Brose India's ambitious business plans: Aiming for comeback with new investments and products

Euro 8 billion German auto component giant Brose India Automotive Systems is exploring joint ventures, mergers & acquisitions, and partnerships to accelerate its presence in India.

Dr. Philipp Schramm, CEO of Brose Group, stated that while his company is open to expansion, it will be selective and focus on "smart and wise moves." He did not specify a defined "war chest" or budget for investments, explaining that it will depend on the specific target and opportunity. The focus is on finding the right fit rather than just deploying capital, the top executive clarified.

Schramm's strategy is rooted in Brose's long history, which includes successful joint ventures with family-owned companies in South Africa and Turkey. The company is exploring similar opportunities in the Western world. He emphasized the importance of aligning with the growth and value development mindset of these family-owned companies.

"We see benefits in growing together because there's a similar mindset behind it," Schramm explained, adding that he is looking to support Brose's Indian operations to increase profitability.

Schramm emphasized that Brose has grown organically in India so far. However, the need now is to make "bolder decisions" and take the next step in the market.

Financial Performance and Challenges

The push for expansion and profitability for Brose India comes even as the company has been facing headwinds such as a slowdown in demand and regulatory challenges since the pandemic.

The company's revenue in 2023 stood at around Euro 45 million (approximately Rs 400.5 crore). This represents a significant ramp-up over previous years. In FY2022, the company generated revenue of Rs 226.69 crore with a net profit of Rs 4.01 crore. The figures for FY2021 and FY2020 were Rs 147.65 crore with Rs 8.22 crore net profit and Rs 191.30 crore with Rs 15.80 crore net profit, respectively.

However, the revenues from pre-Covid-19 days were much better. In FY2019, Brose India reported Rs 221.16 crore in revenue with Rs 23.24 crore in net profit. Similarly, in FY2018, the revenue stood at Rs 232.23 crore with Rs 31.93 crore in net profit.

Brose India declined to provide any financial guidelines for the future.

Global Strategy and Restructuring

The move by Brose's top leadership team to re-energize its operations in India aligns with the Group's broader global strategy. The Group saw a turnover of 8 billion euros in 2023 and is projected to reach 8.3 billion euros this year.

The company has restructured its overall operations, including those in India, to align with the Group's global functioning.

New Product Launches

In India, Brose offers a wide range of products, including window regulators, seat adjusters, and door modules, among others.

Brose India's strategy revolves around introducing new, high-demand products that cater to the evolving needs of the Indian automotive market. Schramm highlighted that the company is betting big on electric power liftgates and motorized retractors, especially as SUVs—ideal for such advanced features—are rapidly gaining popularity in the country.

"We have won orders from new customers in India due to increasing consumer demand for these features," Schramm noted, reflecting a broader market shift towards enhanced vehicle technologies.

Moreover, the company is eyeing the burgeoning electric two-wheeler segment, a market that offers substantial growth potential given India's status as the largest two-wheeler market globally.

Brose has developed a specific drive unit for electric two-wheelers, providing the motor, power electronics, and control units, with most production and supply chains localized in India. Schramm emphasized the importance of this development, stating, "This is a significant opportunity for Brose, as the electric two-wheeler market is expected to grow exponentially in the coming years."

The Brose top executive's emphasis on the significance of the electric two-wheeler segment underlines the fact that the company is a supplier of electric drivetrains to Hero Motocorp's e-two wheeler Vida.

India's Role in Brose's Global Vision

India is more than just a sales market for Brose; it's a vital production and development hub. Brose India employs over 600 engineers and software developers in India, combining development, production, and administration at its Pune facility. Beyond serving local OEMs, the Indian team also supports Brose's global operations in areas like IT and electronics.

"India is a cornerstone of our global operations," added Schramm.

These comments should be seen in the context of India emerging as one of the few major countries outside of China where the pace of automotive sales continues to grow. In contrast, Europe, Japan, and other mature markets have been witnessing shrinking demand over the past few years.

Meeting Unique Demands of Indian OEMs

One of the key insights Schramm shared was about the unique demands of Indian OEMs, which he described as sometimes more stringent compared to their European or US counterparts. Indian automakers prioritize rapid technological advancements and shorter development timelines, requiring suppliers like Brose to be agile and innovative. To meet these demands, Brose India has streamlined its business processes, accelerated its development cycles, and tailored products to local market needs, especially in motors and electronics.

According to Schramm, there is a need to move away from the mindset of seeing India as just a "low-cost location" or "shared service center". Instead, the focus is on valuing the Indian colleagues as trusted, valuable contributors.

Challenges and Future Outlook

Even as the company is taking efforts to expand its business in India, Schramm views the country's regulatory environment as challenging at times, noting that efforts are needed to iron out these issues.

By focusing on high-demand products, leveraging its strong engineering capabilities, and adapting to the unique requirements of Indian OEMs, Brose is looking to capitalize on the country's substantial growth potential. As India's automotive sector continues to evolve, Brose's efforts towards innovation and localization may help it achieve enduring success in this dynamic market.