‘Growing middle class, professionals aspiring to buy cars provide opportunity’
The Indian operations of the world’s largest auto parts’ maker Bosch Ltd will soon see a transition with the 49-year-old Steffen Berns taking over as the Managing Director from V.K. Viswanathan from January 1. In an interview to Business Line, both Berns and Viswanathan spoke about the company’s growth so far and the way ahead. Excerpts.
Looking back, do you think you were able to achieve the milestones you had set for yourself.
Viswanathan: Overall, I go out with a lot of satisfaction. When I took over five years ago, we were just going into a slowdown. It was not because of slowdown in India but because of the global slowdown. Subsequently, we grew pretty strongly. We have grown by nearly 20 per cent on a CAGR basis over the last five years. We have added special competences and special businesses. We launched locally made anti-brake locking system and added new products and new innovations. Our engineering and business solutions too grew. When I took over, we had less than 6,000 employees and now the workforce has doubled.
Berns, you are taking over at a time when the Indian economy as well as the auto sector isn’t exactly doing well.
Berns: I am very happy to be back here. I was here between 1996 and 1999. There is more volatility everywhere. Perhaps the difference between India and the rest of the world is we think there is a shorter dip in India than in other parts because the market pull is huge if you look at the growing middle class and the well-trained professionals who aspire to buy cars. If you look at the low number of cars, of say 12 or 13 or 14 per thousand people, there is a huge opportunity out there. I think at the moment, it is just a temporary dip and this will be overcome.
If one looks at the last quarter numbers, the net profit has taken a dip because of low sales of medium and heavy vehicles and yet India is perhaps one of the few growth countries in the world. Is there anything that you are doing internally to grow out of this rather bad phase.
Viswanathan: We are increasingly diversifying our portfolio, adding products and services beyond the automotive side which is a sort of a de-risking strategy. We started many businesses in the non-automotive side such as packaging, power tools, security technology etc. We are also actively into thermo technology. In the Indian context, there are two verticals: solar thermal connectors like roof tops water heating applications and the other one is the boilers for the industrial applications. We are also importing solar energy products such as cells and modules for the customers here.
We are moving up the value chain as far as our engineering and business solution is concerned. We are not just doing back-ended or front- ended software services. We do total platform projects. And then the anti-braking system. In other parts, ABS is used for passenger cars but here we want to use it for two-wheelers which have a huge market. We are doing these things when our own parent is not much into it.
Berns: Of course our main turnover in Bosch and in India is the automotive sector. We have good market here. In the non-automotive side, we are doing well even though there is slow growth in the market.
So, there is increased focus on non-automotive sector?
Viswanathan: We will continue to focus on both businesses. Automotive industry is cyclical in nature whereas the others may not be cyclical.
We don’t want to get into areas where we don’t have competence and into unrelated and unallied areas. Wherever we have both competence and technology, we will go there with lot more confidence.
How does Bosch Headquarters view the labour unrest in India and in its Indian operations here?
Viswanthan: We are an employer of equal opportunity. We believe we not only give a fair compensation for a fair day’s work but also provide training to our employees. As far as support from our parent is concerned, they have always told us to encourage communication in an ongoing basis and to involve all stakeholders in a meaningful manner. Therefore, they are solidly behind us.
Berns, what would be the first few things you would want to do when you take over in January.
Typically you take about 100 days before you can communicate a strategy. The track record of Viswanathan has been excellent here. I am not going to make any fundamental change or major changes but try to build on this growth. For this, I think we have to try to expand our business. Make sure that all the existing businesses are performing well. We have to look at innovations for the Indian market.
Will you go for another round of buyback?
Viswanthan: No. We are not going for any buybacks.
Once you shift your manufacturing plant from here to outside Bangalore, will you be adding more workers?
Viswanathan: It depends on what we would be needing at that point of time.
We plan to shift there in a couple of years though we haven’t decided on the exact time. It will happen in phases. But the space here will be utilised to build a world class research and engineering centre comparable to what we have in Germany or in North America.