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    Electrification will mean more kit value for us: Nirmal Minda

    Synopsis

    I am very bullish on the auto segment, even two-wheelers and cars, says Minda Industries CMD.

    Nirmal Minda-1200
    As far as electric cars are concerned, our group is not much impacted. We have already listed and mapped all our component, said Nirmal Minda, CMD, Minda Industries, in an interview with ETNOW.

    Edited excerpts:

    What production disruptions are you going to expect? Do you foresee going into safety and emission norms for auto majors? How do these norms affect the content per vehicle?

    There are different regulations on safety, emissions and things like airbag usage. Airbag usage per car varies from 2,500 to 3,500 per car kit value. In the sensors, the RPAS is something around Rs 1,500 on average.

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    Therefore, the kit value in a car is increasing in our product line from Rs 6,000 to Rs 7,000. Even in the existing product line, there are opportunities in lighting system. On top of it, the multi-utility and SUV segment is also increasing. If you look at the car, the general user looks for more and more features and that also enhances kit value.

    Big brokerages like Nomura are essentially betting on strong content per vehicle. The comparison which everybody now tries to draw is what Motherson has achieved in terms of increasing the component per car?. What is your ratio right now?

    It differs from segment to segment. In the car segment we supply almost 26-27 products in a car. The total potential of the kit value is up to Rs 90,000. It ranges from Rs 25,000 to Rs 90,000. For a Toyota Crysta, our kit value is around Rs 65,000.

    Two things are at play. One, there is a slowdown in autos, demand has been bad -- whether it is interest rate or election or both. Second, there are new emission norms which are at play where every company this year will be discounting in clearing that inventory. What does that mean for your business?

    I would not say at the lower price. The vehicle industry has to move. We are fortunately in all segments – two-wheelers, four-wheelers, cars, three-wheelers, tractors and even commercial vehicles. If one segment is going slow, the other segment has a chance of recovering.

    Secondly, our kit value is increasing with this emission norm of BS-VI and all that.

    Third, after the election, in the fourth quarter we expect clearing of the stock of BS-IV. As we all know, from April 20, all new cars have to be BS-VI. The vehicle manufacturer would make more cars, more business for us. But definitely if the vehicles are down, there are impact in the component manufacturers as well.

    You are a key supplier to Maruti. Have you seen any impact on the back of the output cut? What is the outlook in terms of orders in backdrop as well of Toyota Suzuki partnership?

    The Toyota Suzuki partnership is going to start vehicle production by 2022 and then there is no impact because of Toyota. In fact, Maruti is going to save the investment and we are a major supplier to them. As much as they produce, we continue to supply them and these days per model double sourcing is ruled out because of the investment of the tooling and all that.

    So whichever model we are supplying, we are doing it 100%. If they produce that model well, we are in the right spirit. There is an impact but depending say in Manesar, we have little impact but in Gujarat there is no impact. So, on an average, there is little impact as far as Maruti is concerned but not for us. You must be seeing Maruti figure as well, depending upon vehicle production.

    You have 47% business coming from two-wheelers and that is where the problem is. Whether it is Bajaj or Hero MotoCorp or Eicher, all of them are admitting that we have high inventories and business may not even grow in double digit. Would you be looking at changing that business mix ?

    As far as the electrification is concerned, our group is not much impacted. We have already listed and mapped all our component. In fact, there are opportunities for us and we shall be able to increase our kit value as far the electrification of the vehicle is concerned because our products are not in engine related parts.

    As regards two-wheelers, there is pressure on inventory. This is because of NBFC funding problem as 45% of two-wheelers are dependent on NBFCs. There has been a pressure and we are hopeful that this pressure will be over immediately soon after the election, but there is an impact and I am very bullish on the auto segment, even two-wheelers and cars.

    Our per capita usage of cars is 28, whereas in China, it is 145. Our two-wheeler numbers are almost 20 million. In case of China, it has started dropping down after reaching 35 million.

    We have a huge market going forward. The only thing is infrastructure. Our GDP and our spending per capita income should come into line and we are hopeful that it will continue to grow.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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