2013 Automotive Lighting Special - UNO Minda bags Datsun supply order

While Nissan plots its India assault with its revived Datsun marque, Indian suppliers to the reborn brand are a happy lot. Fresh orders in their kitty amidst a slowing market are giving them much reason to cheer besides opening new vistas for growth and business opportunities.

Lighting equipment happens to be among the foremost components to be finalised by automobile manufacturers while zeroing down on the car design. With aesthetics and styling of headlamps and tail-lamps increasingly swaying customer choices in new buys in terms of model looks, other features are finalised thereafter.

One of India’s automotive component biggies mandated to supply lighting solutions for Nissan’s Datsun brand is the UNO Minda Group (through its lighting division, Minda Industries) that is to supply lamps for three of the new low-cost models to come from the Renault-Nissan stable. Leading the charge will be the Datsun Go for which UNO Minda will supply tail-lamps, not only for the Indian version but also for its Indonesian counterpart as well. The Indonesian Datsun Go will go on stream around six months after the Indian version is launched in early 2014. Tooling and samples are currently ready for the Indonesian model.

For the next two models after the Datsun Go, which are slated to be launched sometime in 2015, the lighting equipment supplier will provide all lamps including small lamps and interior lamps. To cut down on the logistics cost for this big order, the component maker has set up a new plant in Renault Nissan’s Suppliers Park II. The Park that became operational a year-and-a-half ago is located about 12km from the OEM’s Oragadam manufacturing facility.

Minda’s new lighting facility near Chennai will have a production capacity of 400,000 sets of headlamps and tail-lamps for the three Datsun models with 200,000 sets dedicated for headlamps and tail-lamps each.

The plant that will have gone into production by end-August involves an investment of Rs 50 crore funded through a mix of internal accruals of the lighting division and borrowings from the corporate office. Spread across five acres, the plant has a built-up area of 6,000 square metres. The facility will also cater to the requirements of new models of Toyota Kirloskar Motor in the form of interior lamps.

Expansion in Karnataka, Gujarat plant on the anvil

Speaking to Autocar Professional, Naresh Warrier, CEO of Minda Industries, does not rule out the possibility of setting up another facility at Bidadi in Bangalore for another of the company’s key customers – Honda Motorcycle & Scooter India (HMSI) – if the volumes justify. The Japanese two-wheeler manufacturer recently flagged off operations at its third plant in Narsapura in Karnataka with its mass commuter bike, the Dream Yuga and the Activa scooter rolling off the lines initially.

UNO Minda currently supplies tail-lamps for the Honda Activa made at Narsapura from its Pune facility with supplies expected to reach 1,000 units daily in a few months. It will also be a supplier to HMSI for its third model to be made at Narsapura that is likely to be a motorcycle model. Its supplies to India Yamaha Motor are routed to the two-wheeler maker’s Surajpur plant.

Also on the radar is a new manufacturing facility at Gujarat, probably in the next fiscal, to service its key customers who are setting up base in the state and to facilitate just-in-time supplies. Logistics costs would be much higher if they came from another location. Maruti Suzuki, whose plant is slated to become operational sometime in 2015-16 but is now delayed due to the slowdown, is one of them.

The UNO Minda Group has already signed a Memorandum of Understanding with the Gujarat Industrial Development Corporation for 20 acres of land in Maruti Suzuki’s suppliers park at UghrojpuraMandal in Ahmedabad district. Furthermore, all its current clients are either setting up new facilities or extending their existing plants in the state.

Earlier this year, NK Minda, chairman, UNO Minda Group, had told Autocar Professional that “as the volumes of these OEMs increase, we will step by step set up a factory there and increase its production capacity.”

Among the first products to be produced from the Gujarat plant will be those that are currently supplied from the Manesar and Pune plant – switches, arms and lighting – with the Group ready to acquire more land if required.

Banking on ASEAN markets for growth

Meanwhile, PT MindaAsean Automotive (an equal partnership between the Ashok Minda and NK Minda Groups) has set up a lamp manufacturing facility in Indonesia that went on stream a year ago to service customers in the ASEAN region. Slowly, all the manufacturing for this region will be shifted to Indonesia from India with tooling undertaken at the Group’s design and development centre at Taiwan.

The Indonesian facility is pegged to soon kick off supplies of tail-lamps and cabin lamps for Suzuki’s new Indonesian car that is a derivative of the Indian Wagon R. The lamps have been designed and samples have been sent to Suzuki for approval. Besides Daihatsu and Suzuki, other customers include Nissan and Kawasaki. Minda is also in talks with Toyota and Yamaha in the region for their upcoming models as this will help utilise the capacity of the new unit.

In terms of its Indonesian experience, Minda’s switches business has notched good gains and the company is now slowly garnering a significant share of the lighting business. Warrier says the market has good growth potential as the Indonesian government plans to implement a low-cost green car project and is driving this initiative through with proposed incentives. As a result, many car manufacturers have lined up new small car launches in Indonesia. Hence, the topline of the automotive market there is expected to grow quite dramatically over the next few years. Furthermore, Indonesia offers growth opportunities in two-wheelers as well though dips in growth are also a reality. Last year, the market experienced a dip due to some policy changes but overall the growth rate has been higher than India’s, notwithstanding the slowdown.

The Group is also extending its reach in LED lighting and, according to Warrier, is in fairly serious talks with a couple of companies that should reach fruition by end of this calendar year. The targeted partners are in Asia and could either evolve as a joint venture or as a technical collaboration for sourcing technology for developing LED headlamps and tail-lamps. Currently, LEDs are imported with key suppliers being Philips and Osram. Some are also sourced from a local source.

Going forward, ASEAN is expected to play an important role with the possibility of inorganic growth in this geography also on the radar. Active work is currently underway towards sewing up an acquisition for acquiring a gamut of lighting solutions including LEDs. “We are talking to a couple of potential targets in the Western part of the world, Europe onwards. It should be finalised during this fiscal and will be a medium-size company,” confirms Warrier.

This acquisition will gain global market access and technology for UNO Minda. A likelihood of the overseas company planning an exit from the lighting business in order to focus on other priorities is not being ruled out. The cost of the acquisition is still being worked out at the Minda end while it continues to strengthen its footprint in Indonesia during FY’14.

The UNO Minda Group also sees much growth in Vietnam where it is hopeful of bagging good business in the two-wheeler market over the next 12 months. Thailand too is under its scanner albeit the Group plans to thoroughly check it out by early 2015.

LED-ing the way

In the domestic market, UNO Minda has been developing LED tail-lamps for many of its customers. Its R&D setup is based at Sonepat in Haryana and since the Group does not have any tie-up in lighting at this stage, all the development takes place in-house. The company’s goal while developing new solutions lies in being cost competitive by leveraging frugal engineering (a term coined by Carlos Ghosn, president and CEO of Nissan Motor Company), especially for cars made in India. Minda’s mid-term strength draws on offering reasonable features in lighting solutions at a low cost. While LEDs are currently present mostly in lamps fitted in high-end models, the technology is expected to become common in the years to come and percolating to B-segment cars and even in headlamps over the next 8-10 years.

The supplier is also strengthening its product portfolio in interior lighting and is in talks with several customers for developing map lamps. It developed the map lamp for Toyota a couple of years ago. These lamps are seeing use of microprocessors and are set to become more advanced in future. Therefore, the need to keep pace with the evolving technology.

Light guides, which is external lighting, is perceived to be another emerging and a popular alternative in many new- generation high-end cars globally. Going forward, light guides are likely to become more popular and Minda is girding up in this sphere. Though it is not present in the commercial vehicle segment in terms of lighting products, servicing Maruti’s upcoming small commercial vehicles, slated to roll out from the carmaker’s new Gujarat plant in 2016, will be a start.

But for the moment the lighting division has a strong order book with new business from Tata Motors, Nissan Motor India, Honda Cars India, Maruti and Toyota Kirloskar Motor. Its Manesar facility is fully dedicated to Maruti Suzuki with the carmaker opting for traditional designs and standard lamps. Earlier, this plant also made some lamps for Daihatsu; this operation has now been shifted to Jakarta.

Lighting being a fairly topline-driven business thrives on high investments. With the industry experiencing difficult times, both in India and overseas, UNO Minda’s lighting division has faced its share of downturn over the past year.

However, it is optimistic of a turnaround in the sector and of posting a turnover of Rs 1,000 crore by 2017-18 with around 15 percent revenues coming from the ASEAN market, the key growth drivers there being Vietnam and Indonesia. The proposed lighting acquisition will also contribute its bit with the domestic market both OE business and aftermarket bringing up the rear. Minda’s lighting division is expecting to grow at a CAGR of 26.97 percent till 2015-16 in its OE business. Despite the ongoing slack in the market, the lighting division is hopeful of mustering a Rs 300 crore turnover by the end of 2013-14, up from the existing Rs 270 crore. Currently about Rs 50 crore comes from the aftermarket, with the share expected to grow in pace with the overall growth in revenue.

Overall, given the various new model programmes it has been enlisted for, both in India and abroad, Minda Industries is well placed to capitalise on growth. Right now it is in consolidation mode and is beefing up its R&D and technological capabilities.