Endurance bets on after-market business outperformance

Aurangabad-based Tier-1 manufacturer Endurance Technologies, the biggest supplier of parts for two- and three-wheelers in the country, is adopting a two-pronged strategy for expanding its footprint and business margins in domestic and overseas markets.

The diversified company has 29 plants across India and Europe. It also exports products to over 31 countries including the newly entered ones such as Rwanda, Burundi, Brazil and Vietnam. The Indian arm generated around Rs 421 crore in sales for the company in FY22, reflecting a 5.5 percent increase over the previous year.

Furthermore, it expects the business to grow four or five percent faster than the industry. As part of this strategy, in addition to tyres and lubricants, the company has recently added several high-margin volume products that are used in e-scooters and e-3Ws. The export market is also on the radar and Endurance Technologies’ new countrylist includes Africa, the Middle East and Latin America.

The company's management claims that the goal is to grow faster than the industry and competitors while surpassing the $100 million sales mark in the coming years. Speaking on the sidelines of AutoExpo 2023, Prabhas Chandra Dash, President, Aftermarket & Exports at Endurance Technologies, said, "Our objective remains to grow at least four or five percent higher than the competitors and the industry."

Citing ACMA data, company executives stated that the entire automotive component sector expanded by 3.3 percent over the preceding three years, including when the pandemic was at its peak. Endurance Technologies, on the other hand, managed to grow around 12–13 percent, they added. Though that kind of jump appears unviable now, given the slowdown in many markets globally due to inflationary challenges amid geopolitical challenges. The executives, however, feel that even a modest four to five percent growth over industry growth is still reasonably acceptable for the company. Another hurdle to aftermarket exports appears to be currency instability because of the US Federal Reserve (Fed) tightening monetary policy, which has resulted in higher interest rates. As a result, the US dollar has gained, leading capital to flee emerging markets.

Furthermore, it is lowering overall consumer sentiment. To avoid instability impacting the business, Endurance Technologies had previously resolved to only operate in countries where Indian OEMs were present, but that plan has changed. It is now collaborating with a few Japanese automakers in countries like Indonesia, to bring in the incremental business. This strategy has worked well, and the principle has been successfully adopted in South America with the help of reverse engineering, where larger brands compete fiercely.

Endurance Technologies aftermarket offerings include camshafts, clutch shoe assemblies, steering bearing kits, tyres, and variator assemblies. In India, Endurance Technologies focuses on key states such as Rajasthan, Gujarat, Telangana, Andhra Pradesh, Tamil Nadu, and Karnataka, though the inroads are being made in other parts of the country. The company sells aftermarket items in countries, including the newly entered ones such as Rwanda, Burundi, Brazil and Vietnam. While the company expects domestic aftermarket sales to expand by 15-20 percent, export markets are projected to remain flat, if not negative, due to geopolitical issues such as those witnessed in Sri Lanka, Bangladesh and Egypt. Another source of concern for Indian exports appears to be the slowdown in European markets.

To have localised presence in Europe, Endurance Technologies purchased an Italian company called Frenotecnica in July 2022. Frenotecnica, owns Brenta, that manufactures friction materials and components for braking systems like brake pads for two-wheelers. In 2021, Brenta’s sales revenue was €3.6 million and an EBITDA margin of €1 million. It is Endurance Technologies' third acquisition of an Italian company, following the acquisitions of Grimeca and Adler in 2020. If that isn't enough, management has hinted at potential of further acquisitions. At a recent investor conference, the company highlighted its efforts on building a richer product mix with higher[1]margin items such as front forks, paper-based clutches, completely machined castings, ABS, and drive shafts, among others.

Catering to various OEMs, the company is also expanding its disc brake, ABS assembly, and alloy wheel capacity expansions besides focusing on the electric vehicle (EV) market, which is estimated to reach $150 billion by 2030, and has already begun supplying brake components, suspension, and cast aluminium products for e-scooters and e-3Ws.

This feature was first published in Autocar Professional's February 1, 2023 issue.