German Brose bats for ‘Advantage India’
Looking at India beyond emerging market, Brose Group, a 4.7 billion Euros component maker is adopting a dual-edged strategy for the country. First - to support its global operations, second - to leveraging the growing business opportunities here.
“This is for a few reasons. First - because India has English speaking workforce. Second- its has the capability and skill, third- the availability of the engineers that can be supportive of the group. The group expects that this team will also support the local engineering activity,” said Ashwin Aggarwal, President Brose India.
Progressing in a very astute fashion, firstly, it shopped for talent and made India as back office for engineering and designing to support the global operations and then graduated to be a manufacturer. It expects to earn annual revenue of 50 million Euros by ramping up manufacturing in the next five years.
The Indian engineers have already earned a couple of patents for the group while every year a few of them are applied for. The frugal skill at the manufacturing level has also been endorsed and adopted by Brose for its global business.
Low-cost of talent has been a major attraction of the company as the cost of setting up engineering centre is almost half the cost that would incur in a similar set up in Europe. The group has recognised and established that India can be used as a development centre for engineering centre for electronics product and simulation activity and evaluate proto-type and testing purposes to support the entire group.
Brose, a mechatronics leader, entered the country in 2006 and till 2008 it had an evaluation period with less than four-member team. It opened the first manufacturing unit in India in 2011. Now, it has around 150 people working at different responsibilities which included a special team of 24 IT engineers to manage systems and SAP activities for global operations. In the next three years, the company expects to double the manpower in India creating at least 150 new jobs.
Brose Group, which operates in over 23 countries, has engineering and development centre in three countries namely – Germany, China and India. Indian centre is probably the second largest after its home country Germany.
Brose India moved production into a new facility. In addition, the company is installing new testing and prototyping equipment at the new plant. The bigger facility will help increase Brose’s range of locally manufactured products and further enhance the local value addition to product development. With the newly set up plant production output is anticipated to reach 2.4 million units by 2015 in India.
Brose will start production of side door latches and mini module in India from November 2014. The company will put up a new facility with a capacity of close to one million latches a year at existing leased plant here. The company currently have two products in – window regulator, seat adjusters. The company has year-marked a 312 million Euros investment globally for 2014 to take the revenue to 5 billion Euros. The Indian expansion will also get a part of investment from this.
It is initially bringing the same latches to India which it supplies to various customers abroad. This door latch is used in specific models of vehicles only. However, it is also developing a platform known as - ‘latches for India’ which will be a new product that can be used across various models and OEM with slight tweaking and adaptation. This would help the company in enhancing the profitability by reducing the cost of production.
Globally, the company has three main product categories – module & component for vehicle door, vehicle seats adjusters and engine cooling systems, contributing 50%, 25% and 25 % revenue share respectively. Brose is also strongly considering bringing other products to India such as ABS wheel motor and HVAC system in the near future.
Talking about being slow in the Indian market Aggarwal said: “The market is tough to penetrate. And the way forward we have decided to penetrate the market via the engineering and development route. So that our engineers can understand what is needed in Indian market and then that engineering strength can be used to develop and manufacture product competitively therefore being a profitable. We are successful”
The company currently has around 7% market share in door regulator and it hopes to command 15 percent market share in this category in the next three years.
The company is a major supplier to the leading OEMs globally and now beefing up its efforts to leverage its relations with them and build new customers in India. A number of vehicles on Indian road already have Brose products in it being imported as CKD from company’s abroad operations -to name a few – VW Jetta, Passat, Octavia etc.
Taking India Globally
The family-owned firm is also evaluating to make India a supply base for its global manufacturing in line with many other international firms which are already using the Indian suppliers for meeting global requirements. Brose has also started working in this direction. But first, it is trying to stabalise supplier base for Indian operations as it is a very important market for them.
“Very soon we will start supporting global manufacturing from India. We are already discussion with one or two Indian suppliers for components like die-casting to supply abroad. Not every material can be exported out of India. Castings, die-casting, hardwares, these are the areas, where we are evaluating. We have made considerable progress and. Soon, within next year or we will be able start supplying from here,” Aggarwal maintained.
Brose has major business in Europe, America and Asia with revenue contribution of 55%, 26% and 19% respectively. In Asia, China is a major contributor to the tune of above 600 million Euros where the company venture in 1996.
Brose’s door regulators are also being exported from India directly as well as indirectly. The company supplies door regulators to Ford in Chennai for one of the highest selling SUVs – Ford EcoSport which is exported to various countries. The component maker will now be directly exporting door regulators to Russia from India for Ford EcoSports. Currently it earns 30 % of Indian revenue from exports.