Major auto component suppliers add EV products to repertoire

Most of the supply chain players have already shifted to EV, while they have begun exporting about 20-40% to countries like Europe and the US. Most of the purely ICE-based manufacturers have also added EV components to their repertoire.

Along with automakers, component suppliers are also preparing for electrification of the entire industry. Nearly three years ago, Uno Minda began developing specific products for the electric vehicle (EV) segment, and it supplies key components to major electric two-wheeler manufacturers in the country. 

“In 2019, we saw EVs as the future and a big opportunity for us to increase our kit value. So, we started our engineering centre in Pune, Centre for Research, Engineering and Advanced Technologies (CREAT). We have over 200 engineers working at CREAT on a lot of incubation, EV and non-EV projects,” Sunil Bohra, chief financial officer at Minda Industries, said.

The firm manufactures alloy wheels, lamps, switches, acoustics, infotainment system, blow moulding components, controllers and telematics among others for both EV and internal combustion engines (ICE). The company’s kit for a two-wheeler ICE would be priced at `7,500, but with incremental changes for EV, it rises to `9,000.  According to Crisil Research director Hetal Gandhi: “EV components such as battery pack, electric drivetrain and power electronics are seeing higher traction as these are replacing traditional engine and powertrain components in the transition to EVs. This transition is presently being led by the two and three-wheeler segments. Battery packs are expected to account for 35-50% of the total vehicle cost, while electric drivetrain and power electronics together are expected to account 10-20%. Players in these categories would be able to benefit the most due to EV adoption.”

EV sales in India have been on a steady rise. In February, the passenger EV segment sold 2,352 units, a 58% rise compared with January and a whopping 297% rise from the same month a year ago, as per the Federation of Automobile Dealers Associations (FADA) data. Tata Motors had aced the four-wheeler EV market, with its compact SUV Nexon and sedan Tigor range garnering 87% market share for the 11 months of the current financial year, according to the Tata group company.

Paradigm shift

Most of the supply chain players have already shifted to EV, while they have begun exporting about 20-40% to countries like Europe and the US. Most of the purely ICE-based manufacturers have also added EV components to their repertoire. “In the last 12 months, more than 100 EV companies have come up across the country. Bengaluru and Hyderabad, where ICE manufacturers are present, are the major hubs for these firms, while Pune is also a good option as EV as a concept is more of a tech firm than an automobile company. In an ICE firm, 90% of the manpower is mechanical and 10% technical, but in an EV firm 30-40% are tech people,” FADA president Vinkesh Gulati said.

“The only EV component we are not making in India is the battery and its cells, which are being imported. This is the major reason we are not able to ramp up production,” he added. 

With the industry rapidly shifting gears towards EV adoption, companies such as Godrej Tooling, a business of Godrej and Boyce Mfg Co., are looking to develop new engines, battery boxes and high-precision sheet metal parts.

“E-mobility is gaining traction in India due to its eco-friendly features and comparatively lower total cost of ownership. We have increased our investment by 10% YoY on R&D towards a portfolio of tools and dies with a special focus on the EV industry. In the coming year, we also plan to explore tie-ups for exports across identified geographies,” Pankaj Abhyankar, senior vice-president and business head at Godrej Tooling, said.

Godrej Tooling, a manufacturer of custom-built tools and dies for two-wheelers, four-wheelers and tractors, has also earmarked a part of its R&D budget for EV, such as light-weighting, alternate materials and structural castings. The firm, which is expecting a minimum 30% YoY rise in our orderbook in coming years, has also applied for a patent for its Cloud-based Smart Connected Die that can remotely monitor a set of operating parameters.

Funding constraints

From a lending point of view, barring a bit of slowdown in 2019 and that in the Covid days, auto business has been doing well. However, the same excitement is not seen in the EV funding scene.

“In the EV world, most companies are younger and newer players – not taking into account biggies such as Tata Motors and TVS Group – as we are yet to see large OEMs jump into the fray. Most lending institutions look for a certain vintage, scale and track record before providing loans, and traditional lenders do not have that level of comfort when it comes to lending to the EV segment,” Vinod Parmar, global head (sales & marketing) at Vayana Network, a supply chain trade finance platform, said.

Some banks and NBFCs are lending to these younger firms (manufacturers and dealers) based on their assets and output, but at a higher interest rate of about 300-400 basis points. Traditional lenders are also coming up with new models of underwriting for EV vehicles, especially for delivery firms.

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