May 2:
With two acquisitions in under six months, Varroc now has footprints in the developed markets in the EU and the US.
In what must rank as one of the most important acquisitions of the year, the Aurangabad-based supplier, Varroc Group announced its purchase of the lighting division of Visteon for $92 million. The deal, which will be finalised by the third quarter of this year, is Varroc’s second acquisition in the automotive lighting space. Just four months ago, the company had acquired TriOM SpA, the Italian two-wheeler lighting supplier.
Vineet Sahni, president – electrical division, tells Autocar Professional that the strategy behind both acquisitions is technology upgradation. Sahni says, “We wanted to offer frugal engineering benefits to our customers and have positioned ourselves in the four-wheeler segment. We were keen to graduate ourselves as a concurrent design partner in the value chain for the customer.” Varroc has now said it is confident that it has become the only Indian supplier with the latest in technology.
So what impact does the acquisitions have? The buyout of TriOM enables Varroc to improve its positioning in Europe. “With this acquisition, the Varroc Group has acquired more than 60 percent SOB in the European two-wheeler space. The acquisition of Visteon’s global lighting business gives the company business footprints in the US, Europe and Asia. It has a 50:50 JV in China. Varroc has 26 plants worldwide including five in Europe, 20 in India and one in South-East Asia," says Sahni.
India’s automotive lighting market has been estimated at approximately $500 million and is expected to grow over 12 percent on the basis of robust growth of OEMs. The Varroc Group’s own automotive lighting business is about $60 million and over the coming year, this would would reach to level of over $650 million, about 50 percent of Group turnover.
Varroc is now bullish saying that it expects a compounded annual growth rate of over 20 percent over the next few years for the automotive lighting sector.
Among the Varroc Group’s lighting business clients are almost all the OEMs across the globe across all vehicle segments. Here it is pertinent to mention that one major client is Bajaj Auto, to whom the company supplies products for both the Pulsar and Discover range of bikes.
Strategic advantage
With the acquisition of Visteon’s auto lighting business, the company has now added a slew of overseas clients including Ford and in India, Tata Motors, Mahindra & Mahindra and Volkswagen India, to mention a few.
The Mahindra flagship XUV500 uses an advanced poly-ellipsoid system (PES) headlamp with LED styling accents, making it the first SUV in India to showcase headlamp design and technology incorporating projector, LED-based position function and 'static bending'. This optional feature enables headlamps to anticipate and illuminate turns in the road for improved visibility.
In the context of the company's recent acquisitions, and to put things in perspective, the Varroc Group is a pioneer in India for LED lighting solution in the two-wheeler segment. Besides introducing LED solution in rear and directional lighting (indicators), it has recently introduced the same in front headlamps as well. The Bajaj RE60 four-wheeler, revealed at the 2012 Auto Expo in New Delhi earlier this year, has been fitted with the lighting assemblies provided by Varroc.
Among the major developments in the two- and three-wheeler lighting space is the shift in technology. Sahni says, "As the market dynamics are changing, OEMs are focusing more on lighting style and design. A recent analysis reveals approximately 70 percent of consumers are influenced by the aesthetic appeal of a vehicle when making a purchase. In turn, a key ‘impact’ area for new models comes from a vehicle’s exterior lighting, where it is a major stylistic feature. LED and Xenon/HID are leading the technology shift, especially in front lighting solutions.”
INTERVIEW WITH VINEET SAHNI, PRESIDENT, ELECTRICAL DIVISION, VARROC
OEMs are fast opting for LEDs for most, if not all, of their lighting requirements. What developments do you see in the LED space in the future?
The introduction of LED technology as an increasingly cost-effective automotive lighting technology has expanded the design and packaging opportunities for the next generation of models for OEMs. In India, the usage of LED lighting is restricted to high-end models to create a USP through improved technical capability and vehicle branding.
Is Varroc developing any new lighting technology? If yes, please elaborate.
Auto lighting players are focusing more on safety as one mega trend to retain their space in the market and create their USP.
The growing importance of safety considerations, especially among buyers, means OEMs are willing to source lighting products that contain the latest safety technology. We are working on various such projects; some of the immediate focused projects involve replacing the cluster of LEDs into a single LED solution. Combination with light guide is also a cost-effective solution.
Over time, we have plans to address major mega trends such as design, regulations and energy efficiency and introduce relevant products.
Is there any new eco-friendly initiative planned in the automotive lighting space?
We wish to introduce LED-based lighting solutions for two-wheelers. We are pioneers in LED lighting in India. We have a plan in place to introduce the same for the four-wheeler segment as well.
What is the range of Varroc’s automotive lighting solutions?
After these two acquisitions, we are the only Indian supplier with a state-of-the-art in-house technology set-up. In fact, we can be considered as a one-stop shop to support any programme from concept through to series deliveries across all vehicle segments.
Does Varroc also plan to offer interior lighting products? If yes, please elaborate.
Yes, we do have a roadmap in place. We will offer CHMSL (Centre High-Mount Stop Lamps), rear and front fog lamps, complete interior lighting and directional lighting solutions.
How closely do lighting suppliers work with OEMs in developing products? Is there a change in the supplier-OEM relationship of late in terms of, say, coming on board a particular vehicle programme?
Over the past few years, the automotive sourcing scenario has been completely transformed. OEMs are expecting Tier-1 suppliers to own more responsibility in terms of product design as well. In OEM marketing campaigns, they use exterior lighting as a distinctive feature for the new models. As such, to improve the aesthetic aspect of a model, OEMs are relying more on the advanced suppliers who not only suggest design improvements but work with their team to develop the new product.
We often engage with our customers as a concurrent design partner for their upcoming projects. This gives the OEMs better understanding on the usage of the latest technologies, vehicle packaging and lamp-to-body tolerance. It also helps OEMs to keep cost targets in producing vehicle content budgets.
How long does it take to develop new lighting solutions?
For upcoming programmes, the lead time varies. For any new programme, usually the lead time varies between two and three years. For any design upgradation programme, the lead time is between one and five years. As we are not dependent for technology support on outside parties, we can very well adjust the development time.
SUMANTRA BAROOAH