Hemant Luthra, chairman of Mahindra CIE, in an interview to FE’s Deepak Kumar explains how the tie-up with Spanish auto component company CIE Automotive has helped it get more customers in Europe. He also shared his views on electric vehicles and why the government’s target of an all-electric future by 2030 may be too ambitious. Excerpts:
How has your tie-up with CIE helped your business?
We have got access to CIE’s customers, but we are disappointed that exports have not happened to the degree they wanted. There is a plus and a minus. The Germans, if it is a critical engine component, take much longer to approve an India vendor because of the long supply chain. So they won’t move stuff from Germany to India so easily. But if you say you are moving stuff from Germany to the Mahindra CIE plant in Spain or to the Mahindra CIE plant in Czechoslovakia or to Lithuania, the shorter distance encourages them, and that has helped the business. Business overseas has helped us to reach clients who were part of CIE. It cannot be said how many clients will switch to India. Only where there is a large element of human labour, it becomes helpful to move it all the way here to India.
Half your revenues in India come from M&M, Maruti Suzuki, and Tata Motors. Are you trying to get new clients?
We want more customers and we also want Hyundai’s business. That is why we bought Bill Forge in 2016. Bill Forge has been a kicker. Bill Forge has helped us get from four- to two-wheelers. It has helped enter the market in the south.
Do you think an all-electric future is possible for India by 2030?
Our forecast is that by 2025, the number of electric cars may not be more than 6% globally. We don’t see a threat, like the market sees.
Why do you think the transition will be slow?
Has anyone found out where lithium in the world lies? It is lying in China and Australia. If you want more range in your car, you need cobalt, and it is lying in Congo. If China is saying all-electric vehicles by 2030 and India saying something similar, the amount of cobalt required per annum is more than the cobalt that has been dug out for the last 20 years.
Any acquisitions to be future ready?
We look at acquisitions where we feel there are holes in our portfolio. If electric cars are coming, we should have a little more of aluminium in our business, and we should have more plastics in our portfolio, to back the move that is coming for light weighting.
How are you faring on capacity utilisation in India?
Our foundry is running at 60-65% of capacity. Gears is going flat out. Forging is 70-75% of capacity.
How do you plan to lift capacity utilisation?
The diwali month was good. I also feel there are signs of rural recovery. The tractor and 4-wheeler markets have picked up, which has led to some organic growth. We are a little worried about M&M losing market share to Maruti Suzuki. But by buying Bill Forge, which is supplying substantially to Maruti, we have created an entry point to Maruti, which I did not have before.
How do you plan to sustain the growth and profitability?
Volume growth is shifting to Asia. The value per car, however, will always remain higher in America. Who is the other player in the world who has a chance to become a low-cost country player? That is the vision. The ambition that is driving us is to become the global low-cost country leader in terms of profitability. This is possible because of the locations we already have. We are in Mexico servicing the North America market. We are in Brazil where the falling real has made the export business more competitive. We are also in China and India.
What is your M&A strategy?
The automotive component business was developed in India as a result of Maruti asking vendors to come in. That was at least 30 years back. Those entrepreneurs would now be 60-70 years old. How many of their kids want to do metal bashing? As a result, many of them are for sale, and some others have driven themselves into bankruptcy. You don’t turn down such opportunities. So we take advantage of the generation change and also ARCs selling assets.