Baba Kalyani, Chairman, Bharat Forge
The chairman and managing director of Bharat Forge speaks to Ammar Master on his new joint venture in China and the experience of working with First Automotive Works.
Do you believe that India’s advantage in having low labour costs no longer holds true?
I don’t believe that India has any advantage in labour costs. The Chinese will eat you for lunch and dinner on labour costs. Their labour cost is much lower and they work much harder. I don’t think, therefore, labour cost is India’s advantage. It has never been, at least that’s my experience. I think technology is and the ability to use technology at a reasonable cost is India’s advantage.
What kind of cultural challenges has Bharat Forge faced working with First Automotive Works (FAW) in China?
It’s a different challenge. First of all there’s the language barrier because very few people there speak English and hardly anybody in our company speaks Chinese. There are (other) cultural issues. The way of doing things is different in every country and in every culture. But at the heart of the issue, most people are sincere. They are honest. I think they want to work hard. They want to make improvements. They want to see their company do better. So, you have to build on this side of the equation and take that as the driving factor to overcome cultural issues.
Is value-added engineering a major challenge in China?
Yes, it would be.
How long will it take the Chinese, who are great imitators, to develop our kind of technology and engineering?
To give them credit, they work hard. They are pretty smart. My gut feeling is that it will take us roughly about a year to get our business strategies aligned and another two years to get everything else in place.
What is your major strategy for success in China?
Our business strategy fundamentally is to make this as an independent forging business which can serve many other customers in China. Right now, this is like an in-house departmental undertaking, or was a departmental undertaking of FAW. We have to make it more customer-focused. We have to make it more customer-centric.
How many Indian engineers are stationed there to help FAW with the forging business?
We currently have about six people, and some people just travel back and forth. That’s about it. I don’t think we need to have too many people.
Will your FAW joint venture help you expand your customers significantly in China?
Yes. In China, we have only three customers today but they are big customers. And China has over a hundred OEMs in the automotive sector, and a couple of hundred Tier-1 suppliers around these companies.
The Chinese government has talked about consolidation of the automotive industry. Do you see the components sector being affected?
No, I think the Chinese government is encouraging competition in the components sector. It is encouraging globalisation of the components sector. That’s why they are inviting companies from all over the world to invest in their components sector. Why did they choose Bharat Forge from India? We must be one of the few companies, an Indian company, which a Chinese company has chosen — because they could have chosen anybody from Europe or anywhere else in the world. But they chose us because they thought that we have the technology, the size, the scale and we are sincere in terms of doing what needs to be done.
Is there a chance for exports from China into India?
Of course. Exports from China will happen anyway.
Being the biggest Indian company to invest in China, what are the lessons to be learned?
I believe having a China strategy is extremely important for components manufacturers from India. If you don’t have a China strategy, you will have tremendous difficulty in seven or eight years from today because the markets will be far more competitive at that time. Chinese companies will become far more competitive and technologically smarter. So you need to have a China strategy. Our China strategy was driven by the fact that we want to achieve global leadership in our business. And there is no way Bharat Forge can achieve global leadership without having leadership in China.
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