Auto component major UNO Minda Group’s Chairman and MD, Nirmal K Minda, is bullish on India’s growth story. Given the low per capita penetration of vehicles, he says the growing demand for personal mobility will further accelerate two- and four-wheeler sales. In a freewheeling interview, he speaks about the year gone by, new challenges and opportunities in the automotive industry, views on electrification, Auto Component Show 2023, and the growth mantra for the Group.
How has been CY2022 and what are the challenges you think exist ahead?
Other than semiconductors there are no major challenges. I think it may be partly because the automotive industry is using the old generation semiconductor. We are looking at alternatives that can be used for the same design to mitigate the risks. One good thing is that none of our OEM clients had to stop their operations because of us so far.
How do you see segment-wise sales? During our last interaction, you had said UNO Minda would surpass Rs 15,000 crore revenue in FY2023 (at Group basis). Is that still on track?
Currently the orders we are getting from the electrification segment will mature in terms of supply in a couple of year, it takes some time, but our order book this year is very strong. The impact coming from these orders in our sales would not be apparently visible so early.
We had already budgeted, Q3-Q4 FY2023 with good revenue numbers. The two-wheeler segment is currently not showing promising returns because the market is awaiting EV products. On the other hand, four-wheeler segment is doing good. There are up and down trends in the A & B category vehicles. But our overall sales will be better than our project, but not exponentially high because I would say the order book is for the future, whatever order we are getting in present times It will be realised in due course of time.
In terms of revenue, we will be able to achieve that and are currently working towards that target.
The EV penetration has been strong in the two-, and three-wheeler space, and in the PV segment, SUV sales are driving growth. Do you see those segments to be the major revenue bringer for the component industry as well as for the UNO Minda Group?
As far as the electric 2W segment is concerned, most of them have parts imported from China. With the government giving a significant push to localisation and introducing policies that promote indigenous players there is a huge pool of opportunity for the component industry as well UNO Minda Group.
What is your current split between your OE and aftermarket and also your India and global business in terms of percentage?
Around 17% of our revenue comes from the international business which includes our manufacturing operations in Indonesia, and Vietnam as well as exports from India. Aftermarket contributes around 10% of our revenue.
Will you look to tap into export opportunities given that India is now looked as China +1 strategy globally?
I would agree with that. There is a massive opportunity as far as the international market and our Indonesian/Vietnam operation is concerned because the new products that we are developing now are for global models. Many of the OEMs are now coming to us for global models. For example, we have started supplying rear lamps and head-mounted lamp for the Toyota Innova, which is common in the Indonesian market also because it is a global model.
There are opportunities to export and from our international operations. And you’re right, China plus one is the reason people have started looking at the opportunity more aggressively. As far as the aftermarket is concerned, our growth is almost I will say 15-20% more than the last year. We have now recently opened an office in Dubai. Therefore, the Middle East market will also improve for us and huge opportunity for us to supply in the Middle East.
How do you see CY2022 and expectations from Q4 FY2023 for the overall auto retails?
The automotive industry is catching up and is filled with positive momentum. Some specific segments are ready to surpass the pre-Covid levels, especially in the small car segment. The fear of the pandemic was gone, but now with the conditions in China, it is again coming back. In terms of shared mobility, people are reevaluating their decisions. Owner-driven car is a huge market and 2022 has been a good year for it. The two-wheeler segment has been observing some ups and downs. But I’m very bullish on the overall industry’s long-term plans.
The auto industry posted its highest-ever annual domestic passenger vehicle (PV) sales in 2022 at 3.793 million units on the back of pent-up demand. I see this number growing to 2.5 times of the sales made in 2022 in the next 8 to 10 years.
In the 2W segment, we had touched a maximum of 22 million sales and are now back to 18 million units. I expect this figure to reach 28- 30 million in the next 8-10 years.
My bullishness lies on the back of the low per capita car and per capita two-wheeler penetration, which is far less than the developed country or middle-developed country. If India’s economy and GDP grow, the per capita income grows. All these indicators are poised for the growth of the automobile industry.
What is the average content per vehicle presently for the UNO Minda and target for the future?
At present, the potential kit value in the IC-two-wheeler space it is around Rs 8,000; for electrification, our potential kit value is more than Rs 50,000. In the electric four-wheeler space, we are not very aggressive as of now as the market is still at a nascent stage of growth. Even in terms of the overall industry sentiment, the four-wheeler segment has only started to pick up.
Our focus on the electric PV segment is on the R&D front, as we have started receiving RFQs from OEMs. This indicates that the OEMs are now serious and are planning to move forward with localisation.
For us to get into this space we need volumes, so once we start to see volumes in this segment it would be the right time for us to enter. We have initiated our work on the engineering front, our potential kit value for 4W ICE ranges from Rs 30,000 to Rs 1,40,000.
What is your focus at the Auto Expo Component show 2023?
Our focus is on PACE (Personalisation, Autonomous, Connected, and Electrification).
While autonomous will take some time demand for ADAS will come early. The visitors will see our different product line, technologies, and an innovation zone. We are having our innovation zone catering specifically to the category of electrification.
In terms of product electrification our range includes Chargers, DC-DC converters, smart plug, battery management systems (BMS), battery packs, EVAS, and traction motors among others.
For the Connected category, there is a control monitor and monetise vehicle data. We are showcasing the potential connected applications, including the software, and then the telematics we use including our software via the data center. We will also showcase the cloud technology deployed, and how it works and provides us with details from different OEMs helping us maintain a smooth ecosystem with them. We are one of the largest players in terms of the ‘connected’ segment in India.
For connected tech, Indian markets in terms of without driver vehicles is a far-fetched proposition, this is where ADAS will be in demand – driver assistance system for behaviour monitoring, 360-degree cameras, around view mirror. These are the technologies we are showing in the ADAS segment.
In terms of personalisation category- we are going for affordable luxury. The key technology is in the lighting space – illuminated lighting, badges, logo projectors, connected tail lamps, talking tail lamps, welcoming tail lamps, LED headlamps, DRM, and new technologies like projectors, lamps and smartphone-integrated, ambient/mood lighting to showcase what an Indian consumer can expect in their life and wireless chargers.
How many of them are completely new products and the ones being already commissioned by customers?
Many of them are completely new products. We are the first one to introduce made-in-India wireless chargers. We are supplying to Toyota, Maruti, Mahindra, and Tata. Even for the ambient lighting, we are going to be the first one to introduce locally designed and developed products in India. The logo projector is another one. In each category, there are different products that we will be displaying for the first time.
What about headwinds facing the industry – increase in raw material prices, Covid wave in China, hike in repo rate, availability of finance, among others?
The necessities for a common man have changed drastically and have gone beyond just food, shelter, and clothing. We are in times when vehicle ownership has grown tremendously. The public transport ecosystem is not that conducive, even if metros are coming up, the rural areas are still far away from achieving that kind of public transport connectivity. If the per capita income continues to increase, the economy will see a positive turn of events. While the challenges of commodity pricing, Covid-19 remain but when we look back at the year 2020 important industries were allowed to open, manufacturing being one of them we maintained and operated in our facilities following social distancing rules and regulations. We learned a new way of life.
You mean to say rural is a very major market that is yet to be tapped.
Yes, that’s one way to look at it, and the other aspect is that our cities are also expanding. Taking the example of Chandigarh, Zirakpur is now a planned urban city on the city’s borders. It was a village before. Delhi has become Delhi-NCR no one differentiates between Delhi, Gurugram and Noida. People have started investing in high-rise societies in the regions of Manesar and Bawal.
What about new investments and plans for inorganic growth?
Being a listed player, we wouldn’t be able to share the exact figures. But we try to do it via our internal accruals or maximum of debt-equity 1:1. At present, we are 0:2 in terms of debt-equity. The CAPEX we put up is carefully planned to keep in check the OC return on capital-employed carriage.
Our Capex allocation policy considers certain evaluations and checks before we move ahead with opportunities that provide us with a major product line.
Our mission is in 2-3 years once the product line matures, we must be able to have 30% of the share in the Indian market. We do SWOT (Strength, Weakness, Opportunities and Threats) analysis in terms of our competition, and customers. This helps us in analysing the customer’s pain areas and then we go into the product.
The other factors taken into consideration for SWOT analysis are localisation opportunities available, import channels already set up and running for the product, and import rate for localisation. We continue to look for any technical license preferably. We usually do not go for JVs, but if collaborating partners are not willing sometimes, we must take that route. But that again depends upon what is the customer need, the pain area, whether the technologies are not available in India, and whether in terms of those technologies our R& Center will take a long time to market.
We have 350 people strong team dedicated to R&D and have branches in Gurgaon, Pune, and Chennai. Our focus is on self-reliance and new production technology that will be showcased at the Auto Expo. If there is an urgent requirement from the customer, and we don’t have time to validate the order then we keep looking for JV in terms of new opportunities.
What about acquisition opportunities?
Not for the top line. We are more focused on bottom-line return on capital. Additionally, with the technology coming in India instead of JV technical license assistance or any joint venture if there is technology available in during the acquisition. Then we go for the acquisition abroad. However, if there are opportunities in India in terms of consolidation then we keep a check on that aspect. It helps us in improving our economy and scale, but not at a demanding price.
We also look if we are able to add value to the acquisition. Most of our acquisition, if at all in the global market is more driven by technology access rather than growth of revenues. It is more about getting new technologies irrespective of the size of the company. The Delvis acquisition gave us competencies in LED headlights, and tail lights, the controllers market came from the iSYS acquisition. We have all this being showcased at Auto Expo.
Lastly, what’s your view on working with start-ups?
We are already working with two startups including Dhama Innovation for their cold and hot seats.
We keep evaluating startups. They have their own weak areas, in terms of manufacturing, and setting up a supply base. We can add value via our associations and then the purposes and objectives of the alliance are taken into consideration.
