just bumpers but we are looking at four to five other product verticals like structural parts, chassis parts, thermosets, so that we can enter into an OEM with multiple products and not just one window of supplying bumpers,” adds B P Shiv, chief marketing officer, POV. According to Shiv, the company is focused primarily on passenger cars and will subsequently focus on commercial vehicles. Over the next eight to nine years, POV will introduce Plastic Omnium’s entire portfolio in India.

Apart from Rs 200 crore, about Rs 160 crore will be spent on organic growth. POV will set up two new plants. “On an average, each plant requires Rs 80-120 crore of capex, depending on capacity,” says Singh. A plant each will be set up in Chakan, near Pune, and in Sanand, Gujarat. The next phase of expansion may take place in Chennai to cater to manufacturing bases in the South. The next two plants are expected to come up by 2014.

Target: fast growth

POV’s aggressive plans have to be seen in the context of the growth prospects in India and China. In China, Plastic Omnium has set up 12 facilities over five years.

It has started relatively late in India and doesn’t want to take too long to achieve the parent company’s international vision. “Our vision for any market is to become the largest bumpers supplier. We want to be the leader in exteriors. In five to six years, Plastic Omnium tries to be in that position in a country,” explains Singh.

In India, Singh and his team have targeted the top slot in plastic exteriors by 2015. Towards that objective, POV has grown from a Rs 7 crore company in its first year to Rs 46 crore in its second year, with a projected turnover of over Rs 130 crore in its third year.

Plastic Omnium expects the growth of light vehicles in the BRIC countries (Brazil, Russia, India and China) to reach over 65 percent between 2010-2015. It will keep on investing to accompany and supply its local and global customers’.

The company, just two years old, began its innings by supplying plastic parts – 13 in all – for the Chevrolet Beat. One of its latest additions is also for a Chevrolet product. Autocar Professional has learnt that POV is set to supply to Chevrolet’s new midsize car which is slated to hit the Indian market in the first half of 2012.

The company is currently building its business by bagging orders for new models and acquiring others from competitors. Meeting stringent cost targets is also helping, says POV. “The fact that we have received six repeat orders from a customer like Mahindra and a part, which is the unpainted bumper (for the Gio) – the cheapest kind of bumper in India – that we are supplying to M&M in Haridwar, speaks about our QCD (Quality, Cost, Delivery) performance. POV supplies around 1,500 Gio bumpers a month. The most prestigious order it has bagged so far is for all the plastic exterior products for the Mahindra XUV 500, the company’s 'global SUV' that has got off to a great start.

Inergy, a Plastic Omnium-owned company in India, supplies the plastic fuel tank in the XUV500 from M&M which, incidentally, is also POV’s single largest customer.

With most OEMs already having a longstanding relationship with their suppliers, acquiring business from another supplier makes it more valuable. The challenge for POV has been to balance the cost-technology ratio in addition to convince prospective customers to switch.

Shiv is busy trying to “penetrate” into OEMs through “advanced technology without added cost”, which is why he speaks more like a member from the technical team rather than a marketing man. “I spend more time with the OEMs’ R&D than with the purchase team. I have met Tata Motors’ purchase team once or twice maximum but with R&D, 10 times more,” says Shiv.

Plastics revolution

With the Indian automotive industry set to climb up the emission regulation curve and also adopt new regulations, 'plasticisation' in the industry is almost imminent. POV wants to cash in on this opportunity. The company says it can offer components which can replace metal parts in an automobile and help reduce weight by up to 110kg.

After advanced technology in moulded plastics, POV plans to introduce thermoset plastic technology next. Thermoset plastics offer high strength and are used mainly in commercial vehicles and structural parts, like floors in passenger vehicles. Themoset plastics can undergo the electro-deposition process, which enhances the corrosion resistance of metal parts.

Utilising India for development, R&D

Plastic Omnium’s JV in India has helped the French company to leverage the low cost base that India offers. Singh cites the example of the plastic fender. “If this project was being done 100 percent in France, we would have incurred at least Rs 3.5 crore more than what we incurred now," says Singh.

Savings are also met by tapping the services of other Plastic Omnium subsidiaries. POV had earlier planned to design and develop a particular component in France but then decided to do it at Plastic Omnium’s Chinese base. “There was another savings there of Rs 2-2.5 crore,” reveals Singh.

As the company’s operations expand in India, it will increasingly strengthen its R&D capabilities to contain costs. Plastic Omnium Varroc will set up a technical centre in Pune during the first quarter of 2012. The goal is to have a high level of localisation right from the beginning of a project. For the plastic fender, the company started with 100 percent expertise coming from France. “At the end of the project, 10 percent was done in France and 90 percent in India. From 2008 to 2011, this was the journey,” says Singh about the growth curve in the engineering capabilities of POV.

A tour of POV’s Chakan plant also gave me an insight into the efforts that POV is putting to strengthen its production and engineering capabilities. Incidentally, Autocar Professional is the first publication to be given access to POV’s facility in Pune. Coincidentally, POV commissioned its third 3,000-tonne injection moulding machine the day we visited the facility. This machine is being used for a bumper that will go into a new model slated for a 2012 launch.

According to Plastic Omnium, the utilisation rate of thermoplastic and composites in cars is expected to double in the next 10 years. India, projected to be the third largest market for cars and light commercial vehicles by 2020, will have a host of new regulations that would require OEMs to cut weight and reduce emissions, will play an increasingly larger role. All of which is good news for POV.
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