Although it won’t be easy to phase out diesel engine, Arnd Franz, Member of Management Board & Corporate Executive Vice President, Sales & Application Engineering and Aftermarket, MAHLE is still very bullish on the potential for electric mobility in the world’s fifth largest car market. The Stuttgart-headquartered firm is one of the leading manufacturers of engine systems, filtration and engine peripherals, thermal management products, and mechatronics, globally. With a presence in 18 locations across India, MAHLE is poised to undertake a major expansion of its Pune technical centre and significantly add to its engineering pool, tells Franz to AFP’s Manish Pant in an exclusive interview.
Globally there is a move away from diesel, with some countries even suggesting a total ban on diesel engines by 2014. Do you see as the end of the road for the fuel?
We believe that the diesel engine is certainly by far the most efficient engine when it comes to fuel consumption depending on its placement and usage. Around 10 to 15 per cent reduction in fuel consumption is achieved when one moves away from gasoline to diesel engine. Of course, public opinion has turned very critical now because of some unfortunate events that have caused a of loss of confidence in the diesel engine. We still believe that for a large number of vehicles, especially SUVs, the diesel engine will be very hard to replace. Certainly, targets for the automobile industry and our planet seek to significantly eliminate CO2 emissions by 2050. Without the diesel engine in the next five to fifteen years, it will be very hard to achieve that reduction in CO2 emissions. The electric engine will be very hard to produce in adequate numbers and it will be even harder to get consumers to accept it in sufficient numbers to compensate for the loss of market share on the diesel side.
Given this backdrop, what opportunity does MAHLE see for itself in the Indian market?
Of course, technologically speaking, the application of new emission norms like Bharat Stage (BS)-VI is a big opportunity for us to deepen the relationship with our customers in India. We not only intend to bring in technologies that have been developed to contain the specified emission levels in other markets but will also be adjusting them to Indian requirements, especially when one considers the road conditions and use cases in India. MAHLE’s engineers are working very closely with our customers here to deliver products that will meet everyone’s expectations from our products.
However, you are still very bullish on the potential for electric vehicles in the Indian market. What is the reason for your enthusiasm?
We are bullish because we believe there will be electric vehicles in India. Although we cannot predict what the actual share of electric vehicles will be at different stages or over years, we believe there are number of applications – especially in urban transportation – that are very suitable for battery-operated vehicles. Through MAHLE Efficient Electric Transport (MEET), we have certainly laid out a concept that could also be viable in India. That’s why we are very optimistic that electric vehicles will penetrate the Indian market, even though we are conservative on whether this share will be markedly significant within a very short time frame because of the restrictions in the charging infrastructure, capacity and government incentives that can help make such products affordable for the average car buyer. All these parameters will need be addressed to pave the way for a wider acceptance of the electric engine in India.
When we talk about electric vehicles, another major concern in India is storage. What is your take on that?
We are monitoring the market quite closely. Storage solution will be among the key market drivers for electric mobility, but it is equally important that vehicles be available at a reasonable cost and in adequate numbers. Certainly, there are several stakeholders such as governments, utility companies, battery makers, providers of charging stations that also need to contribute in equal measure. This is a very complex topic, but we also see a lot of innovation happening. Therefore, we believe that once we gain a better insight into the initial acceptance of electric vehicles and growth in storage solutions, we will also know how innovative and low-cost solutions in storage technology will be made available in the market at an affordable cost. These include the cost of battery inside a vehicle and buffer batteries in homes that want to produce electrical energy from renewable sources.
What are other areas of engagement that you are looking at in the Indian market?
MAHLE is well versed with the Indian market and we may now be entering a new phase because of a very dynamic environment and effective government policy. For instance, direct implementation of BS VI emission norms after skipping one level. Also, initiatives such as demonetisation and GST have taken out obstacles for economic growth by removing systemic inefficiencies. As an investor, all that greatly encourages us about a bright future for India. At the moment, we are also finalising plans for substantial expansion of our technical centre that we have in Pune. Further, we not only intend to hire several hundred more engineers to support the Indian market but also provide engineering expertise for overseas markets. We hope that with some of the obstacles of the past being removed, the training that we are providing to our associates in India will bear lot of fruits for our customers, employees and company in future.
So, what is the growth potential for MAHLE when you take an overall view of the market?
MAHLE’s target is to exceed the average growth rate in all segments. So, if you consider that to be 5 to 6 per cent YoY, then our expectation would be to grow over and above that. We have tripled sales in India in the last six years. Of course, the base is now higher but our expectation is somewhere between the two numbers in the future. But that will also be dependent on how the world economy grows as it will certainly have an impact on our India business.
That’s true! But then the Indian economy is far more complex than say even the Chinese economy. Given this nature of our economic ecosystem what is your own long-term view for India?
The next step for us will be to maintain continuous growth in our existing businesses while also establishing new technologies in electric vehicles. Of course, a very first step would be to ensure successful rollout of the BS-VI implementation. Very soon we should see the first activity in electrification moving into the next decade. We are actively working with customers in and outside India on these programmes.
Are you also looking at entering into some kind of local partnerships?
We already have a number of JVs and we also have wholly owned facilities here. It’s always a question about the kind of partner one gets. If a partnership works well, both companies flourish. And that is always our objective. For example, some of our JVs in India have worked very well. MAHLE has grown into a size where we can take a very good look at the contribution made by our local partners. And that is something that we will continue to pursue in future as well. For example, we have collaborations with the Anand Group of Companies on filtration and thermal management, where both companies have benefited. That should form a very good basis for our future success.