Uttarakhand-based Steelbird Auto Components, a supplier of air filters and rubber components, primarily for two-wheeler and three-wheeler applications, is expanding its manufacturing capacity.
The new plant, spread across 40,000 square feet, is coming up in the vicinity of two of its existing plants in Pant Nagar, in Uttarakhand, and is slated to become operational by February.
The new facility will complement the company's overall production capacity, which is currently pegged at 60,000 units per day, and will scale it to over 100,000 units, combing air filters, and rubber parts which include dampers, O-rings, oil seals, mattings, dust covers and foot-rest covers for two-wheelers.
The company has invested around Rs 40 crore in the plant and close to 80 percent of the capacity has already been booked, says Manav Kapur, executive director, and the third generation of the family-owned Steelbird International.
“The time right now is rather scary for conventional players in the automotive business, but the next three to five years are still going to see an upward trend. With commitment from our customers, we decided to invest into this new facility with a vision to recover the capital over the next three years,” says Kapur.
The company sees a 60:40 split between its aftermarket and OE share of business and players like Greaves Cotton, Tata Ficosa, Lumax and Royal Enfield remain its key customers in the OE space. Parts are also exported to Italy, Germany and neighbouring countries including Sri Lanka, Bangladesh and Nepal.
Also, with the GST rolling in, the company has seen a huge benefit in terms of the undue pressure from the unorganised players in the aftermarket space dying down.
“Before GST, there was a substantial price difference between a genuine part and the other substandard options available in the market. The effective tax came out to be 34 percent (18% excise + 14% VAT + 2% CST), which has now come down to just 18 percent, thus, giving high quality components an edge over the rest. While the last two years has been very uninspiring with a slew of economic changes in the pipeline, we now aim to cross Rs 100 crore in revenues by FY2018-19.”
“While there were teething problems at the onset, but, we have completely settled down into the GST system now. Having over five thousand retail points in the country and five zonal warehouses, network expansion is another focus on our agenda for growth over the next couple of years”, he adds.
E-mobility a tremendous challenge
Since the company's core strength lies in rubber components, e-mobility is a big challenge and a notable cause for concern in the immediate future.
“Since most of the profit margins lie in high performance rubber parts, which are related to engine and NVH, EVs are a big – and rather inevitable – threat to our business. I expect our rubber business to be easily hit by around 50 percent in the next five years, once EVs start getting adopted in big numbers. Having said that, our helmets business, which is a separate entity, is going to remain largely unaffected, and only grow as safety regulations become more stringent in the future.”
Steelbird is now looking to diversify and is brainstorming upon options around its area of expertise to strengthen its future. While it is expected to sign an MoU and enter into a technical collaboration with a Japanese company in the near future, it will only invest further into the project if it is able to develop a good customer base for the new offerings. “The situation is very volatile and there is very little consistency in the market right now. One cannot openly invest into the auto components business as the future is going to be very disruptive,” adds Kapur.
Steelbird Auto Components is working towards a new strategy to step into the future. While it has already switched over to being technology oriented in its standard operating procedures by implementing SAP across its systems and using Industry 4.0 and IoT-enabled sensors for machines to electronically generate notifications in case of errors, the company is going to reveal its new thinking at the upcoming Auto Components Expo next month.
“The Auto Expo is going to be a perfect place for us to showcase our products, announce our future roadmap and build our brand equity at such a global platform,” concludes Kapur.