Lumax plans JV with Spain’s Francisco Albero for oxygen sensors

Tier 1 supplier of automotive lighting solutions, Lumax Auto Technologies today entered into a joint venture with Spanish automotive electronics vendor, Francisco Albero S.A.U (FAE) to assemble and supply oxygen sensors in India. 

The partnership, which is slated to materialise with the commencement of on-ground production from early 2019, will see the homegrown auto components major hold a 51 percent stake, while FAE will have the remaining 49 percent in the new company, christened Lumax FAE Technologies. 

The new association aims to fulfil the upcoming needs of the domestic automotive market in India, with the advent of BS-VI emission norms from 2020. It will initially focus on the immediate requirement of oxygen sensors coming in from the two-wheeler market, also taking the total number of global tie-ups of the Lumax Group to eight. 

According to Deepak Jain, promoter director, Lumax Auto Technologies, "With India being the largest two-wheeler market in the world, 20 million two-wheelers are set to switch to be using oxygen sensors from 2020 with the government's BS-VI mandate." 

"The JV company aims to leverage the capabilities of both the groups and is eyeing to capture 10 percent of the market share, which is going to be pegged at at an overall revenue size between Rs 1000-1500 crore," he added. 

Founded in 1952, FAE is headquartered out of Barcelona, Spain and boasts a diverse product portfolio, ranging across temperature sensors, ignition lead solenoids, timing sensors, light switches and oxygen sensors. 

The company, which closed FY2016 with revenues of euro 27 million, skewed majorly towards aftermarket supplies (89%) and 11 percent coming in from OEs, is looking to enhance its exports and fully utilise the 3 million units capacity, where the level currently stands at 33 percent. 

The JV is looking at investing Rs 14 crore, to come up with a new facility, either in existing land parcels of Lumax in Delhi-NCR or in Pune, so as to remain in close proximity with prospective future customers. The component validation work is set to begin in the next 2-3 quarters, with the setup getting ready by 2019. The new plant will incorporate 15 engineers, including two expats being deployed by FAE.  

The oxygen sensors will initially see basic manufacturing of the core ceramic sensor at FAE's fully integrated plant in Barcelona, with the remaining bits being assembled in the India unit. Initial level of localisation is slated to be around 60 percent, until the company sees volume growth to up to 6 million units in the next few years.  

According to Deepak, "The company is taking a long-term, 3-5 year plan to localise the sensors in a phase-wise manner. Starting with partial localisation, we will then try to enhance localisation once volumes grow to 6-8 million in the next five years." 

According to Francisco Marro, chairman, FAE, "Oxygen sensors are becoming more and more important due to the stricter regualtions being enforced across the world to cut down on emissions. FAE is one of the few vendors in the world, offering an end-to-end solution for these parts by completely manufacturing them from scratch. We have had a stable growth of 8-10 percent over last couple of years and we target cumulative revenue of 30 million by end FY2018."  

With the JV, Lumax, with its strong knowledge of the Indian market and a well established clientele will look to utilise the company's existing relationships in the automotive sector to materialise concrete orders for these parts. It is going to utilise the strong know-how of FAE, which has invested its last 15 years into the serious development of this technology intensive component. 

"We are venturing into the Indian market for the very first time with an aim of growing our global reach. It will be a win-win for both companies to grow with one another," added Marro.  

The Lumax Group posted consolidated revenues for FY2017 at Rs 2,500 crore, with 52 percent of it coming from its automotive lighting business.