Bosch on the fast track with India operations
Bernd Bohr is confident that increasing dieselisation augurs well for his company, and is keen on increasing stake in Mico, reports Murali Gopalan.
Bosch has been particularly bullish on India and recently announced its intent to make an open offer that would increase its stake in Mico to 80 percent from the current level of 60.55 percent. Recently, it bought out the Kalyani group’s stake in Kalyani Brakes and the company has since been rechristened Bosch Chassis Systems India. “Over the last five decades, India has been a very good market for Bosch. We have invested heavily in the past and are doing so now because of the growth potential. We are happy with flagship company, Mico and are keen on increasing our stake.
“In the case of the former Kalyani Brakes, which is now Bosch Chassis Systems India, we reckoned it would be a good thing to take over the management (from a joint venture to majority stake for Bosch). This is because with new systems coming in like ABS and more brake system integration, we thought it would be appropriate to change the ownership structure,” Bohr said.
He added that the company was very happy with the former setup and that it had been a good relationship with Kalyani but it was important to keep pace with the times. According to him, even with the increased stake in Mico, there would be no attempt to dilute the Indian entity’s brand. Bohr said that while efforts would continuously be made to increase the Bosch branding effort in India in terms of awareness (for both the auto and non-auto business), he was conscious of the fact that Mico brand stood for value and equity in the Indian aftermarket. “It is never our intention to do anything rash and jeopardise it,” he reiterated.
Earlier in his speech at the briefing, Bohr referred to the fact that common rail sales in India (and China) would increase to 1.3 million by 2010. Interestingly, when he was in the country a year ago, he had projected CR sales of one million units keeping in mind the rapid pace of dieselisation. “We have changed our projections upwards though I would like to mention here that, as a company, we are conservative with our forecasts and this is built into our DNA. We do not believe in being brash.
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“The increase to 1.3 million has to do with the investment programmes of Indian OEMs (in diesel engine manufacturing) on the one hand and the strong overall growth of the market. We see stronger diesel growth in India,” he said. In India, Mico Bosch has four facilities in Bangalore, Naganathapura, Jaipur and Nashik. Asked if the company would now consider new locations, especially in the context of the Tata car mandate and the huge numbers planned, Bohr replied that it was too early to make any comment at this stage.
“This is something which we are constantly evaluating. We already have four locations and are rationalising operations and getting more products out of each plant and higher output per employee. In the case of our products, we need very specialised, high precision machinery, processes etc and this is not something that can be put anywhere.
“We need training programmes for the workers (it is three years in Germany) and this is similar in Mico. Any decision on a new plant will need lean time and for our products, we need good economies of scale. This is because of the expensive machinery, training and our plants are typically larger than most competitors,” he explained.
Bohr added that logistics costs alone would not determine the need to set up a new plant. “For instance, a brake booster should possibly be closer to the customer because there is a value package involved. In the case of a common rail injector, which is barely 400 grams, this is a different matter and it can be easily transported,” he said.
Bosch has also been using India as a vital sourcing base and plans are on to increase this significantly. The Nashik plant, for instance, exports high precision parts used in the CR injector to Korea. Once again, Bohr cautioned that the company believed in a step-by-step approach and that the best bet was to go ahead with products that were locally produced. “This is the only way to build up volumes and consider worldwide production. We are doing this with the distributor pump which is now four years in India and could extend this to the common rail injector in good time.
“Once you have set up a supplier for local production and are using this part locally, you have a close control over quality and it is easy to increase volumes. If you are trying to buy some 10,000 km away, it may not be the best option,” he said. Interestingly, the media representation included journalists from the BRIC countries, Goldman Sachs says could be potential economic superpowers by 2050. These countries are critical to Bosch.
As in the case of India, Bosch has been around in Brazil for 50 years too and its products included diesel injection, brakes and electrics. ABS systems have been added to this list. In Russia, Bosch kicked off operations 12 years ago in Russia with spark plug production and has now got into engine management systems too. Bohr is relatively more upbeat on India. “What we like about India is the continuity of the growth pattern. Investments in India have grown continuously quite unlike Brazil which has had its share of inflationary pressures. Russia has the resources and the question is when it will hit the big league.”
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