After becoming partners through a technical collaboration in April last year, India’s Sandhar Technologies signed a 50:50 JV with Taiwan's Whetron Electronics Company on June 21, with an ambition to supply safety related auto electronic components like rear parking sensors, cameras, lane departure warning, blind spot detection, and tyre pressure monitoring systems (TPMS) to the Indian vehicle OEMs.
Sandhar, which had earlier planned to explore the opportunities of the technical collaboration, soon realised that to cater to the large volume requirements of the Indian market with the upcoming AIS 145 regulations from July 2019, and to bring down costs, it would be imperative to localise the technology and build a local establishment in India.
Hence, the company pressed upon Whetron to strike a JV, so as to bring a transparency in technology transfer as well as allow for local development of new innovations, rather than importing everything from abroad.
While all four-wheeler segments, including passenger cars and CVs will come under the purview of the JV, Sandhar will continue to serve the two-wheeler segment with the technical collaboration and is already in talks for some of the products like USB chargers with leading OEMs in the country.
High localisation target
The company will start with rear park-assist systems (RPAS), which primarily includes the rear parking sensors, and targets a 70 percent localisation with majorly the PCB getting sourced from Taiwan. It would set up a line at its Pathredi facility situated in Bhiwadi industrial district, in Rajasthan, and would commence operations in January 2019, well before the July 2019 deadline, when the regulatory norms mandating rear parking sensors for all existing as well as new models kick in.
“We have earmarked one existing shed at our Pathredi plant and we will be using that for the moment. We expect that to last us for about the next two years and by that time, we would have more clarity on our volumes, customer profiles as well as on our requirements as to from where we are getting good traction. It would only be after that that we look at building a new plant, which could be either in Haryana, Pune or Chennai”, said Jayant Davar, co-chairman and managing director, Sandhar Technologies.
“Our aspiration with the RPAS is to have 20-25 percent of the Indian market, which stands at around 3.5 million units being cumulatively produced annually in the PV segment. So, we are targeting one-fourth of this number and that is not going to be gradual, rather, it is going to start right away. So, with other players like Bosch, Continental and Minda-TTE also being in the space, we do expect that we will probably get more traction than some of the international companies because of our costs being comparatively lower than these players as their design fees are usually higher as they get designed overseas. Thus, we believe that with competitive pricing, 25 percent of the market is achievable and our idea would be to maintain that number”, Davar added.
Eyeing a big opportunity with Whetron
The company, in the beginning, is looking at investments only for the RPAS, but the chunk of the money will need to be infused two years later, when it gets more clarity on the actual volumes.
“Initially, the investments are going to be devoid of any cost of land and building and thus, our total capital costs would come into the picture two years from hence, which should be in the range of US$ 20-25 million (Rs 135-170 crore) for such a big establishment. In future, our Sandhar-Whetron facility will be a dedicated one to produce all the product lines related to active vehicle safety.”
While Sandhar is being approached by a lot of the players in the PV segment, with Whetron being a global supplier for RPAS on all Honda models across the world, the company expects to gain its business in India as well. Whetron also supplies globally to Toyota, Suzuki, Renault, Hyundai, Mitsubishi, Yamaha and Piaggio among others.
“To be honest, India is a huge market, and there are very few opportunities like this where a mandate calls for a change overnight. So, we will gradually understand the traction for different products like cameras, lane departure warning systems as well as TPMS, which is also going to become mandatory”, Davar said.
“Requirements will develop as we go forward and we have a detailed plan as to when we will introduce all the products in collaboration with Whetron.”
Moreover, with Whetron also being very strong in terms of EV components, according to Davar, “The JV is a very big opportunity for us and we are keeping our fingers crossed until the Indian market adapts to and openly adopts EVs in the future”, he added.
Optimistic about Kia’s India entry
With Kia Motors entering the Indian market and Sandhar having a host of JVs with Korean component players across a multitude of product categories, the Tier 1 supplier sees itself to be a natural fit for Kia Motors India in that regard.
“We are in discussion with them for several product lines. Kia is a natural fit for us, and while I am not at the liberty to announce, but, suffice to say that we are working closely to be supplying to Kia”, Davar said.
“Moreover, Kia is localising a lot. So, the way how Hyundai setup by bringing in a lot of Korean suppliers with them, Kia is not taking that route and are looking at localising from indigenous Indian players right from the Tier 1 level. Large parts, big components, big assemblies are all being closely worked out to be localised by Indian players and while of course, they want to be sure that there is technology available, which could be either from Korea or other countries, their intent is to look at Indian players. And while Hyundai has the advantage of volumes, Kia Motors India is looking to target Hyundai in terms of costs even as they start with relatively lower volumes”, Davar concluded.
Sandhar Technologies closed FY2018 with overall revenues of Rs 1,989 crore and registering a growth of around 13.3 percent (FY2017: Rs 1,755 crore). While its consolidated profit after tax stood at Rs 97.02 crore in the fiscal, significantly growing by 86 percent over the previous year (FY2017: Rs 55 crore), its standalone profit dramatically rose 106 percent to 97.67 crore (FY2017: Rs 47.33 crore). The company expects overall growth to be in the range of 20-22 percent towards the end of the ongoing fiscal.