Focus of Varroc is to offer higher value-add products

Varroc Group, the tier 1 supplier to auto OEMs, today is the second largest auto component manufacturer in India. Out of its four business units, three units (polymer, metallic and electric & electronics) are based out of India and the fourth unit, passenger car lighting business (Varroc Lighting Systems), is headquartered in Plymouth, Michigan (USA). Varroc is among the very few companies in India that compete globally and is at the forefront of technology development. The company has always worked ahead of time and developed new products well in time to make them available for mass market usage, says Arjun Jain, President and Business Head - Electrical & Electronics division and whole-time Director at Varroc Group. In this interview with Rakesh Rao, Arjun Jain highlights impact of changes like BS VI emission and electrification on component suppliers and how Varroc is also geared up to tap the evolving market.

In January 2020, Varroc tied up with Danish company Lithium Balance to manufacture EV Battery Management Systems (BMS) in India. What is the rationale behind this move?

The tie-up with Lithium Balance is an extremely significant move for us.

EV can be viewed by auto component suppliers as a threat or as an opportunity. For ICE, we supply practically the entire electric & electronic system such as starter motors, magneto, voltage regulators, ignition control units, fuel injection control units, head lamps, tail lamps, switches, digital clusters, etc. For lot of these products, we were first in the market in India. For example, we launched the first digital cluster in India on Bajaj Pulsar way back in early 2000s. Similarly, we were first to launch LED tail lamp on a two-wheeler and then, in 2016, 2 LED head lamps in India.

Most of our products are also suited for EV applications. But there are auto components like motors, magneto, etc which will become obsolete in the EV space.

A few years ago, when we decided to focus on EVs, our strategy was to supply the entire electric and electronic system for EV two wheelers as well. As part of this vision, we are aggressively focusing on products like traction motor and controller (the power train for EV), BMS, onboard charger, DC-DC converter, lighting, etc.

To fasten the process of mass production of BMS, we realised that contract manufacturing route was the most appropriate for us at present. Hence, we joined hands with Lithium Balance.

Lithium Balance specialises in offering BMS solutions to all auto segments (2W, 3W, 4W, etc). While the focus of Varroc (through this tie-up) is on two and three-wheelers at present, we are in position to attack all auto segments (from technology standpoint).

Is this collaboration only for India?

Lithium Balance is not a manufacturing company and hence it will need a contract manufacturer to fulfill its manufacturing needs.

Right now our focus is on Indian two- and three-wheeler market. The decision for expansion will be taken at appropriate time as this business evolves. As an organisation, we have the history of taking our relationship (with our collaborators) to new level and expand them as the need arises.

Could you please elaborate more on your EV strategy?

Electric vehicles need high performance components and solutions.

The first step in our journey towards developing product line for EVs was to define the kind of products that we intend to develop. Hence, we decided to develop products for vehicle which is the benchmark for quality in the 2-wheeler space. Products below this quality benchmark were ruled out for tapping the EV segment.

We defined specs for high-quality products very early and this allowed us to be ready in time to design and develop new products for the industry. Design and development process is not just about making prototypes, but it involves developing a robust supply chain to meet the mass manufacturing requirements of EV makers.

We have spent last three years on making all these processes - design & development, supply chain and internal manufacturing – robust and of high quality standards.

Lots of motors and controllers in the market today are not of automotive standards. In some cases, industrial motors are used in automobiles. Our product lines will be exclusively for automotive applications.

Indian auto component companies play dominant role in ICE space. Are they capable of replicating this success in EV as well?

For Tier 1 suppliers, which have not invested in technology historically, life is going to become tougher. Going forward, OEMs will seek partnerships with technology-savvy suppliers to deliver components. We can also expect consolidation in the auto component space in the near future.

Take the example of lighting. As the industry moved towards LED, top 6-7 players started growing at exponential pace. We will see similar trend in other component space as well in India.

In August 2019, Varroc Engineering acquired majority stake in CarIQ Technologies. How has this helped you tap the demand for telematics solutions?

What really is a benchmark vehicle which will define lots of technologies that start flowing into the market and become the need? At present, Ather 450 and Bajaj Chetak fit the bill. If you look at technology content on these two vehicles, it really maps exactly what we are working on. They are connected vehicles, so you are able to provide lots of features. Telematics deliver certain functionalities; with CarIQ Technologies there are lot of opportunities to provide additional featurisation and utilities in the vehicle.

From 2W product point of view, the number one place for telematics to become a part of vehicle is instrument cluster. We bring the capability to develop connected cluster (both hardware as well as software) for 2W on the table. CarIQ had differentiated platform and was capable to house & manage the data and deliver services based on the data. The company was profitable and was able to drive a successful business model. This gave us a confidence to offer superior product that was successfully tested in the market and was acceptable to OEMs.

India is all set to shift to BS VI norms from April 2020. How is Varroc helping auto industry in this shift?

BS VI is the most comprehensive change in the vehicle system. Because of BS VI, the industry had to bear the big development load that it has never seen before.

Out of the eight product lines that we have today, five are undergoing complete revamp. Catalytic converters had to be overhauled because solutions required to meet BS VI emission norm are far more stringent than BS IV standard. Fuel injection or electronic carburetors both require a control unit which is significantly more value add than CDI that it is replacing. We are probably the only India-based company which is offering fuel injection ECU for BS VI in the country.

All regulators have to be of higher power now as there is more requirement of current across different vehicle electronics. Magneto should also be of higher power. Besides, digital clusters need more featurisations due to BS VI to meet OBD 1 standard in order to curb vehicle emissions.

With respect to lighting, there is a consistent move towards LED whether in form of DRLs (Daytime Running Lights are headlights that are lit whenever a vehicle is running) or full LED lamp. Being one of the leading lighting suppliers in the world, we are helping OEMs in their move towards LEDs as they look for energy efficient lighting solutions.

Thus, we are fully geared up to support OEMs in their transition to BS VI standard.

What are the emerging trends in automotive industry? And how is your company gearing up for these trends? There are trends towards greener, safer, more connected and customised products.

Electric vehicle is clearly a mean to become greener. Though initial cost of purchase is high, its total cost of ownership is low. We should pursue to make purchasing cost lower.

Lighting - fundamentally a safety product – is also a mean to become green by using energy efficient products like LED. We are in position to offer superior lighting products at cost-competitive rate.

Connected vehicles or connectivity products are tools for customisation and are used to provide the end customer as much as access to the vehicle as one can. It is said that building superior customer experience can never be a bad marketing tool. Our telematic offering is driven by this idea. There are lots of needs that can be fulfilled by our products without incremental hardware cost.

What are your growth plans?

There are lots of uncertainties in the market and we are cautious about where the market is heading to. Our focus is to offer higher value-add products and drive market share growth. We aim to deliver these products to OEMs in the most value conscious way.

For lot of products that we offer, there are no Indian tier 1 competitors. We have the advantage of knowing the 2W market – which has been our bread and butter for the past three decades. Second, we have always worked ahead of time and developed new products well in time to make them available for mass market usage.

Besides, speed & agility to develop new products and market knowhow, building our own technology will be the cost-differentiator.