Post the acquisition of Spheros by Valeo, Spheros Motherson, the Indian joint venture with Motherson, is looking at Africa for growth.
After applying export thrust in neighbouring countries like Bangladesh, Sri Lanka and Nepal, Spheros Motherson Thermal Systems Ltd. (SMTL) is gearing for another round of growth internationally. This time, it is looking west, at Africa, and in-line with the rising focus of Indian commercial vehicle manufacturers on Africa. The African thrust of the company, which specialises in the manufacture and supply of commercial vehicle air-conditioning systems and some other HVAC solutions, will involve Ashok Leyland. Spheros Motherson thus would be supplying 100 units of its CC350 air-conditioner to Ashok Leyland buses that will make a debut in the Ivory Coast according to Cyril Xavier, Chief Operating Officer, SMTL. Considering the display Ashok Leyland put up at the Defexpo 2016, it does not come as a surprise that SMTL is supporting Ashok Leyland’s defence business arm and would supply 100 units of the CC350 model in the first quarter of FY2017.
Apart from Ashok Leyland, SMTL, which has been working closely with most Indian commercial manufacturers and bus body builders in the country, is set to support JBM’s Citylife bus venture. JBM has already received an order for 50 buses from the Noida Metro Rail Corporation. “We have been supporting JBM for their 12m buses that will be launched in the first quarter of FY2017. We will also extend our support with our AE350 model for their buses destined for the African markets,” revealed Xavier. Stressing upon the emergence of 16 to 18 per cent growth in the Indian bus market, Xavier mentioned that this was the right time to seek growth more than ever. Drawing attention to the efforts of the Central Government to encourage alternate fuel vehicles, Xavier said, “You are already aware that we have launched two new models, the Revo E and the Revo Global 400. These have been specially developed for electric and hybrid buses. We have supplied the Revo E to Volvo Buses to the two hybrid buses that found their way to the Navi Mumbai Transport Corporation recently. Both, the Revo E and Revo Global 400 are currently imported from Neubrandenburg (Germany) and Turkey respectively. The two models, explained Xavier, require special equipment to test and validate them. “For us it is the safety of the people that is of paramount importance,” he added.
For the Revo E model, SMTL has made design changes in order to shave close to 50kg; ensure better flow and reduce refrigerant usage by 50 per cent. This would result in 30 per cent lower power consumption. Efforts to localise the Revo E and Revo Global 400 are on, and with an intention to bring the costs down. Localisation, opined Xavier, will also help to cater to the rise in demand. He added, “My team members are in Turkey to understand all that would be necessary to build the Revo E and Revo Global 400 from CKD kits locally.” Apart from the Revo series, the other products that SMTL supplies in India have been localised. Supplying to Volvo and Scania for their 14.5 m buses, Xavier is optimistic about growth. “If Scania is going to make 500 buses of which 250 are inter-city buses and the rest are city buses, we would be supplying the city buses with the Revo Global 400,” he added. These 250 Scania city buses are bound for Nagpur.
Post Valeo acquisition
The acquisition of Spheros by Valeo was completed on March 2016. Spheros Group is now a part of the France-based Valeo Group. Post the acquisition, Spheros, according to Xavier will get more room for growth. Valued at Euro 250 million compared to the valuation of the Valeo Group, which is Euro 12.6 billion, the global acquisition is expected to present the two companies an ability to strike synergies. Confident that the acquisition will be mutually beneficial for both, Xavier averred, “Valeo will be able to get access to Spheros’s strong thermal systems knowledge base. It would also help Spheros to grow, and for Valeo, which is largely into the passenger vehicle space, to expand its horizons. Dive deeper into the commercial vehicle domain.” Xavier averred that there are many possibilities post the acquisition. “Spheros could enter passenger vehicle air-conditioning; enter into areas like construction equipment, reefer trucks and locomotives as well,” he added. Spheros will remain an independent brand as both companies have agreed brand identity should not be a victim of the acquisition.
Commanding close to 30 per cent market share in India, SMTL is doing business worth Rs.50 million per month. The plan to take this to Rs.70 million in the next one year. Having exhausted its capacity, rolling out 3000 bus air-conditioners from its Noida plant, SMTL is looking at increasing the number of shifts to two. Working towards an entry into the 6kW air-con market, which includes light commercial vehicles and vans like the Force Traveller, SMTL, stated Xavier, is also keen to enter the school bus and staff bus market. “Growth from these two segments is already showing up. We have received orders from South India for such air-cons. These are from tech firms and schools. Orders are also coming from these segments in other parts of the country,” beamed Xavier. An interesting part of the school bus market is the emergence of aftermarket demand for air-con retrofitment in school buses. SMTL has received an order for 20 units of its CC225 model for Tata Marcopolo Midi buses bought by the Shiv Nadar University in the NCR region. SMTL, informed Xavier, has not received the kind of demand they were expecting from state transport undertakings. He drew attention to the financial condition of such bodies. “State Transport Understakings are mostly dependent upon government grants and government priority has to be channeled rightly,” he added. After expanding its base in Karnataka where it commands 40 per cent of the market, SMTL is looking forward to establishing and strengthening its foothold in the Tamil Nadu, Kerala, Chattisgarh, Jharkhand and Bihar markets. The company has 40 dealers pan-India. Plans are on to take this to 50 in the next one year.
Need for clarity
The government of India might have allocated Rs.800 crores under the FAME scheme apart from the move to Bharat Stage VI emission norms. Pointed out Xavier, it is great to opt for new and better technology, but the government needs to chalk out clear policies. Bringing in new technologies is not a problem, sustainability is. The need is for an efficient supporting infrastructure. “Upgradation will happen as the bus air-con market moves to better quality refrigerants. The bus industry may be using R134 A refrigerant, which has an impact on environment. Though expensive, it may be worth moving over to R407, which is already being used in cars in US and has almost zero impact on the environment. It is all about phasing out and phasing in at the right time after all. When we talk of Asian markets, such technologies will take time to come. Policies and technology can’t go together. There is a need to decouple them to progress faster,” opined Xavier. He added that smart cities can be of great help for the industry as well as the economy. “When leapfrogging emission norms, an amount of planning is necessary. Policy paralysis has to be firmly dealt with. It is not beneficial for the economy, neither is it beneficial for the industry,” he concluded.