Valeo plans to invest Rs 1500 crore on capex, 35% of it for EV business

As the electric vehicle (EV) adoption gathers momentum and prospective buyers move towards more premium vehicles, the Indian subsidiary of Euro 20 billion French auto component major Valeo is expecting to double its turnover in the country to Euro 800 million and quadruple its clean energy business in the next five years. 

Valeo is making a swift transition towards the global strategic plan of Move Up. A programme that lays a strong emphasis on disruptions of autonomous, connected and electric vehicles. Christophe Périllat, the company’s global CEO defined four key pillars for future growth — Electrification, ADAS, reinvention of interior experience, and lighting.

Valeo India is well aligned to the global vision and is developing expertise and technologies to be at the forefront of the transformation in mobility. India is a key hub for testing, validation and global development for the company. Jayakumar G, President and MD, Valeo India told Autocar Professional, that the company has lined up an investment of Euro 150 million or Rs 1,500 crore in India over the next three to four years to participate in these emerging opportunities and accelerate its business in the country. Out of this, 35 percent of the capex is allocated for the electrification space.

Much like the global pillars, Jayakumar says the focus is to accelerate expansion into electrification and ADAS and the market is quickly shifting to these new age disruptions.

In Pune, Chakan, Valeo is expanding its facility for EVs and in Sanand, the company is putting in the second manufacturing line. While the avenues of EVs and ADAS will continue to outpace the market, Jayakumar says the current core business of clutches, HVAC and lighting are also growing at a market rate if not faster.

In 2023, Valeo completed 100 years of its operation globally and 25 years of its presence in India. The largest auto component maker from France caters to a diverse customer base across four business verticals, that is powertrain systems, lighting, thermal systems and comfort and driving and all have a strong presence in the country.  

“Our investments are going more towards electrification and deeper localisation of sensors. If you see our growth, we are above the market, because the content per vehicle is increasing and all the new technologies have a much higher value,” says Jayakumar. 

Expanding products and capacities
The French Auto component major is currently expanding factories in Pune and Sanand to cater to these future disruptions. The additional footprint is currently under review, and the management said the company is likely to add 3,500 people over the next four years in the manufacturing and research and development (R&D) centre.

And this investment amount is likely to go up with additional opportunities under discussion, said the Indian head of Valeo. Valeo has eight plants in India, spread across the North, West and South of India. All its business groups have a presence in the country. It generates a revenue of Euro 400 million and has over 6,400 employees, with 50 percent of them being engineers dedicated to its Tech Centre. While Chennai is its base for clutches, lighting, HVAC plants, Pune focuses on EVs with alternators and converters and in Sanand the company is focusing on manufacturing of ultrasonic sensors. While these sensors are currently assembled, Valeo is on its path to deep localisation and manufacturing.

The group had closed with a turnover of Rs 3,700 crore at the end of FY23 and it has grown at a compounded annual growth rate of nine percent over the last four years. Based on the capex plans announced by the company, it is certain that the global ADAS specialist is eyeing significant market outperformance.

The company is also exploring the possibility of manufacturing cameras in India for the purposes of export. But the decision on this is likely to be made in the second half of 2023.

EV push and a unique three-in-one combo
Valeo has the full spectrum of electric powertrain systems, from low to high voltage. Its technologies power two- and three-wheel urban vehicles as well as premium sedans and SUVs. In India, Valeo produces electric powertrain units at its manufacturing facility in Pune, Maharashtra. This manufacturing line has been set up with Industry 4.0 standards from the start of production.

Its Three-in-One Combo Unit is its biggest bet for passenger EV space and it has tailored swappable solutions for the two and three-wheeler segment.  

On the future of EVs, Jayakumar says, “The question of whether the transition to EVs will happen has gone. The discussion has moved to the pace of growth. As against the prediction two years ago, there is an upward bias on the penetration of EVs across segments. We believe while EVs for passenger vehicles will steadily grow, the swappable solution for two wheelers and three wheelers can be a
game changer.”

The Three-in-One Combo Unit is a combination of three standalone power electronics products i) On Board Charger (OBC 6.6 kw), ii) DC-DC converter, and iii) Power Distribution Unit (PDU) as one common unit in an electric car.

This product is used in the Nexon EV and Tigor EV manufactured by Tata Motors. To cater to the growing demand, the company added the second line at its Chakan plant. 

Valeo is in talks with almost every OEM to offer its solutions. In fact, the global engineering expertise and Indian cost with a high localisation will put Valeo in a much stronger position in the future, claims the company.

The product is not only cost effective, but also takes less space and weight and it is easier to use. While this unit was initially being imported, the company put an assembly line in Chakan. Jayakumar says that there is an aggressive localisation plan for the unit to ensure lower cost and easy availability.

The company’s first target is 50 percent localisation by 2023 and then as volumes increase, the company will take it up to 80 percent in the next three years. 

Thanks to this electrification push, Jayakumar expects the sales from its Pune plant to grow four times in the next five years. “Today, EVs account for five percent of our total business, it is set to go up to 40 percent of our total business in the next five years. In the ICE products, we are not in engines, however we offer alternators, starters, E-Drives, motor-inverters, onboard charger, DC-DC converter in an EV, so our value per vehicle is set to shoot up by a minimum of five to 15 times with an EV and hence we are very bullish on this shift,” added Jayakumar.

Swappable solution
The company claims it is a pioneer and a world leader in the 48V affordable systems. In 2020, it launched a fully integrated compact 48V electric powertrain system in India to aid affordable electrification for small mobility vehicles like two- and three-wheelers, that are extensively used for first- and last-mile connectivity in the country..

Valeo has entered into a partnership with Atul Auto and Honda Power Products to offer a solution for the three-wheeler space. As part of this, Valeo will provide the electric powertrains and powertrain control unit for Atul's electric three-wheelers to work with Honda’s swappable battery solution.

The company will provide these parts for both the cargo and passenger three-wheeler appications. In addition, Valeo’s engineers will provide the technology integration support to help Atul go to market quickly with Honda’s swappable battery.

“With the swappable solution, you are taking away the cost of an EV by 40-50 percent and it becomes a very attractive proposition for the auto rickshaw driver, for whom the Total Cost of Ownership is very important. Even if you take out subsidies, the swappable solution is still better than CNG or petrol run three wheelers with a swappable solution.“

If the swappable solution works in India for three-wheelers, it could be adapted in other markets too, says Jayakumar.

ADAS future
Connectivity and ADAS is another big focus area for the company in its Move Up plan. It claims it is a world leader in automated driver assistance systems (ADAS). The company designs and manufactures ultrasonic sensors, radars, lidars, satellite- / smart- cameras and compute units that are used in conjunction with apps to detect obstacles around vehicles, making driving and parking more enjoyable and above all, safer.

The company offers one of the largest ranges of smart sensors and features that improve vehicle safety and comfort such as automated parking systems and enhanced automated driving systems.

Valeo has produced over 1.5 billion ADAS sensors over the past 30 years and it plans to produce another 1.5 billion by 2027.

The production of parking sensors at Sanand location, Ahmedabad, started in November 2021. Its rear parking sensor for cars is a parking assistance product that features four flush mount ultrasonic sensors that are fitted on the bumper of the vehicle, with one loudspeaker to alert the driver to obstacles.

Just last month, Valeo celebrated a milestone production of one million ultrasonic sensors at the plant in Sanand, Gujarat.

The company claims it is consistently working on solutions to your everyday parking pain points. As part of its bouquet of ADAS offerings, Valeo is exploring the possibility of bringing its Auto Park Solution. 

Global Move Ahead Plan — India well aligned
In 2022, Valeo global CEO Christophe Périllat had announced the ‘Move Up’ plan for the period of 2022-2025. The plan envisages building a Group that is technologically stronger and well positioned to participate in the accelerating electrification space. With the integration of Valeo Siemens eAutomotive, as well as ADAS, it will enable the company to reinvent the interior experience and the concept of lighting everywhere.

The Move Up plan has key business metrics too. Based on the four pillars, Valeo will seek to accelerate growth and outperform the automotive market by more than five percentage points. And through a programme of synergies and efficiencies, the company will seek to enhance profitability, generate cash of between 800 million and Euro 1 billion in 2025, and divest Euro 500 million worth of non-strategic assets, Perillat had announced.

“We are at the start of a period in which the transformation of mobility will drive hyper-growth in the electrification and ADAS markets for 15 to 20 years. Move Up means capitalising today on tomorrow’s mobility,” Perillat had said.

At the end of 2022, Valeo generated a turnover of Euro 20 billion, with presence in 29 countries, 183 plants, 21 centres and 18 distribution platforms.

Valeo invests about 8.7 percent of its total turnover in R&D every year and around 60 percent of this goes into cleaner vehicle space.

Globally the commitment towards disruptive technologies of EVs, ADAS has been going on for the last one decade and Jayakumar believes the company is well positioned to participate in this transition for the next few decades in India too.

Rising global role
Jayakumar says, in the 25 years that the company has been in India, the technological progress has been phenomenal. In fact, the tech centre in India apart from developing affordable solutions for the domestic market is also helping the parent on the software front and the base has already become a key hub for testing and validation. “Going forward, India will have more export opportunities in EVs and sensors, India could become a hub. But for that we need a deeper localisation in order to be competitive globally,” he said.

Valeo’s Development Centre in Chennai employs a few thousand skilled engineers. This facility has emerged as the global hub providing efficient support to Valeo’s global customers in the areas of mechanical design, simulation, embedded software development, vision systems software and hardware and functional safety design. “We are making a big investment in labs. India is going to be a hub for global testing and validation. For the entire electrification and thermal parts segment, the sole responsibility is on India. French colleagues are stationed here to cater to the global market needs,” he said.

This feature was first published in Autocar Professional's June 15, 2023 issue.