By setting up a manufacturing facility in Morocco which will go on stream in 2013, Steel Strips Wheels Ltd plans to supply to a host of European OEMs.
“Morocco has a good automotive market. Moreover, it will provide a gateway to Europe,” Dheeraj Garg, managing director, SSWL, told Autocar Professional. He says the company’s export target for 2011-12 is 1.8 million wheels and three million in FY’13.
The Moroccan project will result in considerable benefits to SSWL, mainly logistics, and help it target the four-million car market in some European countries. It is estimated that nearly 70 percent of the current transportation costs from the Chennai plant will stand reduced. Additionally, the Moroccan government has provided incentives to the project.
SSWL will be a single-source supplier to Renault’s four-wheel-drive MUVs and SUVs in Morocco, generating around euro 28 million for the company. SSWL already supplies steel wheels to Renault in Brazil, France, Spain and will also supply wheels for the Renault Logan and Dacia in Russia. The order to be implemented by end-2011 will involve supplies of 20,000 wheels per month. Total supplies over a five-year timeframe will work out to around 1.3 million wheels, generating foreign exchange of over euro 30 million or Rs 190 crore.
Brazil in focus
The wheel maker is also optimistic of selling 180,000 wheels to Renault Brazil against an earlier estimate of 1,20,000 for the Q2 FY 2011-12 due to rising demand for the Logan. This order size is likely to further increase in Brazil as the Logan gains in popularity.
Further, Steel Strips Wheels has been supplying to PSA Peugeot Citroën in Europe for the past four years and is likely to win its India orders as well. It is believed that Peugeot is considering new wheels for the Indian market that it will produce in its Sanand plant. The first meeting in this regard with SSWL has being scheduled for the first week of December.
Besides, SSWL is tying up fresh foreign orders for supplying steel wheels for different models of Volkswagen in Brazil and Germany, Audi in Germany and Fiat in Italy and Brazil. The order will be finalised within the next three months and will involve supply of over a million wheels to the European car manufacturers at these overseas locales, says Garg.
Earlier this year, an order was etched for supplying wheels for commercial vehicles to Volkswagen in Germany and Argentina. The contract was pegged for around 100,000 wheels per year with a foreign exchange revenue of over euro 1.7 million annually. The contract is expected to run over five years. In addition, business worth $ 38 million was concluded with Volkswagen Group company Audi last July.
Other contracts in SSWL’s bag include supplies of steel wheels to BMW Germany for its new models to be launched in 2013 and 2014. BMW’s three new models will draw 265,000 steel wheels annually and supplies will start from November 2013 to its Oxford, Leipzig and Regensberg plants in Germany. The projected order size is $ 32.65 million. SSWL is already supplying steel wheels to BMW's Oxford plant for its Mini model.
Meanwhile, SSWL has also realigned its focus towards the trailer and truck market where growth has been positive due to transportation requirements. The company has bagged a long-term contract with a leading trailer manufacturer Krone in Germany for supply of 60,000 wheels per year, worth an annual Rs 25 crore. Supplies will commence from November 2011 from SSWL’s Jamshedpur plant. The wheel rim manufacturer is also in talks with other OEMs in the trailer industry for similar volumes like Cargobull in Germany with new orders to flow in during the first quarter of next year.
Burgeoning India business
To cater to increasing demand for steel wheels, SSWL plans to set up a new plant in Pune spread over 40 acres, according to Garg. The plant will manufacture 0.7 to one million large wheels for OTR vehicles and will involve an investment of Rs 180-200 crore to be funded through equity participation and loans. A final decision on whether SSWL will opt for the Morocco facility or the Pune plant first will be taken later this month.
With the renewed focus on growth in the domestic and export market, SSWL is optimistic of clocking a topline of Rs 1,200 crore in FY’12, a 15 percent uptick over last year. Export sales are likely to cross 1.5 million wheels in FY’12 from 0.92 million wheels in FY 2010-11 and 0.46 million wheels in FY 2009-10.
The Chennai plant, which has been operating as an export hub, has recently upgraded its production capacity to six million wheels per annum for passenger cars from 2.5 million wheels earlier. The increased capacity will target the export markets of South America, Europe as well as domestic customers like Hyundai Motor India. SSWL is also considering exports to South East Asia, which is not yet tapped, from its Chennai plant.
Due to the strong growth in the CV market, SSWL is establishing a 0.5 million capacity truck wheel rim plant in its Chennai facility to cater to the requirements of Daimler Chrysler and Ashok Leyland apart from Tata Motors. The proposed truck wheel rims plant was originally to be commissioned by March 2012 but will now be delayed by a few months due to depressed market conditions.
The component maker has also received repeat export orders from trailer manufacturer KFZ, Austria a part of the Alcar Group. The business is valued at euro 0.3 million with supplies to begin in the first quarter of next year. KFZ is one of SSWL’s oldest customers in the winter wheels market of Europe. The company is supplying wheel rims to this group since 2007 and hopes to bag a large volume of business with the Alcar Group.
The company’s Jamshedpur plant, which was inaugurated in July last year, has been supplying steel wheels to Tata Motors from December 2010. It has a production capacity of a million tube type and tubeless wheels annually.
The Punjab-based SSWL is a supplier to the passenger cars, MUV, tractors, trucks, OTRs and two- and three-wheeler segments. It has three production facilities with nine million wheels manufactured for passenger cars at Dappar (near Chandigarh), six million wheels manufactured at Oragadam (near Chennai), with truck wheels produced at Jamshedpur.
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