Uno Minda Chairman Nirmal K Minda says the auto parts maker stands firm on its assessment of EVs’ potential for India, and will stick to its investment roadmap. Minda also addresses the need for GST reduction and urges OEMs and component makers to work together at this time of deep transformation.
20 Sep 2024 | 12461 Views | By Mayank Dhingra
Nirmal K Minda, Chairman and Managing Director of Uno Minda, one of India’s top auto components makers, is not one to be fazed by a slowdown in the sales of EVs – a segment to which the company has committed significant investments. Minda says the company does not turn back ...
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Nirmal K Minda, Chairman and Managing Director of Uno Minda, one of India’s top auto components makers, is not one to be fazed by a slowdown in the sales of EVs – a segment to which the company has committed significant investments. Minda says the company does not turn back once it has ‘pressed the button’ on chasing a new opportunity.
He also talks about the profound transformation that the auto industry is in the middle of, and how the company plans to stay one step ahead. Minda also gives a glimpse into how the company – which has 67 manufacturing plants in India and 33 global R&D centres – plans to emerge as an end-to-end systems supplier for OEMs.
How do you view the current transformation underway in the automotive segment globally?
The industry is undergoing a profound transformation, driven by technological advancements, shifting consumer preferences as well as regulatory pressures. These are the key drivers of change right now, and as we all know that EVs are rapidly gaining traction around the world, they are presenting both an opportunity and challenge for automakers.
This ongoing mega transition requires significant investments in R&D towards new battery technologies, as well as the adaptation of manufacturing processes and supply chains to accommodate the unique requirements of EVs and ICE-based hybrid technologies that are likely to gain more traction.
All these solutions, therefore, are required to reduce the country’s fossil fuel dependency and improve the environment, in sync with the consumer who is also increasingly becoming more environmentally conscious.
Furthermore, the software content in automobiles is also increasing exponentially as the industry is witnessing premiumisation and changing customer needs. Hence, we must also build the right capabilities in the fields of electronics, software, and AI, as well as localise several components used in EVs.
As a leading automotive component manufacturer, this transformation offers a significant opportunity to Uno Minda, which is well positioned to capitalise on the growing demand for EVs and advanced automotive technologies. While we have a wide product portfolio spanning electrical and electronics, software, and other components, we continue to invest heavily into R&D.
Is the unidirectional EV approach the right idea towards sustainability?
The world is changing drastically, and if we consider the example of Europe, where manufacturers like Mercedes-Benz and BMW were heavily focused on EVs initially, they have now taken a pause.
While every country has already set some target to achieve a certain penetration of zero-emission vehicles in the next 10 years, going forward, EV is not the only technology for de-risking the environment from the adverse effects of transportation.
It will largely depend on each market and its energy mix. Hence, all OEMs are gearing to be ready in multiple technologies. We believe that all technologies will come to India sooner or later, and component makers must attempt to produce more parts locally to cater to OEM requirements. For Uno Minda, we are fortunate that our products are largely agnostic to propulsion technologies.
Is Uno Minda relooking at its EV strategy with the present slowdown in EV sales?
Once we identify an opportunity and decide to move in that direction, we stick to our strategy. Regarding the present slowdown, we consider it a temporary phenomenon because if we look at China, it is set to produce 12 million EVs in 2024, and Chinese EV makers are taking over most of the Asian market. They are already very strong in countries like Thailand, Malaysia, Indonesia, and are investing significantly.
Therefore, as Uno Minda, we also stand firm on our assessment of the potential of EVs in India. We have developed almost 10 different products for e-two-wheelers other than our existing portfolio of 14 powertrain- agnostic two-wheeler components like switches and lights. We have entered the two-wheeler EV domain with 2 JVs — with Buehler Motor and Friwo — to offer EV-specific products such as e-motors, motor controllers, BMS, and DC-DC convertors – from the two plants we have set up for these respective JVs. We have already acquired orders from TVS Motor Company, Bajaj Auto, Hero MotoCorp, and Honda Motorcycle & Scooter India, among others.
As far as four-wheeler EVs are concerned, we have signed two technical licenses — one with Starcharge Energy (for EV chargers) and another with China’s Suzhou Inovance Automotive (for EV powertrain components like e-axles and motors). These two technical license agreements (TLAs) span seven passenger vehicle components such as integrated on-board chargers, AVAS (advanced vehicle alert system), telematics, and e-axles, among others, and they are currently in their various stages of development and commercialisation. We are set to outline our investments in these two ventures in our next board meeting in the next 2-3 months.
Therefore, for us, there is no going back and we have already pressed the button. We are going to invest in these products in an incremental manner. We will begin by getting one anchor customer, and then take the standardised components from one OEM to another. While we identify such standardised components and outline the additional investment required, we always take care of the RoI.
We have six stakeholders – customers, employees, suppliers, collaborators, investors, and society – and we try to satisfy all of them. Our aim is to become leaders in India in the products that we have identified in the EV category within 3-4 years of their SOP.
Is Uno Minda eyeing more M&As to further strengthen its competencies in future technologies?
From a long-term perspective, we are aiming to become an end-to-end systems supplier, and, therefore, if we require certain integrations, then we would be evaluating some synergies. In that case, our first preference would be getting into a TLA, followed by a JV approach.
We are working on the ‘PACE’ philosophy that primarily focuses on developing solutions in the megatrends of Personalisation, Autonomous, Connected, and Electric vehicle technologies.
In this regard, we have three dedicated verticals for our R&D in India, beginning with our Centre for Research, Engineering, and Advanced Technologies (CREAT) in Pune. We also have the Global Centre for Electronics, Systems, and Software Technology (GCESST) in Bengaluru, followed by the Advanced Engineering and Technology (AET) centre.
With these three dedicated verticals, we pin our focus on developing cutting-edge technologies, including software. We leverage India’s software competencies at these technical centres, and while most of the work being undertaken at these facilities is for the domestic market, we also do work for our collaborators as well as for Uno Minda’s German entity as it offers significant cost benefits. In all, we have 33 R&D and engineering centres around the world, and we invest to the tune of 4% of our annual revenues in new product development.
Today, OEMs are looking for local solutions and have started working on proof-of-concept (POC) at the beginning of a new project itself. This collaborative approach leads to joint POC, patent filing, joint prototyping, joint validation, and joint SOP (start of production), which enables the localisation of the vehicle right in the first attempt.
Are OEMs becoming increasingly confident about localisation at SOP and R&D in India?
While India used to rely on imported automotive components at the start of a new model’s production, the situation is changing, and in the case of Uno Minda, almost all OEMs keep visiting our R&D centres to understand our capabilities. We must understand that every OEM has its own process for localisation and vehicle development.
From an OEM’s perspective, they face the challenge of having to rely on parts originally designed for application in Japan and Europe, owing to the lack of localisation competencies. As India’s use cases and consumer needs are significantly different from that of other markets, both OEMs and component makers are learning about the possibilities of localisation within India right from the model SOP, and the situation is changing at a rapid pace.
While India has the potential to emerge as a key R&D destination for the global auto industry, we must understand the latent needs of the consumer. R&D and software development is already happening in India, but most players are not acting as Tier-I suppliers but rather as Tier-II service providers. Therefore, R&D at the Tier-I level in India will take time, but it is bound to happen.
What are the key pillars of growth for Uno Minda by the turn of the decade?
We are a multi-product company, which aims to be a technology leader that strives to fulfil the customer’s demands of QCDD — Quality, Cost, Delivery, and Development. We also focus on environmental sustainability, and for achieving this, the development of our human resources is paramount.
We have a very good kit value and most of our products, barring air filters, are agnostic to the powertrain technology. Our constant endeavour is to outpace industry growth by 1.5x-2x, and we achieve this by adhering to the QCDD customer requirements as well as growing our kit value. We see a consistent rise in our kit value. For instance, from being pegged at Rs 9,500 for an ICE two-wheeler, it has risen to Rs 35,000 in case of an e-two-wheeler. In case of passenger vehicles, it is set to exceed Rs 2,00,000 in an EV, from around Rs 40,000 to Rs 70,000 for internal-combustion-engine equipped cars.
Therefore, this increase in kit value enables us to achieve our growth targets. Our target is to achieve more than 30% market share in each product out of our 25-strong product line. We already enjoy this benchmark in around 12-13 of our mature products, but we are yet to reach this level in the 8-10 nascent product categories, such as advanced technologies and EV parts.
Does the company foresee the need for capacity expansion in the coming years?
Across all our manufacturing locations within India as well as overseas in Vietnam, Germany, Spain, Mexico and Indonesia, we have plans to expand our capacity based on customer requirements. In India, we have acquired land parcels, measuring almost 100 acres each, in Haryana (Kharkhoda) and Maharashtra (Pune), and around 37 acres in Tamil Nadu (Hosur) to be ready to increase our capacity when our OEM customers demand it.
In Kharkhoda, for instance, we have earmarked around 25% of the land for setting up an alloy wheel plant with an annual capacity of 2.4 million units at a cost of Rs 540 crore for supplying to Maruti Suzuki India. We will continue expanding our capacities for existing product lines as per customer requirements, while also setting up new facilities for the four-wheeler EV products we are getting into. Having said that, we are now also consolidating all our 67 plants in India based on the 25 product lines to leverage economies of scale.
Do the declining small car sales worry Uno Minda, and how can the situation be improved?
This is a cyclical issue. At the same time, our public transportation system is also not so adequate as of now, although the government is taking several measures to change the situation to fulfil the mobility needs of the population.
As far as we are concerned, as a component manufacturer, there is an opportunity for us if there is more premiumisation of the market. But having said that, we must adopt a gradual trajectory in terms of evolution of our regulations — be it safety or emissions – as rapid transitions cast a burden on automakers as well as other industry stakeholders.
Furthermore, in my opinion, the government must reduce the GST on two-wheelers as well as passenger vehicles to generate more demand. If the government reduces the GST to 12% or even 18%, demand will double within 3-4 years’ time because the vehicle price will come down. When considering the local taxes including the road tax along with the GST, the tax component itself comprises around 40% of the overall price of the vehicle.
Therefore, even if the government lowers the taxes, it is set to benefit from a significant growth in vehicle volumes, employment generation, as well as an overall growth in the GDP, as 49% of India’s manufacturing GDP is contributed by the automotive industry.
What is your industry growth outlook for the mid-term and what will be Uno Minda’s growth strategy?
The passenger vehicle penetration in India stands at around 24 cars per thousand population compared to the global average of 345. This is also well behind that of developed markets, where it is pegged in the range of 700 cars per thousand. Moreover, while India crossed the 4-million-unit mark in the passenger vehicle volumes in FY24, China ranked first among all countries in 2022 by producing 24 million cars. As of now, we are far behind China.
Therefore, we are quite bullish about the long- term growth potential of the industry, and if our GDP continues to grow at a rate of 6-7%, thereby leading to an increase in per-capita incomes, it will also improve consumer affordability and drive new vehicle sales. As Uno Minda, our strategy remains to outgrow the market and to increase our kit value by making consistent effort in R&D, competency, and capability building.
While quarterly blips are a cyclical phenomenon, we believe that the industry is poised to grow at a mid-single-digit rate in the mid- to long-term horizon, which is why every industry stakeholder is adopting a long-term viewpoint and investing in new products, EV and hybrid technology, and increasing overall manufacturing capacity. Toyota Kirloskar Motor, Tata Motors, Mahindra & Mahindra, Maruti Suzuki India, and Hyundai Motor India are all preparing for future capacity expansion in anticipation of growth.
What are the major challenges ahead for the industry as it transitions to sustainable mobility solutions?
The technological disruption that is currently underway with the growing levels of electronics and software in vehicles is set to pose a challenge for the industry, which needs to understand the upcoming technology and changing consumer preferences more deeply.
Furthermore, this shift is also going to create challenges related to human resource development and talent management. As a result, we need to hone our resources and upgrade their skills to enable them to understand technology and quality better. While a growth focused mindset might not always be the right strategy, we sometimes need to go back to the basics as well.
While Tier-I component makers like Uno Minda will face challenges in terms of supporting their Tier-II vendors through this transition, OEMs will also rationalise their suppliers and look for players that can offer consistent quality. Therefore, OEMs must handhold Tier-I suppliers, who, in turn, will handhold their Tier-II vendors. This is a major challenge ahead for the industry and the entire ecosystem needs to be stronger and must come together.
This feature was first published in Autocar Professional's September 1, 2024 issue.