Sona Koyo to begin EPAM supplies to US

Sona Koyo Steering Systems has decided not to place all its eggs in one basket and is mulling diversification into the engineering and manufacturing streams to pan out risks. Simultaneously, it is strengthening its presence in the farm equipment and LCV markets where it visualises future growth opportunities in the face of the slowdown in the passenger car market in India. The component maker has commenced production of its new low cost electronic power assist module (EPAM) developed for off-highway customers in the US. North America is believed to be the largest market for off-highway applications. While the EPAM is manufactured at the company’s Dharuhera plant, the product is currently undergoing tests with its US client.

Shipments are slated to kick off by the end of March. Later, the EPAM will be introduced in India for the farm equipment sector like agricultural tractors and pick-ups. In North America, Sona Koyo will target smaller off-highway applications like golf carts, tractors and all-terrain vehicles (ATVs) for the product, according to Sunjay Kapur, vice-chairman and managing director of the company.

Fewer parts used

The module is based on a design that structurally uses less number of parts resulting in lower fuel consumption. This enables it to be 20 percent lower priced than electronic power steering systems.

Surinder Kapur, chairman of the Sona Group, had earlier told Autocar Professional that the US is a tough market and the largest for off-highway vehicles. Further, it is not bogged down by stringent regulations compared to road vehicles in terms of safety features including specifications and regulatory approvals. Hence, the selection of the US as the ideal market for the EPAM launch.

The initial orders for the EPAM are expected to be worth $ 300,000, rising to $ 1-2 million in the second year. It will be initially offered as an option in the vehicle but once adopted as a standard fitment, volumes are expected to increase.

Sona Koyo has also, for the first time, won orders for steering columns for electronic power steering systems from Honda Siel Cars India (HSCI) including for the Brio small car. Supplies are being routed through group company JTEKT Sona Automotive India. The company was set up to manufacture column-electric power steering systems (C-EPS) for passenger cars. C-EPS is the next-generation technology for automotive steering that takes care of environmental concerns and sports superior features. But the supply volumes to Honda are still low and need to pick up as Honda recovers from the impact of floods in Thailand. Meanwhile, the component maker has completed the Rs 100 crore capacity expansion programme at its Dharuhera plant. It involved setting up of a pressure die casting unit, sheet metal and sourcing units, as part of its backward integration activity. Sunjay Kapur says Sona Koyo is now concentrating on production efficiencies to tide over the slowdown.

The components from these plants will not only cater to the requirements of Sona Koyo but will also be supplied to part makers outside the Group. Sona Koyo expects flat growth this fiscal compared to the Rs 1,200 crore turnover in 2010-11, mainly due to flat growth experienced by OEs. Kapur says the company is optimistic about clocking around Rs 1,200-Rs 1,500 crore in 2011-12.

In the recently announced third quarter results, the company’s net profit was down at Rs 14 crore from Rs 20 crore year on year. Third quarter margins came down from 16.29 percent to 14.29 percent, a 200 bps drop due to addition of fixed cost in terms of employee and administration costs. The company is, however, optimistic about improving its margins once it consolidates its business further.

SHOBHA MATHUR