NSK Bearings to roll into the aftermarket
Already a large supplier to a host of carmakers in India, the company is set to enter the aftermarket with its bearings for both two-wheelers and passenger cars.
In a bid to access a larger market, car manufacturers are expanding their product range in India with newer vehicle platforms. This offers opportunities to suppliers to benefit from this new product range by stepping up supplies.
NSK Bearings, a leading supplier in India, is targeting new passenger car platforms from OEMs like Maruti Suzuki, Toyota Kirloskar Motor and Honda Cars India. Further, expanding its business in India, the company is working on plans to enter the Indian aftermarket business in the second half of this fiscal year.
As part of its mid-term strategy, passenger cars will remain its core segment but it is actively looking at growth in the two-wheeler and commercial vehicle segments, albeit on a smaller base. NSK Bearings, which sees the automotive market as its largest revenue contributor with 75 percent, has traditionally been strong with Japanese OEMs in India; Maruti Suzuki is its largest client.
“We have just drawn up our mid-term strategy which continues to be based on new platforms coming out from our existing customers including Maruti Suzuki, Toyota Kirloskar Motor and Honda Cars India. We are now aggressively looking at gaining access to Indian manufacturers. We are already supplying to Mahindra & Mahindra but are looking at other carmakers too,” says Ajit Krishnan, CEO, NSK India.
In India, NSK Bearings is a leading supplier to Maruti Suzuki, Hyundai Motor India, Toyota Kirloskar Motor, Honda Cars India, Mahindra & Mahindra, Fiat Chrysler Automobiles India, Volkswagen India and Tier 1 suppliers like Subros, Gates India, FCC, Lucas-TVS and Sundram Fasteners, among others. The company's bearings business has recorded a turnover of Rs 650 crore in India, the majority of it coming from OEMs.
NSK started its India operation with an office in 1997, slowly expanding with a steering column joint venture with Rane Group. This was followed by setting up a bearing factory exclusively for the Indian market, mainly with a view to tap larger growth opportunities.
Its new strategic move is to foray into the Indian automotive aftermarket for bearings, having taken time to understand the nuances of this market.
To position itself better, NSK is trying to enter both the two-wheeler and passenger car bearings aftermarket. However, in a bid to command better prices, it is working on a unique model that will give it some leeway. “We are now entering the aftermarket and being a late entrant in the segment, we are working on some unique supply chain models to able to enter the aftermarket. I think it will be so unique that it will be a game-changer in the industry,” says Krishnan.
The company plans to roll out its aftermarket business, initially from South India, in the next six months, and then gradually all over the country in the next three years. This is a significant move for the company since until two years ago, the sole focus was Japanese OEMs.
“The aftermarket is a huge opportunity. It is one market where there are still some regions where quality gets respect. I think we can make big gains with our quality products and can exploit the strength of our products in the aftermarket. We are also receiving an overwhelming response from prospective retailers,” elaborates Krishnan.
While the company is optimistic about growth in its passenger car aftermarket foray, it acknowledges that the growth won’t be sudden and the focus will also be on the two-wheeler aftermarket which has considerable potential. NSK today has a little over 5 percent market share in the domestic automotive market and is ranked fifth in India.
Talking about the challenges, Krishnan says the automotive market is extremely competitive and price sensitive. “Customers expect annual and long-term price reductions. Therefore, we have to be extremely smart and lean in our manufacturing base and adopt best practices. We already have good skills but are extremely focused on reducing our costs. This is done by skilling our people at Japan and help from external experts,” says Krishnan.
Enhancing the technical footprint
Being an OEM supplier, the company works with manufacturers from an early stage of product development. However, as most Japanese vehicle platforms are developed in Japan itself, a lot of the groundwork happens there. Now NSK is developing an Indian technical centre to enhance its application and material engineering, field return and investigation capabilities. Clearly, a lot of focus is underway on making India as a key asset.
“In a market like India, we have proved our technical superiority and we have the best product with technology, quality and endurance. But there is a need to develop the value addition that we can give to customers in India by developing a good engineering centre in India,” remarks Krishnan.
Taking steps towards this objective, the company has set up its India technical centre with 8 people and plans to hike this headcount to 30 by the end of this fiscal with local leadership and development capabilities.
NSK sells almost all its products in India and nearly 40 percent of the automotive bearing volumes are catered to by the Indian factory. However, the company imports bearings from its key factories in Japan, China, Thailand, Europe and the US. The company says it offers competitive prices on its imported bearings but the focus is now increasingly on more localisation.
NSK supplies bearings to OEMs for various applications including chassis, transmission and engine; for suppliers, the applications are found in magnetic clutches, fan pulley drives and fuel pump bearings from Tier 1 suppliers. For motorcycles, it has all the bearings including those for transmission, engine and wheels. For commercial vehicle chassis, it has tapered rolling bearings.
At present, NSK’s Indian plant is running at about 55 percent of its total capacity but with new orders and new products in the pipeline expects to reach 75 percent capacity by 2018.
Speaking about future opportunities in the Indian market, Krishnan says, “One of the biggest opportunity is the upcoming Euro 6 norms. We are seeing big investments being made by companies in India and we will be able to cater to them. Also, with anti-lock-braking system
(ABS) being made compulsory in certain categories of passenger cars and two-wheelers, we foresee another opportunity although our biggest strength will remain passenger cars.”
However, pressure on costs and a highly competitive market scenario pose a challenge to the company. To tackle this, it is making sure it offers best-cost products with all the quality manufacturing practice and continuous value engineering to reduce costs.
INTERVIEW: Ajit Krishnan, CEO, NSK India
Can you elaborate on your India business operations?
I look after the Indian operations and we have three companies in India. We have NSK 100 percent as a sales company, a factory in Oragadam, Chennai, which exclusively manufactures automotive bearings and is 97.5 percent owned by NSK and 2.5 percent by ABC. The third company is our joint venture with Rane Group for the steering column business.
Are all three independent businesses?
Yes, all these three companies are independent entities and we have a governing virtual organisation called Indian headquarters. I am the CEO of the Indian headquarters and also CEO and managing director of the sales operations of the bearing division and look after all the three companies. So I have dual responsibility.
Besides this, we also sell bearings imported from all NSK factories across the world including China, Japan, Thailand, Europe and the US.
How much does automotive contribute to overall revenues?
For bearings we do about Rs 650 crore top-line, both for industrial and automotive; of this 75 percent comprises automotive business. NSK is basically a Japanese company and all the major Japanese OEMs including Maruti Suzuki, Toyota and Nissan buy from us and we are very strong with these OEMs.
Within automotive, 85 percent of our business comes from passenger cars. We are not very strong in commercial vehicles because we cannot manufacture bearings for CVs in India due to an understanding with our joint venture partner. In the two-wheeler segment, we have a limited presence with OEMs like Honda Motorcycle & Scooter India and Hero MotoCorp.
Are you working on new vehicle platforms with OEMs in India?
Yes, we are working with Indian car manufacturers and there is a large volume which will come as these new vehicles get ready for production and commercial launch. There are new platforms coming up from Maruti Suzuki. We already have a whole lot of business from them and this will take care of our capacities for the next three years. We don’t want to be just a Japanese supplier, so we are opening up for local OEMs.
What are your growth projections for the overall market?
In the OE business we will grow about 15 percent CAGR in the next three years because we already have a significant presence in the passenger car segment. In the industrial segment, we foresee our share of business to grow almost double because we have started focusing on this sector very recently and our market share in the industrial segment is about 2 percent.
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