‘As a percentage, India may be the fastest growing market but its base is too small’
Vivek Chaand Sehgal, chairman of the Samvardhana Motherson Group, speaks on investing in R&D, striking the right balance between cost, safety and lightweighting.
Vivek Chaand Sehgal, chairman of the Samvardhana Motherson Group, speaks to Shobha Mathur on investing in R&D, striking the right balance between cost, safety and lightweighting.
The Samvardhana Motherson Group (SMG) exhibited a wide range of products and technologies at the Components Show 2016. Is the company currently working on introducing any new technologies or adding to its product basket?
Of course. Motherson never rests on one product. We are always increasing the products per car. So obviously new technologies are asked by the carmakers and new acquisitions are always happening. We acquired a lot of companies, so all those new technologies were on display.
In which product segments does Motherson need to further step up its strength?
This is not based on us but on where the carmaker sees the new opportunity, where it wants Motherson to support them so that is the place where we actually look for. In most cases, the carmaker has already appointed the company we should be tying up with and what particular technology they want us to bring.
Increasingly vehicle manufacturers are asking for components that are lightweight, high on quality and in line with international standards. How far is the component industry and SMG able to meet these requirements?
It depends on what you feel is the future and if you believe electric cars are the future, then definitely you want them lighter. But when you are allowing speeds of 60kph, 70kph, 80kph and if at 60kph you come to a dead stop, you are about 2.5 or 3G (gravitational force). So you have to be very sure you balance the weight, safety aspects and the engines put together. The need is therefore to come up with new materials and that is where we are doing very well.
In fact in the Renault Kwid, the entire instrument panel has been made by the Motherson Group, so we want to take the weight and cost off. And as Mr Osamu Suzuki said, if you can save 1 gram, it is a big saving. I believe lightweighting is a way to the future but one cannot underestimate safety; safety is also very, very important.
How does SMG strike the right balance between cost, safety and lightweighting?
We do this with a lot of design and with a lot of knowledge of materials. One of the good things is that because we are a big buyer of plastic raw materials, we have the chance to work together with the material makers and new combinations are taken out, so compounders then come to us.
For different applications, different raw materials are used. The four door trims that we are supplying the new Mercedes-Benz E-Class are actually 22 percent lighter than their predecessor and is a complete combination of wood, plastic, and a new material altogether and is 100 percent globally supplied by Motherson.
Is there a vast difference between what OEMs are demanding in componentry overseas compared to in India?
Everybody has their own requirements. In Germany, there are no speed limits so cars are driving at 300kph but in India there are speed limits and you can drive at around 100 or 120kph. Obviously, safety and other requirements will change. One cannot say that what is good for one country is good for others as well. It is not. Every country has its own limitations and opportunities.
In terms of R&D, what more is required to take the component industry to the next level?
I cannot talk about everyone else but as far as we are concerned, we are putting in a lot of money in R&D in all the technologies and companies that we own 100 percent. We are looking at application R&D, at product R&D, and at raw materials. There are a lot of efforts that are going on in these areas. I think in the future the world has to adapt to environmental needs as well as safety needs, so a company must offer all these options to carmakers. In India too, new carmakers will ask for similar designs and components soon. They will catch up.
What are the new innovations underway at the Samvardhana Motherson Group?
We have a multitude of companies and each company has undertaken some basic innovations. We have created a new company called Mothersons Innovations. All the innovations emanating from the different companies as well as people from those companies meet often so that they can offer a comprehensive package to a carmaker.
In which areas are the innovations being targeted?
They are into mirrorless cameras, 360 degrees, innovations on special materials, special cladding. There is a beautiful AMG Mercedes front bumper that has diamond-shaped things. It is an exclusive product from Motherson and one must see how it has been done by us. It is not chrome-plated.
VW recently recognised the Motherson Group as one of its key suppliers. What does it signify for SMG?
For us the customer award is a clear recognition that we are on the right path. We have also won the supplier of the year award from General Motors this year.
Why does the Motherson Group have such a large exposure to German car manufacturers alone? Are you not looking at diversifying with other car brands as well?
What normally happens is that you acquire a particular company and whoever are the customers of that company becomes your biggest customer. Maybe in the last two acquisitions we were more German- centric so it appears like that. Maybe the next acquisition will be more America-centric, Japan-centric or China-centric. We are always in talks for further acquisitions.
How is the global recovery compared to the Indian markets?
They are already in the top of it. The US has done fantastically well, Europe month after month is doing better. One or two countries may be up or down but that is part of life. As a percentage, India may be the fastest growing market but its base is too small.
What is SMG’s roadmap, going forward?
The roadmap is two-fold – one is the organic way which involves very high growth led by the carmakers globally. The second way is through new joint ventures and acquisitions that are happening. Normally till the time we have signed it, we don’t talk about them. But all are related to the automobile. We are doing multiple due diligences and things like that.
SMG has set a target of reaching a $18 billion turnover by 2020. How far is the Motherson Group on track to achieving it?
In 2015 we declared our results and have fared very well. For the first time we crossed 41 percent ROCE. We have more than achieved our target. In 2010, we were a Rs 10,000 crore company and had set our target for Rs 40,000 crore. We have actually hit Rs 43,000 crore so we are above our topline. In bottomline also the results have been very well appreciated. We have set very ambitious targets of $18 billion or becoming a Rs 126,000 crore company by 2020 and are on track.
How much of the revenue will come from the overseas markets?
We would have hoped that more would come from India but the speed of growth outside India would be higher, anywhere between 7-12 percent.
What are the current trends in India and globally especially since SMG has a large global exposure in its product line?
I think the Indian consumer is a very informed customer and honestly knows more about what is available outside and wants to see the same in India as well. So really you don’t have to guide them. They know exactly what’s there and if you see the offerings that are coming from the carmakers those are proof that the consumer is king and the carmaker is there to take care of the consumer. The trends are very much similar globally and India is in no way less. The new cars that are coming are fantastic.
Any challenges that you foresee in the automotive industry?
Not understanding the automotive industry and the relevance of the industry to a country is perhaps the biggest challenge. What we see recently, I think there is much more study that is required and then some decisions could have been taken.
VW, which is SMG’s key customer, was recently involved in a lot of issues related to emissions violations. Is the Motherson Group in any way impacted by it?
We are agnostic to the engine and have nothing to do with it. We have always said that our numbers will do the talking and our results are just around the corner.
The government has announced the transition of emission norms from BS-IV to Euro VI by 2020. How does SMG view opportunities in this segment?
We have a lot of our joint venture partners which have those particular technologies but I think the carmakers are pretty satisfied that they would be able to handle this area, so they have not asked us at all. As the government will put the new emission regulation roadmap, carmakers will stand up to the challenge as they have all these cars and engines in their repertoire. The government is quite confident that they will provide the basic amenities and infrastructure that is necessary. These engines are very sophisticated so the cost will move upwards but one small mistake and you could have an engine failure or not performing to the level you want it to. So a lot depends upon the infrastructure.
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