‘We have already started some advance SCR activities with some OEMs in India.’

Nicolas Diehl, Head of Segment SCR Modules (Fuel & Exhaust Management Business Unit, Powertrain Division), Continental, France, speaks to Kiran Bajad on how the components major plans to engage with Indian vehicle manufacturers on supply of SCR technology in the wake of the imminent shift to BS VI emission norms. 

Can you throw some light on the Selective Catalytic Reduction (SCR) business as part of Continental’s powertrain division?
Today, the SCR segment is relatively small in comparison with other businesses in Continental but in the next 4-5 years this segment has incredible growth potential. There is a technical challenge and a growth challenge for automakers; all OEMs today use SCR systems as they are pushed by regulations for cleaner vehicles and to protect the environment.

Continental acquired Emitec last year. What benefits will this offer to Continental?
Through the acquisition of Emitec, we have got a lot of knowledge in terms of technology which we didn’t have; this catalyst business was unknown for Continental. I see a lot of synergies; for instance, we started production of the SCR module in China in June 2015. This wouldn’t have been possible for Continental; we took the parts from Emitec and used existing Continental facilities in China to manufacture. All the facilities, infrastructure quality and logistics was there. It has been done in a couple of months and we are now seeing the real benefits of Emitec being part of Continental. It helps expand our business, offering local solutions to local problems and things are much faster now instead of being Emitec alone. Similarly in India, both the companies were present and are now working together.

What opportunities does the Indian market offer to Continental and are you targeting all the OEMs for SCR solutions?
We are working mainly for one OEM today and the collaboration started almost a couple of years ago. The SCR system is not an easy issue – it is pushded by regulations. Sometimes things seem slow but once something happens on the regulation side, everything has to go extremely fast. So some kind of anticipation is needed, otherwise you never catch up. We have already started some advance activities with some OEMs in India and once the regulation comes then, it will become mandatory and they will need faster solutions.

As the world moves towards Euro 6, SCR becomes mandatory. Will this drive growth for Continental globally and in India?
The demand will increase everywhere. Currently, Europe is on Euro 6 and we are developing our portfolio which is Euro 6 compatible. We also integrate additional features which are not explicitly required in Euro 6 but we are offering best-in-class products and technologies. There is so much pressure on excellence in exhaust management, especially after the Volkswagen dieselgate issue, that it is very important for suppliers like us with the requirements going to be extremely stringent as we move forward.

How realistic is the Indian government’s goal to adopt BS VI emission norms for all vehicles by 2020?
I think we have to take this really seriously. After the discussions we have had with various OEMs in India, I think they are considering this extremely seriously. On the OEM side, they need to clean up as far as their engine roadmap is concerned. It will involve a lot of work and rationalisation for Indian OEMs. They need revisit their engine roadmaps and define what we need to fulfill the regulations. The impression they gave us is that they are taking this issue very seriously.

Do you think OEMs and suppliers will be ready for this change of regulations?
Technically it is feasible and the technical solution already exists. We are not developing just one product because the investment is quite high, so we try to develop one generic platform. Typically in our portfolio, we have products covering commercial vehicles and passenger cars for Euro 6. Principally, the big challenge would be the cost aspect of SCR systems – it’s not for free. I am not talking about the module only but the complete chain. Euro 6 norms will cost and the end customer has to pay for it and for a market like India, it’s a big challenge.

Technically, switching over to BS VI in 4 years in India is realistic and we can support OEMs to effect this change. The biggest question for the industry today is how will consumers accept the price increase. When we talk about low-cost cars with small diesel engines in India, having a SCR system in the exhaust management is significant.  

What is the status of SCR technology in developed markets like Japan, Europe or the US where emission standards are high?
Yes, in Europe we are starting mass production, fulfilling the Euro 6 regulations. I foresee tremendous growth in business for Continental in the coming years and the European market will be the first big wave of growth for us. Our main focus is Europe and the US as the regulations are quite similar. We are working in the US market and introducing our SCR system for commercial vehicles.

Asia too is very important for us as it is the second wave of growth. We expect India to play a key role and are looking extremely carefully at what is happening now. China is to grow significantly in the future with light and medium duty commercial vehicles and a still growing market. We have to be prepared for this segment for the third wave of growth.

In India the entre commercial vehicle segment will move to BS IV by 2017. Will this migration propel demand for Continental?
We are talking to Indian OEMs, have done some pre-developments work and we have a product which is almost ready. One particular OEM is deciding on which platform it wants this technology with BS IV with the SCR route. We are going to help Indian CV OEMs to adopt the BS IV norms as they become mandatory next year. But the real opportunity will be in 2020 as OEMs will have to get this for every platform. Every OEM is working with an SCR system for BS-IV on a specific segment but they won’t be using it for the mass market – they are running pilot projects.

Do you plan to localise SCR modules at your Pune plants?
We have two manufacturing locations in Pune – one producing catalysts mainly for two-wheelers and the other producing fuel supply units. The localisation of SCR modules is not fully decided yet and volume will be key for localisation. In China, we went in for localization as the market is huge and we have got bigger volumes. If we see significant volume in India, we will localise. It’s not about infrastructure as we have the plants here but the question is when does it make sense for us and the OEMs to localise.

Currently how many SCR modules do you supply in India?
The quantity is negligible because the BS IV norms so but by 2020, when BS VI becomes reality volumes will be huge which is when we can make them locally.  

What is your near-term roadmap for the SCR segment in India?
We have two targets; we know the system will be unavoidable in the future. So we need to have a cost-competitive system. We are actively working with our other business units to see how far we can push integration of electronics into the modules to be compact and optimise the system. The second aspect is we need to stick to generic platforms. We have to be very careful while talking about localisation and customization; sometimes when you try to make local it cost you more than getting the benefits of sharing a global generic platform. I think we are in types of products where we need to be as generic as possible. I foresee product sharing from our global generic platform for commercial vehicles and passenger cars in India.

How much does India contribute to your global SCR operation in terms of sourcing material?
I will not disclose names but when Emitec joined Continental, it has opened a lot of opportunities in sourcing and purchasing activities. We are now using Indian suppliers for many components from our existing pumps in China. We have already localised a number of components in India and in China using the purchasing power of the Continental Group. We are already buying (material)in India for some of our SCR systems and for the next generation. We will definitely continue and look for the best ratio of quality and cost.