Behr-Hella Thermocontrol (BHTC) a leading player in the field of automotive displays/HMI solutions, climate control and thermal management, which inaugurated its new state-of-the-art, fully integrated manufacturing facility in Pune on June 22, is bullish on India.
Express Mobility spoke to Michael Jaeger, CEO, BHTC and Kolja Kress, CFO, BHTC on the side-line of the new Pune facility inauguration to better understand the company’s plans for the Indian market. Edited Excerpts.
What is the thought behind investing in the new Pune facility?
Kolja: We have been in India for a long time. The reason for investing now is because of 2 key reasons. First, it is based on statistics, the per capita car usage in India gives an indication that there is huge potential in the market for growth. We are a strong player in both climate control and HMI, providing comfort and safety in the car is a key field for the future regardless of the powertrain. Secondly, the other driver was how do we utilise the huge talent pool that is available in India, and more specifically in Pune for tapping in top talent, career paths and development to move forward.
You are targeting to double revenues from India in the next coming years. At present, you are working with Volkswagen Group, Mahindra & Mahindra and Tata Motors in the country. Will the growth come only from existing players or you also engaging with other OEMs?
Michael: We try to connect with new clients and are connected with those players. We try to explore opportunities with them as well because, in the end, we have to grow with winners. Tata Motors certainly is one winner, but there are also others to whom we do not supply something today but we see very good chances to work with them.
Kolja: While we cannot reveal specifics, there is already in the figures that we mentioned (read doubling India revenue) a lot of book business, the orders that we have already won. Also, to mention, some new customers which are not yet part of our clients and also export business. At least two new customers for both domestic and export markets. And we are also working constantly and demonstrating our technology. Not only do we come with innovative products but the ability to get them into serial production for both premium and volume OEMs.
The Indian customer is one of the most demanding customers – expecting the latest in tech but does not want to pay a premium. How do you address this scenario?
Michael: This is exactly the reason why we are investing in Pune, India. We need to have the best possible understanding of the market conditions here. We need to have proximity to the customer over here and need to have development leads here. Because in the end, the German engineering understanding does not perfectly fit the demands of the Indian market. By combining the proximity to the customers, the new ideas, and different approaches from India together with the German engineering we see the strength to exactly fulfil what the market needs. This means a high-end product at an affordable price market range, which is really challenging as we all know.
To make something cheap at a low price is easy. But to make a product that is valuable or perceived valuable by the customer at an affordable price is a strong power and need that we have.
Does this imply that products engineered in India will help you pass on cost-benefit to your global customers as well?
Michael: This is the clear expectations from our customers. They are asking us if the products are being developed in Germany, Eastern Europe or in India and so on. They are clearly expecting from us that not everything is developed in Germany, as they want to see the lowest possible price. This is also a competitive advantage of being in India, we have the capability and will be able to pass on the cost advantage from here.
Hypothetically, how much price reduction is possible through developing products in India compared to Germany or Eastern Europe?
Kolja: One thing I could say is thatthere is at least 50-60 per cent reduction in R&D cost, which makes up a certain percentage of the overall product cost. That for example is something any customer would expect as you mature and develop products in countries like India the price would come down. But it also depends on product to product, how much is the R&D content in the product, and the complexity of the product.
Michael: Maybe not to bring into a strong notion, this could be 50-60 per cent cheaper if we fully do it in India. We always must take into account, the efficiency level that we have. If we can work at the same efficiency level in a high-cost country this would be the case. But of course in some more complex products, we don’t have this efficiency. Yes, the hourly rates are lower, which helps significantly.
The Indian electric two-wheeler segment is seeing a lot many companies introducing smart-screen dashboards. Will BHTC look to tap this opportunity as well?
Kolja: At the end of the day it is all about where can you differentiate is not a me-too product or the cheapest solution. At this stage, I am not sure how we can differentiate.
Michael: That is completely true for the moment. One of our mother companies Hella is working on a specific two- and three-wheeler product in terms of powertrain electronics out of India. Therefore, I will not completely say no to that possibility. But this still needs to be checked if this can be an ideal activity for us, knowing that the market is so big. It is definitely an idea, but not something that we are looking at immediately.