Saju Mookken, Country Manager of Magneti Marelli India, speaks to Shobha Mathur about expanding to Sanand in Gujarat, growth of Automated Manual Transmissions in India and improving the supply chain, and also eyeing new business from two-wheeler OEMs.
With 2014 drawing to a close, how do you visualise Magneti Marelli’s roadmap for the future?
We are increasing our investments and level of commitment in India. As part of that expansion, we are setting up a new plant for lighting at Sanand in Gujarat. It is the first time that we are entering the state as Magneti Marelli does not have a presence there so far.
We will cater to carmakers who are establishing their plants in the state; for instance, Maruti Suzuki and also Ford India, the two OEMs which will have a significant four-wheeler presence in the state. Of course, General Motors has been present in Gujarat for a long time.
The MMI plant will be commissioned by mid-next year with construction currently underway. We are building capacity and increasing our presence across India in terms of investments and people in a significant way. At present, we have on board about 2,200 people of which 20 percent are in R&D and we have been significantly increasing the manpower in R&D.
A new technical centre, which has come up in Manesar, employs close to 350 people; we will further raise the head count there to 500 staffers by next year-end. We have been working on the technical centre for the past couple of years but over the last year it has considerably increased in size.
MMI has understood that development of local products and technologies is necessary to be affordable and to be able to deliver the end product to the customer in a reasonable period of time. The time to market is also getting shortened, so we need to be ready to meet that.
Can you elaborate on what the tech centre is currently developing in terms of products and technologies?
It is a Technical Centre wherein we have a growing presence of electronics as well as engineers, not only undertaking work for India but also supporting the global requirements of Magneti Marelli. Having said that, we also have applications and R&D centres in each of our joint ventures and plants in India.
Both the Maruti Celerio and Alto K10 house Magneti Marelli’s AMT solution. What are your plans to grow this product portfolio in India?
It has been an interesting product and you will soon see more cars equipped with Magneti Marelli’s solutions in A, B and C car segments. Our AMT solution is fitted in the Alto K10, an A segment car; the Celerio which is a B segment car and the Tata Zest in the C segment and more news will unfold in due course of time.
We are the market leader in AMTs and globally we hold more than 50 percent market share in AMT solutions in passenger cars and light commercial vehicles of up to 6 tonnes.
We have a presence in Europe, Brazil, China and India, as also in the Japanese market which is moving towards AMT, a new phenomenon because Japan is normally a continuously variable technology market but now they understand the value proposition of AMT solutions for customers.
You will also start seeing it in the ASEAN market as AMT expands its presence. Being a market leader, we have an advantage and have been investing in this technology since the last 20 years. The first AMT solution may have started in the Formula 1 application way back in the late 1980s, but we have been further developing it, upgrading it, improving it so that the technology has been evolving.
Will the AMT solution also be seen in the LCV segment in India soon?
At the moment our AMT solution is in three cars but we have a first-mover advantage in India. It is also true that the only solution in the Indian market today is ours. But that does not mean that there is no competition.
Magneti Marelli was facing capacity constraints in supply of AMT kits to Maruti Suzuki for the Celerio and now with the Alto K10 joining in, has the status been streamlined?
I would like to put it this way: Typically, the passenger car market was driven less than 1 percent by automised transmissions – CVT, AT and AMT till last year. Now with the launch of the AMT solution in the first Maruti Celerio, the AMT offtake is almost 40 percent of the Celerios sold in the market.
From the point of the view of the OEM, the success has been unprecedented. A consumer looking at an AMT solution two years ago may not have been as excited as he is now, so going forward, I believe that in a stable small car market comprising the A,B and entry level C cars, the market should accept an offtake of 30 percent plus and in some cases 40 percent which is significantly higher than the rest of the world.
In China, in particular models, the offtake may be 40 percent. This solution is interesting for the Indian market and has had a huge success based on which there are constraints in the supply chain. In the automotive world, we cannot ramp up capacities overnight and that is why car development takes 2 -3 years in terms of building the engineering side, development side and supply side. But we are making all efforts to support the surge in Indian demand and in the last few months the volumes of AMTs have gone up.
In fact, all possible steps to improve the supply chain not only in India but globally have been taken and we are trying to ramp up capacity to the extent the customer requires but there is always a lag.
Going forward, we have decided to localise the production as at present the AMT kits are imported. We have already started the construction of a plant in Manesar and should be able to roll out the first production by end-Q2 2015. On one side, we are doing whatever best we can to increase supplies in the short term and on the other, we are working on building up capacity in India. And with this, we believe, we will be able to serve the market more effectively.
Will MMI continue to import AMT kits to supplement local production when it goes on stream?
In business you need to do this. You can’t one day stop the tap and start a new tap. For a certain period of time, till production stabilises some handholding is required, it is very normal. When we started with ECU production, there was a period like this and then we moved to full production.
So the company is doing whatever is needed to increase the capacity, both from a global supply perspective as well as a local supply perspective. Looking at the current demand, we are putting a certain capacity that will be able to meet the short- to medium-term growth.
Will you be a supplier of AMTs for the Maruti Suzuki LCV Carry as well which is slated for an early 2015 launch?
Maruti Suzuki will launch several vehicle models from now on as will other car manufacturers, so definitely we have a role to play. We are a Tier 1 supplier and we follow the customer.
The AMT has transformed the way we look at transmissions today and is a big game-changer. There are various reasons for it, starting with cutting down of fuel emissions. Moreover, we have a solution that is even better than manual transmissions. Fuel economy is bettered, and in addition, serviceability and the life of the clutch is also improved as this is an automated gear change clutch engagement and disengagement so manual interventions are absent. This makes it better for the end user.
I have spoken to some users who are quite happy and we need to compare it with manual rather than ATs. Besides, AMTs offer value propositions for end users – the differential pricing between the MT and AMT Celerio is around Rs 40,000 and around Rs 45,000 for the Alto K10, so there is incremental cost to the end user driven by two reasons – the cost of the kit is lower and second the modification that is needed in manual transmission cars is limited.
In a conventional AT, a lot of changes are required to be made by the carmaker in the cars that raises investments. The AMT solution does not involve too much of costs so this is a big advantage and there is also a sport option. For India’s bumper-to-bumper traffic and increasing self-driven cars by women and the youth, AMTs make a lot of sense.
Magneti Marelli produces about an annual half-a-million AMTs globally. In India we have just started supplies and the market is also very different. Some markets like that in Europe are already matured, Brazil is doing good numbers, there is a surge in China while in Japan volumes have just started to come.
In India we see a big growth potential and are in the phase of localising components. Some parts of the AMT solution will, however, be imported till production stabilises. But our joint venture with Maruti is committed to further investments. (Maruti and Suzuki together hold 49 percent stake with MM holding 51 percent stake in the JV).
Is there any difference in the AMTs supplied for the Maruti Celerio and the Alto K10?
The two cars are not the same so the kit is also not the same. The technology, however, is the same but specifications vary from car to car in terms of the driveability, weight and characteristics of the vehicle so the software solutions are also different.
Magneti Marelli started this journey with a different generation of AMTs in 1986 with the Formula 1 Ferrari, then came Maserati, Aston Martin and overall very high-end cars as also Chery in China.
Going forward, what are MMI’s targets in terms of revenues and focus areas?
We will end 2014 with a revenue of Rs 1,300 crore compared to Rs 1,100 crore last year. During the next four years, we hope to more than triple our revenue to Rs 3,500 crore based on businesses won and products going into production by 2016-17. Together with our joint venture partners, we have so far invested Rs 800 crore since the start and are committed to very significant investments in the future as well as we have different plans under construction.
We are developing the product engineering team as well as in electronics, powertrain, infotainment, telematics and navigation portfolios. In terms of lighting, there are advancements with lamps moving from conventional to LEDs, projector headlamps and light guides; so there will be more investment in
MMI was working on telematics boxes for CVs besides e-call…
The e-call is an emergency call solution and carmakers who are exporting cars to Europe and Russia need to have an emergency call solution. In some markets there is a regulation for it and in some markets a regulation is expected. Carmakers are preparing themselves to meet this regulation which is based on e-call, like a T-box and helps the driver in case of an emergency or a crash to reach help.
We are already working with Indian carmakers on it for exports but not for the Indian market. Since we tend to follow a global solution, maybe it may come here in future.
What is the status of the Hero JV for fuel injection systems and when is the new plant expected?
The JV is taking shape and we are setting up a new facility for supplies to Hero MotoCorp at Manesar. The first application will be in the market by the beginning of next year for commuter bikes in the mass market.
Would you look at expanding this partnership to cover other products?
Our current relationship is for fuel injection systems for two- and three-wheelers. If Hero wants to source other products, we will do so as globally we supply immobilisers and electronic instrument clusters to manufacturers. We will be happy to support Hero and other customers with our product range.
Today our two-wheeler business in India is limited, so we are looking to increase it and the Hero JV gives us the flexibility to supply to others as well.
Will the JV supply to Hero overseas as well from India since they plan to set up assembly units abroad?|
We have to look at the overall cost competitiveness of fuel injection systems and the demand of those markets. This product is still not in the Indian market and if Hero decides to export bikes fitted with them, we will be happy to supply the fuel injection kits. n
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