Delphi to steer clear of low-cost cars

Low-cost cars could be the latest global mantra but auto-ancillary supplier, Delphi, has no interest in this space.

“There is a price point that has to be reached since technology does cost money and this makes affordability an issue,” said Mr Rodney O' Neal, Chief Executive Officer and President, Delphi. He was speaking to a team of Indian journalists at the company's US headquarters in Troy, Michigan.

It was the Tata Nano which first fuelled the imagination of the world, thanks largely to its widely publicised Rs 1-lakh tag. It prompted Mr Carlos Ghosn, the CEO of Renault Nissan, to promptly follow suit with the ULC (ultra low-cost) car being developed with Bajaj Auto.

However, this is of little interest to Mr O' Neal. “When you look at the Tata Nano, it is not a vehicle where you will find a lot of Delphi content. This is because it is aimed at the affordability segment in the entry level. It is a wonderful car but not very sophisticated in terms of its electrical content,” he said.

A provider of powertrain, safety, electronic and thermal technology solutions, Delphi spends a billion dollars on engineering every year. “To lose tremendous money at the altar of strategy and learning does not make business sense to us. I respect the innovations in the Nano but we will not be learning on those types of vehicles but on other types,” Mr O' Neal reiterated.

Focus not on ‘entry level'

Delphi would be “very interested” in those consumers who, after buying the Nano, would move up to the next class of vehicles. “We will not be participating in the entry level vehicle other than perhaps the powertrain side because we do injectors for motorcycles,” he said.

As Mr O' Neal put it, it is virtually impossible for businesses worldwide to service every segment of the market. “There is a huge spectrum of automobiles across the world but we have no desire to try and be on everyone. We have segmented the market and we think Delphi's capabilities will fit in a particular space,” he said.

After the slowdown of 2009, 2010 was a rebound year and 2011, likewise, has got off to a good start for the company. Yet, the worst may still not be over. “It is amazing what a tsunami, a couple of wars and oil going at over $110/bbl can do. There is a little bit of uncertainty globally in terms of which way the markets are going, particularly in Europe and even the US which is still shaky,” Mr O' Neal said.

Market break-up

In 2010, nearly a third of Delphi's revenue came from North America while Europe was the largest contributor with 43 per cent. The Asia-Pacific region chipped in with 16 per cent and South America with eight per cent. The goal now is to have 30 per cent from North America, Europe and Asia with 10 per cent from South America.

“Things are on the mend but we are all very nervous about the psyche of the consumer because once they are spooked and close down their wallets, it matters a great deal especially when the automobile is the second largest purchase to them,” Mr O' Neal said.

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