German auto component major Brose India sets sights on strategic expansion through joint ventures and acquisitions, aiming to capitalise on India's growing automotive market, despite post-Covid-19 challenges.
25 Sep 2024 | 9289 Views | By Shahkar Abidi, Ketan Thakkar
Dr. Philipp Schramm with senior Brose officials at the Pune plant. The company is actively exploring strategic partnerships and mergers and acquisitions to bolster its presence in India.
German auto component major Brose India Automotive Systems, part of the Euro 8 billion Brose Group, is charting an ambitious course ...
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Dr. Philipp Schramm with senior Brose officials at the Pune plant. The company is actively exploring strategic partnerships and mergers and acquisitions to bolster its presence in India.
German auto component major Brose India Automotive Systems, part of the Euro 8 billion Brose Group, is charting an ambitious course for growth in the Indian market. The company is actively exploring joint ventures, mergers and acquisitions, and strategic partnerships to bolster its presence in one of the world's fastest-growing automotive sectors
This push for expansion comes at a crucial time for Brose India, as the automotive industry undergoes rapid transformation. In India, Brose offers a wide range of products, including window regulators, seat adjusters, and door modules. The company's strategy revolves around introducing new, high-demand products. With increasing demand for advanced technologies and a shift towards electric mobility, the company sees significant opportunities to leverage its global expertise in the Indian context.
Strategic Expansion with a Careful Approach
Brose's expansion strategy in India is multifaceted, focusing on finding the right opportunities that align with the company's long-term vision. The company is particularly interested in partnerships or acquisitions that can complement its existing product portfolio, enhance its technological capabilities, or provide access to new market segments within India's diverse automotive landscape.
The strategy is deeply rooted in Brose's corporate history, drawing from successful joint ventures with family-owned businesses in markets such as South Africa and Turkey. In India, the company is exploring similar opportunities and seeking partners who share Brose's growth mindset and values. This approach allows Brose to combine its global expertise with local market knowledge and established networks.
Dr. Philipp Schramm, CEO and CFO of Brose Group, recently outlined the company's nuanced expansion strategy: "While we're open to expansion, our approach will be selective and focused on smart, wise moves," Schramm explained. He emphasised that the company doesn't have a predetermined budget for investments, preferring to evaluate each opportunity on its merits instead.
"We see benefits in growing together because there's a similar mindset behind it," Schramm noted. He added that supporting Brose's Indian operations to increase profitability is a key priority.
From Organic Growth to Bold Decisions
To date, Brose's growth in India has been primarily organic. However, Schramm believes the time has come for more assertive action. "We need to make bolder decisions and take the next step in this market," he stated, signalling a potential shift in the company's approach to expansion in India. The push for expansion comes against a backdrop of recent challenges for Brose India. Like many in the industry, the company has faced headwinds, including demand fluctuations and regulatory hurdles since the onset of the Covid-19 pandemic.
Brose India's financial performance reflects these /challenges. In 2023, the company reported a revenue of approximately Euro 45 million (about Rs 400.5 crore), marking a significant increase from previous years.
However, this growth follows a period of fluctuation, following the Covid-19 lockdown. In the fiscal year 2022, Brose India generated revenue of Rs 226.69 crore, which was significantly better than the previous year’s Rs 147.65 crore. Notably, the company's pre-pandemic performance was stronger. Going back to fiscal year 2018, the company had revenue of Rs 232.23 crore and net profit of Rs 31.93 crore.
While Brose India declined to provide future financial guidelines, the company's expansion plans suggest a focus on regaining and surpassing its pre-pandemic performance levels.
Global Strategy and Restructuring
Brose India's renewed focus on growth aligns with the Brose Group's broader global strategy. The Group reported a turnover of Euro 8 billion in 2023, and projects reaching Euro 8.3 billion in the current year. As part of this global vision, Brose has restructured its operations, including those in India. Schramm highlighted that the company is betting big on electric power liftgates and motorised retractors, especially as SUVs — ideal for such advanced features — are rapidly gaining popularity in India.
"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, Brose is eyeing the burgeoning electric two-wheeler segment, a market that offers substantial growth potential given India's status as the largest twowheeler market globally. The company has developed a specific drive unit for electric two-wheelers, providing the motor, power electronics, and control units, with most production and supply chains localised in India.
Schramm emphasised 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 company's focus on this segment is underscored by its role as a supplier of electric drivetrains to Hero MotoCorp's e-two wheeler Vida.
India's Role in Brose's Global Vision
For Brose, India is more than just a sales market; it's a vital production and development hub. The company 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," Schramm added, highlighting the country's importance in Brose's long-term strategy. This emphasis on India aligns with the country's emerging status as one of the few major markets outside China where automotive sales continue to grow, contrasting with shrinking demand in mature markets like Europe and Japan.
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 prioritise 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. Schramm emphasised the need to move away from viewing Indiaas just a 'low-cost location' or 'shared service centre,' and instead focusing on valuing Indian colleagues as trusted, valuable contributors to the global organisation.
Challenges and Future Outlook
While Brose is enthusiastic about its expansion plans in India, Schramm acknowledges that the country's regulatory environment can be challenging at times.
Despite these challenges, Brose remains optimistic about its future in India. By focusing on high-demand products, leveraging its strong engineering capabilities, and adapting to the unique requirements of Indian OEMs, the company is positioning itself to capitalise on India's substantial growth potential.
Brose's efforts towards innovation and localisation may well be the key to achieving enduring success in this dynamic market.
This feature was first published in Autocar Professional's September 15, 2024 issue