It’s not all over yet for ICE component makers: Mahle

As the world quickly transitions to the zero-emission mobility space, the global automotive component maker, Germany-based Mahle is banking on India to serve the global internal combustion engine markets in the coming decade and a half as a key production hub.

Martin Wellhoffer, Mahle's corporate executive vice president of sales, told Autocar Professional, his company's long-term business strategy, similar to that of several Asian OEMs, would be to consolidate its ICE manufacturing facilities into India. India continues to be one of the outperformers for Mahle globally and ended in 2022 with €400 million euros posting over 48 percent growth, with incremental orders coming from zero emission mobility business along with conventional business growing at a faster clip, the German auto component major sees its revenues from India to grow to €600 million in the next three to five years.

Interestingly, Mahle Group has recently bagged a multi-million-dollar order from a leading Indian OEM for its e-mobility programme, but the component major wants to ensure it is amongst the "last man standing" with regard to internal combustion engines (ICE) in the anticipation that India would be among the last countries to completely make the transition.

The context for Wellhoffer's statement comes from the fact that several major global auto component suppliers, such as Denso Corporation, Bosch, Delphi Technologies, Continental AG, Magna International, ZF Friedrichshafen AG, among others, are making rapid transitions towards e-mobility, by integrating their existing products and services into the e-mobility market. This leaves a large space for ICE market consolidation, particularly in heavy-duty vehicles such as trucks, which are likely to be the last to see complete transition in India and a few other global markets.

Brazil, seems to be the other example, which will see a switch to EVs much later due to its extensive reliance on ethanol-blended auto fuel.

"We are seeing some of our competitors go out. However, we will stay," he remarked. To be sure, Mahle on its part is also offering specialised e-vehicles components. Wellhoffer emphasised that Mahle has 160 plants worldwide, and that as the global auto industry transitions to e-mobility and other forms of alternative fuels, it makes more sense to expand and innovate existing facilities rather than increase their numbers.

'It makes more sense for the companies to look for alternative sources of supply chain management, and India offers a viable option in that regard as the cost of operating operations in China increases due to various reasons' Martin Wellhoffer Vice President of sales - Mahle, 

"Size matters, not the number of plants," he explained. Mahle has traditionally had strong expertise in the areas of air management, filtration, thermal management, and electronics. Mahle components are installed in one out of every two vehicles worldwide, generating nearly €12 billion in annual sales.

The company's operations are spread across 30 countries, employing more than 71,000 employees, and there are around a dozen R&D centres, the company claims. MAHLE has 13 manufacturing units which represents all 4 business units in which MAHLE is present globally. "So, we are already invested and already there (India)," he continued.

Thrust towards more localisation in EVs
While Mahle's long-term strategy remains firm, it is determined to not miss the bus when it comes to e-mobility. Though the percentage of parts supplied to electric vehicles remains minuscule at present, the company intends to increase it to over 20 percent over the next few years. To be sure, it already started rolling out components such as traction motors and controllers for electric two-wheelers in 2020, which the company's management claims were among the first in India.

Mahle is targeting the rapidly expanding EV component market, which is expected to reach around $ 10.77 billion by 2030, growing at a CAGR of close to 22.1 percent between 2020 and 2030. Further, to make its presence felt in alternative fuels for commercial vehicles, Mahle in September last year, showcased its new SCT electric motor (Superior Continuous Torque) at the IAA Transportation trade fair in Hanover, Germany. In layman's terms, SCT provides extremely high continuous power and is therefore especially suited to commercial vehicles. The company expects to get rolling globally sometime around 2025 and will be followed by India later on.

The development seems significant, considering internal estimates prepared by the company suggest that close to 30 percent of all commercial vehicles worldwide will be purely electric with batteries or fuel cells. The company also presented at the same event its other newest system solutions for battery electric drives, fuel cells, and cleaner combustion engines, which can also be fueled with hydrogen.

India a bright spot, amidst gloomy global demand
Mahle has had its best year ever in India in 2022, with total revenues exceeding €400 million, up from roughly €270 million in 2021 — nearly 48 percent rise.

Wellhoffer attributed the increase in demand to a strong domestic demand despite a number of obstacles such as supply-side difficulties, inflation, routine bottlenecks, and others. He noted that, to his relief, India remained largely uncoupled from the challenges arising out of the geopolitical trends.

This happened even while other major global automotive markets, such as those in Europe, the US, and China, contracted on account of headwinds arising out of pandemic related lockdowns, the Russian-Ukraine war, and semiconductor shortages, to name a few. In fact, India's demand bounced back to the point that it overtook Japan, as the world's third largest light vehicle market in 2022, led by a strong bounce back in demand for personal mobility and last-mile deliveries, post pandemic. "We see a strong market in India, and hopefully it remains," Wellhoffer added further.

Focus on India to increase as Mahle adopts China plus policy like many others
As the global automotive sector, just like most other industries, adopts the "China Plus" policy in order to de-risk its supply chain, Mahle is looking to increase its focus on India. According to Wellhoffer, it makes more sense for the companies to look for alternative sources of supply chain management, and India offers a viable option in that regard as the cost of running operations in China increases due to inflationary pressures, rising labour costs, and Covid-19-induced lockdowns, among other factors.

For instance, Mahle's cost of conducting research and development (R&D) activities is rising, which has led the company to expand these activities in India. The company's R&D centre in Pune currently employs 400 engineers and another 400 people in non-engineering departments like finance, information technology, etc., but it now plans to grow by higher double digits. "We will put more of it in India in the future," Wellhoffer said.

This feature was first published in Autocar Professional's February 1, 2023 issue.