‘We believe there will be demand for ICE way beyond 2050’: Arnd Franz, Chairman and CEO, Mahle Group

Mahle – the global piston specialist for internal combustion engine has pivoted to EVs, but the company believes the role of internal combustion engine will endure way beyond 2050.

Arnd Franz, Chairman and CEO of the German Automotive component major — which has a part in every second vehicle sold globally, told Autocar Professional, the internal combustion engine is here to stay for now, and the global automotive industry as well as the regulators need to look at various alternatives to de-fossilise the ecosystem. 

Franz, who was in India for a review, says the country will play a much bigger role in Mahle’s future global growth and it will be an integral base for supplying parts for both electric vehicles and internal combustion engines for the future.

Share your thoughts on the Indian market.

There’s a lot of positive energy, and we’re enthusiastic about India’s future growth. Despite the substantial impact of the pandemic, India made a remarkable recovery. The country has always been earmarked for above-average growth, and now more than ever, I believe these figures are quite realistic. Being the most populous nation, an increasing number of people would need motorised solutions, whether by two, three or by four wheels, and that will drive future growth.

If you look at the penetration per 1,000 inhabitants, it’s remarkable, how much growth India can see. When I compare it to Germany, the potential is 20 times stronger. This isn’t to say that penetration will grow to the German level, but there’s immense potential, so I’m bullish.

The Mahle 30 plus global plan is well integrated into India, and all the right steps are being taken to accelerate it. We’ll continue to invest in our infrastructure here. In fact, we have fully industrialised our portfolio across 13 locations, especially products relevant for the country. We have a strong engineering base and have just opened a new centre in Coimbatore for electrification and electrical motor manufacturing, testing and validation.

How do you see business in India growing for you in the coming years?

We’ve been here since 1958. So that’s over 65 years — two full generations of experience. It’s been a fantastic journey so far, and the future is even more promising. We are about Euro 420 million, until 2030, and I strongly believe we have an opportunity to more than double our sales. All praises to the Indian government for their positive reforms — from the BS VI emission norms to EV regulation and global biofuel initiatives. Those are great for both business and the environment. I’m more bullish than ever before, regarding Mahle’s development
in India.

Will that call for more equity infusion from the parent company in India?

We have a strong cash flow in the country, so a lot of the growth can be derived through internal funding. We saw similar developments in China a few years ago. Increased mobility, more vehicle production, strong economic growth… Now, India will outpace other regions, including China, in economic growth as a percentage for the next few years, which is why I’m optimistic.

What kind of role do you see India and Asia playing in your global growth? Do you see India as a strong alternative base to China?

For Mahle, Asia, including India, can grow faster than the global pace. So if I look at our vehicle content in Germany, for example, it’s 10 times more than what our vehicle content is here in India. Besides economic and vehicle growth, there’s huge potential to grow more content per vehicle. Mahle has a global footprint for all its products. Therefore, both the China and India markets are extremely important for us. We will not put all the eggs in one basket; instead; we’ll  make sure that we have both manufacturing and R&D alternatives. We believe India has gained competitiveness, more so, post pandemic, than in earlier years. Hence, we are considering more exports from India to other markets. I’m quite encouraged by our highly motivated team in India
that has gained a lot of experience as part of the Mahle global organisation.

What role can India play in the global scheme of things?

It’s obvious that for two-wheeler electrification, India will play a key global role. But I believe internal combustion engines (ICEs) will continue to be produced in large sums in India. As demand drops in other regions, there could be a chance of increased exports of ICEs from India.

One of the biggest areas for future growth in both the automotive and non-automotive sectors, is software. Over the decades, India has proven to have a fantastic knowledge and capability base here, plus competitive costs and incredible speed. So we’re considering utilising Mahle’s Indian facilities for software development, as well, whether it’s embedded software, enterprise software or software as a product. I believe this could be one of the biggest growth opportunities for Mahle, as we move into intelligent products and solutions. So we will dramatically grow our software tech centre in Pune.

How have the dynamics changed since the Russia-Ukraine conflict, given that Russia was a major energy supplier?

It’s certainly driven a lot of inflation, and also lessened Western producers’ access to the automotive market. There’s surely one less source of energy from the West. The war also removed transportation options between the East and West, between China and Europe. So, everything needs to be moved through vessels, container transport or ocean freight. Every business and sector will find solutions sooner or later, and that’s the beauty of open and free markets. Between supply and demand, they will find solutions. However, I’m concerned about the global economy and what it’s done to the way various regions work together in an international marketplace. India has a strong interest in open markets worldwide. Let’s hope we can continue to have those.

What are the threats and challenges for the future?

Besides fighting climate change, we need peace, first and foremost. We need to end the conflict, threats to humanity and threats to business. Everyone earns their living and feeds their families through businesses. Second: central banks need to get control of inflation.  There are some signs of lowering interest rates again. Inflation is always bad for economic growth and bad for the balance in society because winners and losers emerge.

Your opinion of the evolution of India’s electrification.

The two-wheeler market will get electrified sooner, and we’ll see the fastest development in Mahle. We were the first company to localise electrical motor manufacturing for two-wheelers, back in 2020, and we have a sizeable order for upcoming models in India. The two-wheeler segment will spearhead electrification, and four-wheelers will follow. Mahle is ready to industrialise four-wheeler motors once volumes become substantial enough to justify the business case. We have fantastic products on the electrical motor side, the highest peak ratio motor in the market and technologies that would make the manufacturer independent of heavy rare earths, which, of course, is something that’s scarce and sometimes hard to get through the supply chain.

This interview was first published in Autocar Professional's April 15, 2024 issue.