With four plants and 19 sales offices, Schaeffler - the German manufacturer of rolling element bearings for automotive, aerospace and industrial applications - has significant presence in India. Its three major product brands - FAG, INA and LUK - are well represented in India. Schaeffler also has dedicated engineering and research and development support based in India to augment the product teams. According to Harsha Kadam, President - Industrial Division, Schaeffler India, the company plans of investing close to Euro 40 million (about Rs 3210 million) for expanding capacities, bringing new products and enhancing its R&D capabilities in the country. In conversation with Rakesh Rao, Kadam says that Schaeffler sees big opportunities in the country in areas of automotive and other sectors like wind energy, railways, steel, etc.

 

What kind of challenges and opportunities are you seeing in Schaeffler’s two businesses - automotive and industrial? 

 

Multiple factors such as rise in sales of cars, utility vehicles and tractors and a pick-up in industrial momentum is creating a healthy environment for us, conducive to increase our product sales. A continuing emphasis by the government on spending to build infrastructure is driving truck sales. 

 

The new emission norms to be rolled out from April 1, 2020 will see a boost in sales for us. The demand for our products will also get a boost when truck and car makers start making their next generation power trains.

 

Industrial business has rebounded well after the GST-related impact. We supply bearings to steel and cement mills and also to the railways and for wind energy projects. So industrial distribution, which is a major part of our business, has really rebounded well and the distribution business is now on a robust growth trajectory.

 

Surge in raw material prices can be a challenge for us. Raw material accounts for 55-60 per cent of input cost. A large part of that cost is due to steel, which in the last six to eight months has been trending upwards. We are trying to deal with these headwinds by minimising those costs in our value chain and also through long-term contracts. With our MOVE (German acronym for 'More without Waste') initiative in the operations coupled with the various value engineering solutions, we will continue to bring cost-effective alternatives to our customers.

 

Schaeffler is a leading supplier of bearings. What are the latest trends in the bearings market? 

 

Moving parts in automobiles and industries often have to fulfill extreme demands in terms of load carrying capacity, harsh environment and extended durability. Rolling and plain bearings play a central role here, since bearing damage causes the total failure of technical systems in most cases. This is why Schaeffler has developed high-quality rolling bearings with the X-life seal of quality, which contributes to achieving a high level of efficiency, cost-effectiveness and productive use of resources.

 

Friction reduction by targeting stringent performance and emission norms being offered as well as weight reduction and improvement in NVH are some of the new technologies in automotive bearing. Smart bearing solutions that help in condition monitoring is another area of new technology development. 

 

Our current forecast shows transmission automation is likely to reach 15 per cent penetration by 2020. This would include various solutions for automation including ECM, AMT, CVT, DCT and automatic transmissions. Schaeffler has solutions in each of these technologies. We have developed a unique solution ECM (Electronic Clutch Management). It is a two-pedal system; you take away the clutch pedal from the vehicle, but you have the gear shift. It is a classic manual transmission with minimal integration effort for the OEMs. This provides for affordable introduction to automation. We see a huge potential of this technology in Indian conditions and according to our study, for most consumers the biggest pain-point is constant clutching and de-clutching and not changing gears.  

 

How has the Indian industry evolved over the last few years?

 

India is one of the fastest growing markets in the world. We particularly see big opportunities in the country in areas of automotive including two wheelers, agricultural tractors, wind energy, railways, steel and other infrastructure related sectors.

 

There is definitely a shift happening in terms of technological advance and refinement. For years people thought India is a cost-conscious market, so let’s not touch it. Today, the operator model is changing. Now we have fleet operators who own from 50 to 100 trucks; in the past it was not so with owner-drivers managing maybe one to five trucks. Fleet operators are a lot more professional focusing on turnaround time, uptime and such parameters; they require different kinds of service solutions. The market is changing; the way business is run is changing. New companies are bringing in new solutions which have been working well elsewhere. Once the operators get a feel of it, they push other OEMs to follow suit. 

 

India has also been adopting and enforcing the emission standards in a phased manner. The implementation of advanced norms is a critical step as we are the world’s third largest emitter after China and the US. The emission leap requires a significant technological jump, especially in diesel filter technology & in optimisation of selective catalytic reduction technology. Meanwhile, it is an opportunity for Indian companies to create an ecosystem for advance emission technology.

 

Schaeffler is regarded as the number one specialist in products that contribute to the reduction of CO2 emissions and help protect the environment. The innovative & light weight design of the Schaeffler gives significant advantages in terms of space, weight and fuel consumption.

 

Year 2017 saw many policy reforms & announcements (right from demonetization after-effect to GST implementation). Are the after-effects of these events behind us now? 

 

For us the transition to GST and implementation was quite smooth but it certainly affected our sales during the year 2017. However the impact was short term and the recovery is already underway. For the long term we expect GST to be an enabler in the areas of logistics and product distribution. 

 

Having said that, the economic growth momentum is now picking up. The headline is that India is now, once again, the fastest growing large economies in the world. The industrial output has been very encouraging for the last few months, with growth hovering between 7 per cent and 8 per cent. 

 

There continues to be massive investment push by the government as announced in the budget, which is again a very good sign and good opportunity for businesses like us. 

 

The negative effect of demonitisation on other core sectors like automobile, cement, steel, coal and electricity generation has also been reversed. The two-wheelers and three wheelers segment is growing close to 30 per cent and we anticipate strong growth for the rest of the year on back of push in the rural economy.

 

With electric vehicles gaining traction in India, how well-prepared is Schaeffler for electrification? 

 

Electric mobility as a whole – including fully electric driving as well as hybrid solutions – will be defining mobility of the future. Electrified powertrain architectures are shaping the future of automotive progress, confronting the automotive industry with major challenges.

Beyond electric mobility, there are equally important dimensions such as generation and transmission of power which is needed for electric mobility. Experts refer to ‘well-to-wheel’ when taking the entire energy chain into account. It is a method that makes it look at total amount of CO2 emissions produced in the entire chain of locomotion – from the production and storage of energy through to its conversion into kinetic energy. Sustainable mobility can only be achieved if the primary energy for locomotion comes from renewable sources such as wind power, solar power, hydropower or geothermal energy. Schaeffler contributes technology and know-how to the consistent expansion of these energy sources.

 

We have solutions for full range of electrification, starting from P0 (mild hybrid) to P4 (electric axle). We are already working with global manufacturers in Europe and China to provide advanced solutions for fully electric vehicles and hybrid technologies and as India adopts the technologies, we are ready with our solutions for our local customers. 

 

Could you please elaborate more your investment plans?

 

In terms of investments at an India level, we have been investing around Euro 20 million for the last 3-4 years and we plan to double the investment in the coming years. Over the next 3 to 5 years, we will continue to invest in expanding our plant capacities, our product portfolio and engineering capabilities in the country. We are going to invest in our distribution network and all the logistics areas which will provide us substantial benefits in the long run.

 

We have also announced expansion of our operations at INA Bearings in Talegaon, Pune. The expansion will include a new manufacturing facility and a new R&D facility within the existing premises. We are investing Rs 200 crore for this expansion. The new production facility will be operational by the end of 2018 and will manufacture engine and transmission components, serving the domestic and exports markets. The R&D facility, which will be operational by mid-2018, will focus on enhancing product development and engineering capabilities driving innovation for customers. The Pune plant, currently running at full capacity, employs 700 people and with the new facility it is expected to generate additional employment in the future as our operations grow.