‘Electric mobility is for real and there are no maybes to it.’
Sandhar Technologies’ co-founder and MD reveals the company’s growth plan which bets big on auto electronics, e-mobility, autonomous tech and on expansion t remain relevant in a VUCA world.
Jayant Davar, Sandhar Technologies’ co-founder and managing director, reveals the company’s future growth plan which bets big on auto electronics, e-mobility, technology for autonomous vehicles and on expanding its manufacturing footprint abroad to remain relevant in a fast-changing, disruptive world. An interview by Mayank Dhingra.
What do you have to say about the current dynamics of the Indian automotive industry?
At present, the industry is going through a metamorphosis on account of certain regulatory changes that are happening, mandate changes and then, there are technology changes as well. Today, in India, the biggest talking point has been electric vehicles (EVs). Also, there’s a painful area in that the country has said no to hybrids.
While it is inevitable for India to adopt EV technology, EVs just cannot suffice to be the only solution to the problems being faced today. Tomorrow, there could even be fuel cell vehicles, which can also bring down the emissions to zero. While the government has given the mandate for moving towards electrification, rather ambitiously to achieve complete electrification of automobiles by 2030, it should instead set limits to the permissible emission levels, thus allowing industry to brainstorm and create new technologies to meet those tough standards.
Since India is a signatory to the Paris Accord, like other countries which include China, America and the European nations, the Indian government should also give us emission targets like CAFE norms, and not simply dictate a mandate, electing one technology to be the sole game-changer.
What technology is going to come and play its part should be the prerogative of independent players and innovators, and the government shouldn’t have a mandate in that area. I am reiterating this at the cost of sounding repetitive that the government should be involved in the business of saying that we, as a country, must give out CAFE norms, and not what technology should be implemented. Also, if companies meet those levels, then they should be entitled to tax benefits and incentives.
Is the 2030 electrification target achievable?
My personal belief is that complete electrification is not going to happen by 2030. The world over, the best-case scenario directs towards roughly 35-40 percent share of EVs out of the total vehicle sales in the next 10 years.
To say that India will be at 100 percent, given the size of the country, its demographics and the infrastructure (one needs to have charging stations), it looks quite ambitious. EVs are gaining strength and recognition largely in Europe and America, while industrial countries like Japan, where there already are more charging stations than fuel pumps, are still not sure about electric technology and have not yet completely ruled out hybrids or fuel cells too.
In India there are other concerns as well. At one end, there is the buzz on EVs and on the other, there is the upcoming BS VI leapfrog transition. So, in a nutshell, so many changes are happening at the same time.
The government has also done some brilliant work in mandating some safety regulations. These, I think are remarkable. For example, the need for passive as well as active pedestrian safety, rear parking sensors, and improvised seatbelts.
If OEMs like Volvo can come forward and lead the charge into the EV space, what uncertainties do you still foresee?
Volvo has done some dramatic work in terms of electric technology. Five years ago, globally, battery cost was around $ 1,000 per kWh. Today, most of it has dropped down to one-fourth in the range of $200-$250. A large part of that work has only been done in the last two years. Tesla has announced that its battery now costs $100.
Now, if the price of battery is going to fall such sharply, who knows how the model is going to work tomorrow? In any case, powertrain companies and suppliers all over the world need to get their heads out of the sand, and realise that everything is not hunky dory and they might lose a lot of their business, if not all. They need to be careful in the amount of investments they make in the coming times. For example, they need to ensure minimum investments for the BS VI transition and get the returns as quickly as possible.
From a future product perspective, what is Sandhar Technologies’ growth game-plan?
We have taken a very clear view that auto electronics is where it’s all going to be in the coming times. Case in point, in our legacy business areas, we are moving towards smart key systems in the locks division and developing cameras in place of rearview mirrors. Our investments in the past two years have majorly been towards developing electronics for the future automobile.
How has Sandhar's growth been since the year 2012?
I would not like to quantify it from a five-year perspective. Sandhar’s aim has always been to outdo the industry. If we look from a wider angle, since inception in 1987, we have grown by almost 30 percent on a CAGR basis, with growth coming in from organic, inorganic, and brown-field acquisitions. Our revenues, which in 1987 stood at Rs 300,000, are slated to close between Rs 2,150-2,200 crore by FY2018, projecting close to a 20 percent growth YoY, in terms of top-line.
What is your future vision for the company?
There are three elements in the company’s future plans. Firstly, the immediate plan, which, on a daily basis, drives us to be better tomorrow, in every respect than what we are today. The second is a short-term plan until the next 2-3 years. There, we have an overall direction of being into auto electronics and to commercialise that as soon as possible.
Some of it has already started, some is building in; we aim that some portion of our revenue and some profit should be contributed by this new area of products. As one enters into a new business, it is the top line that is valuated, but you also need to delve deep inside and develop a bottom line as well. Some of our traditional businesses need to transform into the same thing, with a healthy dose of electronics; some of them also need to move and upgrade in terms of technology or productivity, while remaining conventional.
Our casting business, for example, is more or less going to remain the same in terms of the fundamental process and the materials used, but we could see an increase in the number of parts coming out in the same time, to battle costs, productivity and competition. Last, but not the least, there is the longer-term vision, which is to find areas and niches, as to where we can take advantage of futuristic technologies that the world is going towards.
Now, does that point towards EV technology? Yes, definitely. We have a Group of Strategy that works and decides that how much should we contribute or devote ourselves, or these resources towards aligning to being a part of the electric mobility space. Some of it could also be fuel cell technology, personal air transportation strategy (drones). Since these technologies are not farther than 5-10 years away, I think these make for us to consider them as our future possible areas of operations.
How much of work has already gone into auto electronics?
A substantial amount, I would say. Sandhar has invested close to Rs 250 crore in the last three years towards developing auto electronics. Starting last month, our JV with Korea’s Jinyoung Electro Mechanics (JEM) for Audio Video Navigation (AVN) panels has commenced production from the Chennai plant and parts are being supplied to our customers.
We have a tie-up for rear parking sensors, where we should be able to see operations start by end of CY2017 or early CY2018. We went into production of relays last year, which is now in the phase of building volumes. Antennae are another range of products where we will be establishing our strengths as we bring in new technology to the product.
Are you looking to make headway in the autonomous technology space?
A large part of what we are doing under auto electronics focuses on sensors and radars, and we are looking to make some contribution and develop technologies for autonomous cars. These new businesses are taking in investments today, but we believe that they will give us good returns in the coming future.
Will it be from a local perspective or would you aim to supply these technologies on a broader scale?
While Sandhar largely is a domestic company driven by a vision of becoming the best in what we do, we do have a global strategy as well. We have offshore plants and we set up a new plant in Mexico last year. A new one is being planned to come up abroad in the next year and since it still is under debate, so I cannot disclose further details. But yes, we are planning to come up with another new foreign plant in 2018.
Around 14-15 percent of our current revenue comes from overseas operations and we would like to enhance it further and see it reach to a quarter mark.
We recently learnt about Sandhar being a supplier to Tesla. What parts are you supplying to the EV maker?
I think Tesla is setting up new standards in every possible way, in a similar fashion as many other OEMs are. We, as a big supplier, are trying to enter that business. So, any relationships like those are new or will be newly formed, and hence I am not at the liberty to disclose what we are supplying to anyone.
Some of it could encompass our legacy products and some of it could be new auto electronics that fall within the sphere of power electronics. Domestically, this is also seeing us to try and work on body control modules (BCM), power management systems (PMS), and battery management systems. We are trying to be agnostic to vehicle powertrain and thus most of what we are doing is going to be agnostic of IC engines, EVs, fuel cells, et al, and will be used across fuel platforms.
What is the time-frame that you have kept yourself to be ready with these technologies and where will the supply focus be, in the domestic or the foreign markets?
We want to be ready to supply, as soon as we are asked to do it. We want to have the front end of technology, agnostic to where it is going to be supplied. Even if we were to supply these futuristic components today in the domestic market itself, some 25 percent of India’s cars are already getting exported every year, majorly comprising small cars.
Since full EVs are also going to largely be small because of the cost involved, and India having a strong foothold in small cars, so, even if these cars are built in India, and we supply these EV technologies domestically, it is pegged to be a big number to keep focus on.
Do you foresee smart technology making its way to the shopfloor In India soon?
Of course, India has been talking about Industry 4.0. That means looking at robotisation more seriously. It is straightaway going to dramatically enhance productivity, alongside improving the quality by not allowing low-spec parts to filter through. Moreover, this is going to percolate down to the Tier 2 and the Tier 3 suppliers, and up their output quality.
Hence, they’ll also need to understand productivity and standardisation norms better. This would mean bringing strong focus upon talent and training as well. Since quality is a given today, what remains is the question of how efficiently or productively can you belt out that standard. Every company is consistently working towards enhancing productivity and improving costs. Our relay plant sees some good level of automation already.
With technology, do you also feel that human jobs are at risk in the future?
Yes, jobs will be lost and automation is the order of the day. There will be two aspects of work handling. While the mechanised work will be outsourced to robots for higher productivity and consistency, humans, on the other hand, will take care of the thinking part and will still be relevant in decision making. Artificial intelligence is still some time away from seeing robots think on their own. While there will be losses of conventional roles, a lot of new jobs are also going to spawn in the coming future.
So, is the auto industry headed downhill as a job creator?
If we as an industry, today produce a certain quantum of vehicles, in future when the volumes grow, and with robotisation being in mass adoption, we would still be creating jobs, but the requirement would run a step lower than the proportion of growth.
What is your opinion on Automotive Mission Plan II?
It is going to change. The AMP-II spoke about some numbers and now that the government has announced the roadmap towards adopting EVs, the numbers are bound to change. They will also change with the improvement in public transport and setting up of smart cities.
So, right now it is very difficult to say where the AMP is. If there are not many technology changes and personal transport remains the way it is and new public personal transport including Ubers and Olas do not see some exponential growth, only then it could remain unfazed. But, AMP the way it was from 2006 until 2016, whether it will be efficient in the same way for the next 10 years will depend a lot upon government policy. For example, the upcoming 2020 BS VI norms would mean cars becoming more expensive by 20 percent and we will then see people holding on to their cars for a longer time. So, everyone is going to take decisions by striking a balance between technology and regulations. So, I honestly do not see volumes in actual to be higher than projected because of a lot of uncertainties and many of them are going to be related to people being hesitant in buying.
How do you see the overall impact of GST on the auto industry?
I think it’s been positive, and everyone is now within the system. There was just no question or debate about the fact that GST was necessary and I am proud of my government to have implemented the reform. The auto industry has benefited because it has largely been an organised sector.
With ACMA also having suggested that Tier 1 majors would need to hand-hold their smaller vendors, have things fallen into place?
The overall system has become a lot more efficient. While most companies have faced a glitch or the other, those are expected to happen, when, in the history of mankind you see a country of a billion people overnight shifting into a different ambit of economic structure altogether. The automotive industry will pass through this in less of a skirmish. We have spent a few crores of rupees in trainings and streamlining the businesses of our Tier 2 and Tier 3 vendors. But, majorly, it is business as usual.
Do you also see logistical benefits coming in with the advent of the GST?
There have been logistical benefits as well, which are positive in every respect. Whether it is in terms of ensuring a better environment with fewer emissions at inter-state check posts, less corruption, and of course, the speed. I think a lot of fillip will be given to high-speed trucks, which are already seeing a 30 percent improvement in transit times.
What is your message to the Indian automotive components industry?
This year’s ACMA AGM is on the topic of electric mobility and I want to tell people that it is for real. It is time for those who have had their heads buried into the sand to wake up and realise that this phenomenon is here to stay and if you do not do something now, then, there would be panic. You’ve got to find ways and do things which are necessary.
If you are in the powertrain business especially, be very careful about the investments you’re about to make. Electric mobility is for real. While there are no maybes to it, those could only be to the extent of electrification, whether it is going to be 30 percent or 100 percent.
Finally, Mr Davar, what do you do to unwind?
I play golf!
This exclusive interview is published in the September 1, 2017 issue of Autocar Professional
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