At a time when OEMs are cutting down and/or delaying decisions to spend on the upgradation of dealerships and service workshops, garage equipment manufacturer ATS Elgi is investing heavily into equipment and processes for, what it calls, the ‘inevitable boom’.
The Coimbatore-based company has recently pumped in a little over Rs 10 crore for a new sheet metal fabrication line and a robotic welding line. While the sheet metal line has already been put to use, the robotic welding line will become operational in February 2014. Apart from this, the company has also hired fresh hands to head its R&D team in Bangalore.
Ramesh Ponnuswami, managing director, is very clear in justifying this spending at a time when austerity has become the buzzword across industry. “We’ve got the confidence about the future, but we need to manage the present and in managing the present, we don’t want to compromise on the future,” says Ponnuswami on a mildly philosophical note. Further rationalising the decision to insert capital into R&D, Ponnuswami adds, “What is strategic and important to our customers is absolutely sacrosanct.” This also means giving its R&D centre in Bangalore the capability to run simulations using complex software.
Streamlining R&D
ATS Elgi’s R&D department dons multiple hats at the same time. With the 22 engineers segregated into Engineering (Four members) and New Product Development teams, the process is extremely streamlined. “Most of the projects are initiated by the marketing team after receiving feedback from customers. The NPD team also pitches in, but it’s mostly for technology upgrade,” says Rajendran P, senior manager – research. “The team in Bangalore mainly runs tests and simulations running CFD, FE tests and thermal analysis,” he adds, “before we put the designs into prototyping at our Coimbatore plant.”
The company’s products are mainly of three kinds – fully imported, locally assembled from kits and locally manufactured. Apart from having to come up with fresh product ideas, the R&D department also needs to make sure indigenisation is done for the right product. “It’s an evolutionary process,” says Ponnuswami, adding, “If we have a source that we can depend on in terms of product quality and the fundamentals of the company, we’re comfortable to work there.” Even though he maintains that local production is the ideal scenario, he admits that having to assemble out of kits “is a nice middle ground.”
It’s fair to presume that the company has learnt its lessons when it comes to deciding what to import and what to locally manufacture. A few years ago when hydraulic lifts were gaining traction in India, ATS Elgi decided to import the product from a Chinese manufacturer. “We burned our fingers there,” admits Anand Cyril, head for marketing &sales. “After rigorous testing and validation, we put it to further real-time tests at our customers’ place. That’s when problems happened,” Cyril says. The main bone of contention was aftersales support, which wasn’t available from the Chinese manufacturer. “So we decided we’d make the product ourselves. We launched our hydraulic lift two years ago and it’s doing very well,” he says.
When quizzed further, Ponnuswami gives an example of a product that has gone through the evolutionary process of being a fully imported product to one that was assembled to one that was eventually locally manufactured. “The AC recovery machine was one such example,” he says. “We used to import it from Europe. However, when some of the specifications changed in the product, we didn’t get enough support. The changes might be simple for them, but it was massive for us,” he adds. “It could be as simple as something like the thickness of the copper tube or the route it takes, it’s a huge change for us,” Ponnuswami says. Apart from this, he lists support for spare parts and products obsolescence as challenges.
Another challenge he faced was something that affects the underlying principles of a company. “When we have failures in the field, we like to get to the crux of it. We do root cause analyses to find out the issue, but this might not be what our supplier wants,” he says.
Hence, after realising that there was enough to play for in the field, the company made the decision to indigenise the product. Still, this doesn’t stop the company from importing certain components. “You can’t imagine the pricing advantage we get out of this,” he says. “Now,” Ponnuswami says, “we look for someone over whom we can exercise a bit of clout,” adding optimistically, “we spend a lot of time evaluating who we want to partner with.”
Export focus
However, from being an importer of products till a few years ago to becoming a strong manufacturer, ATS Elgi has come a long way considering that its products are now sought after in Europe. “We’ve started with our lifts, which is our bread and butter,” Ponnuswami remarks. Even though exports accounted for 5-7 percent of the Rs 144 croreturnover in 2012-13, they will definitely grow, says Ponnuswami. The company is just days away from procuring CE certification, something that is mandatory for selling certain goods in the EU. “They’ve agreed to certify us in principle. It’s just a matter of getting the documentation done,” he adds. He also notes that the CE certification will have a rub-off on their domestic products.
Interestingly, Ponnuswami says that the times are changing with respect to how Western manufacturers source from the East. “Now, manufacturers have set up facilities in China and they offer their customers two different propositions – one of a product manufactured in the West and one in China,” says Ponnuswami, cautiously adding, “They still have their processes in place even in China.”
“It’ll be nice to see the export ratio going up, but for that we need to be able to compete with commoditised Chinese price point,” he says, “and there lies the challenge.” Potential customers have expressed interest for the auto car wash and the under-chassis washer and Ponnuswami says “we might ship out samples soon.”
The company also recently revisited its interest in two-wheeler garage equipment segment after walking away from the space due to ‘operational reasons’. “The segment is too fragmented for us,” says Ponnuswami. “Now,” he continues, “there’s some consolidation happening and the dealerships are getting more mature.” ATS Elgi is now actively working with Hero MotoCorp and Honda Scooter & Motorcycle India with their lifts and pneumatic tools. “Of course, it’s early stages and we are playing catch up as of now,” he adds.
However, the market scenario is extremely challenging. “By nature we’re tightly intertwined with the auto industry. There’s usually a lag between the auto segment suffering and us taking a hit and this is typically because of the delay in investment decisions in dealerships. Network expansion plans start slowing down, that’s when we take a hit,” he explains. “Currently,” he espouses, “there’s a lot of dealership activity being put on hold and we’ve been seeing this since January this year.”
While the consensus among both OEMs and vendors still remains the same – that of long-term prospects in India being excellent – nobody seems to know when or how the trigger will be released. “We are taking baby steps awaiting that boom,” concludes Ponnuswami.