Motheron Sumi looking at opportunities in electric buses and trucks, says Vivek Chaand Sehgal

Vivek Chaand Sehgal, chairman of auto components manufacturer Motherson Sumi Systems, in an interview with Swati Khandelwal of Zee Business, talks about the strategy that will help the company in achieving the target of $18 billion revenue by 2020, the opportunities related to acquisitions and more.

Motherson Sumi has completed 25 years of listing on BSE. How has the journey been?

We have turned ourselves into a wiring harness manufacturing company from a wire manufacturing company. We are also in the production of plastic goods where we are producing several products. People think we are in production of only one or two parts but we are manufacturing more than 2,500 parts in different countries. In fact, we have production facilities in 41 countries.

How you deal with global challenges?

We have grown 7,000 times in the past 25 years. At the time of listing in 1993, we had a turn over of nearly Rs 17-18 crore but today we have a turnover of around Rs 70,000 crore. We have learned we are supposed to connect with our customers and resolve their problems at our end. We created a vision in 1997 saying "to be a globally preferred solution provider" and we have been following the same steps. This is a reason that such disturbances and disruptions don't have any impact on our business. In fact, we get more opportunities. For instance, during the Lehman Crisis in 2008-09, we were able to develop mirror company which was appreciated by carmakers and since then, we have been able to increase our sales by four times in a period of just eight years.

BMW lowered its global forecast. Will it have a direct impact on the component supplier?

It is a very complicated thing. Two-weeks ago, Bloomberg in its report said August sales in Europe had gone up by 3% and is the best one. This is a reason that things can't be generalised. At least, when there is no clarity. I think the reaction of carmaker for a reaction of a particular area is not going to have any impact on our everyday sales.

Can you please elaborate more on it?

They are selling their products in 60-70 countries across the globe, and interestingly, are not aware of the market where the sales have gone down and will not be able to calculate the percentage of the decline. In fact, we will not be able to take care of all these nuisances that happen in the market even after buying the biggest computer available in the market.

Do you generally think the demand is going to be robust considering things like shared mobility and move towards electric vehicles?

This is not a new challenge. In fact, car production and its sales have gone up in the past six decades, it also went up at the time of Lehman crisis. Undoubtedly, there are people who don't want to buy a car but there are so many more who are buying. I would like to say that there is a huge difference between a vehicle and telephone, a sector that can see disruptions soon. But such disruptions can't be seen in the vehicle segment in the recent future, at least when you and your family travel in a vehicle. In fact, global consultants have said that the impact in the sector can be seen in 2040-2045. So, who has seen the future?

How are you preparing for the electric segment?

We are looking at opportunities in buses and trucks. Secondly, PKC Group Plc, which was acquired by us two years back, has all facilities related to electric vehicles. Similarly, Sumitomo also has the technology in the segment. Thus, we have everything available. But 10 crore cars were made last year and the number of electric cars manufactured was just 8 lakh. There is a huge difference between the two numbers. But it is a change for the future and we would like to welcome it. In fact, you can't retrofit electric engines as it was done in case of petrol engines, which were replaced by diesel engines three decades ago. It is a new technology and needs a new vehicle and that's why big companies in the US are struggling in producing electric vehicles. There are other problems related to the segment and it includes the availability of resources. However, Motherson Sumi as a company will not have an impact due to the change and we are agnostic to it.

You also have presence in other businesses like medical diagnostic equipment. How did you want to identify yourself at end of the day?

We have decided to grow and have a positive contribution to society. We create jobs and need for people to be educated and come in and make their life and future. Actually, I got a chance to grow 25-30 years back and now I want to give that chance to everybody. So all these people who come in, they want to do something. We just ask them to go ahead with the product that they want to design. In fact, we have an ecosystem and a geography where we can make anything and everything possible. So in this situation, what is important for us is to maximise our machinery, plants and geographical advantages that are available with us. When it comes to the medical sector, we are going into medical devices, not medicines and interestingly, devices and car products are similar items. Actually, we are taking advantage of what we have in different sectors like defence and aerospace.

You have a vision of being an $18 billion revenue company by 2020. Are you on course?

Yes, we are. In fact, we can achieve it before that with the kind of disruptions being highlighted by you.

What's driving this optimism?

This confidence is due to the change that we have seen in the segment in the past three-four decades. There was a time when 80% of vehicle parts were developed internally by the automaker but now they are producing only 15-20% products in-house. This is why carmakers are in a need of supply chain as the absence of a single part may affect it while designing a car. Besides, if a company in the supply chain goes bankrupt, the supply chain management will call the people or company whom it trusts and ask them to take over the company and under such situation, we have very less time to take over the firm and go ahead with it. That is why all our acquisitions till date - 21 in total, are running well at present.

Do you have plans to acquire any distressed assets?

In the recent past, we acquired Reydel Automotive Group. There are people who plan their acquisition in the morning but we don't have that ego and we wait for a time where the carmaker approaches us, asking for a solution.

Can you let us know the segment that will be acquired by you?

Only automotive.

This means your strategy related to acquisitions always remains straight and stable?

Always. We have three engines of growth. We are capable of developing technology and parts at our end. We have 34 joint ventures in nine different countries and they are doing well. The third is, the engine of acquisition, under which we go with the suggestion of the carmaker. Interestingly, we have been able to acquire just five companies out of 100 of opportunities that came our way. We don't have a ghost riding on our heads and commanding us to acquire everything to achieve the target of $18billion. In fact, acquisitions will be done if it suits our parameters.

You were saying the demand will not impact your business and you are on course to achieve your targets. What is your contribution in Europe as it is a place with such a situation?

We have the maximum over there, and it is 50-52%.

Do you think that the slump in Europe will impact you?

The consumption in Europe is just not restricted in Europe itself. In fact, the products are being sold across the world and that's why it will not have an impact. Secondly, there are talks that there will be an end of luxury cars but I have not been able to understand the reason for such talks.

What will contribute to your business in the next two-three years?

We don't want to have one country, one customer and one component in more than 15% of our turnover. Interestingly, we do it knowingly because it helps in de-risking ourselves in a natural way. If we start thinking that the normal components available with us today can bring opportunities to us, then it is not going to happen. New verticals will be available in the market in a few days but I don't have approvals to name them. In fact, our USP is the way we increase our content per car. For instance, consider we are supplying products valued Rs 10,000 for a car and we have a target to double the value to Rs 20,000, which means that our turnover has doubled. In such a case, a decrease in sales of the vehicle will not have an impact on our business and this is something that we have been doing for all these 25 years and this is the process that has helped us in increasing our business 7,000 times.