Covid-19 prompts Greaves Cotton to look at de-risk options

Murali Gopalan Mumbai | Updated on July 20, 2020

Nagesh Basavanhalli

Engine maker wants to go beyond costs and focus on availability of parts

Greaves Cotton is looking at a de-risk business model for the future following the disruption caused by Covid-19 in its supply chain.

“We have had all sorts of challenges…in some cases, developing second suppliers or bringing them in from a different region. We have also checked if there were alternatives to China and it has been an interesting experience,” Nagesh Basavanhalli, MD and CEO, told BusinessLine.

The initial phase of the lockdown was difficult since some of the engine maker’s key suppliers in Maharashtra are located in containment zones such as Pimpri, Chinchwad, Chakan and Aurangabad. They were unable to deliver parts owing to the constant start/stop diktats imposed by the State government.

De-risk strategy

Greaves Cotton is now looking at “something broader” as part of its de-risk strategy going forward. This thinking stems from the Covid-19 experience and the possibility of coping with similar pandemics breaking out in the future.

“We already had a strategic plan and risk management system in place but this pandemic has given us time to think and reflect in terms of revisiting those concepts,” said Basavanhalli. Clearly, the company is “pretty convinced” that mankind is not going back to a “100 per cent pre-Covid world”.

Based on this premise, Greaves Cotton has “revisited its plans” and will continue to develop ideas in terms of “doing more on some areas and pausing in others”. For instance, the conventional sourcing strategy only involved strategic sourcing partners and costs. “Now from the risk management perspective, it is just not costs alone but also availability and de-risking from a regional standpoint,” explained Basavanhalli.

Typically, this means being more spread out rather than put all the eggs in one basket when it comes to sourcing. One option, hypothetically, could be to focus on either India or turn “region-specific” as in China versus ASEAN.

“The supply chain strategy is evolving and will evolve. This is also a great time for us to push the Ampere localisation to the next level in our own little way,” said the Greaves Cotton CEO. Ampere is the Coimbatore-based electric scooter business which Greaves had acquired in 2018 and saw its latest launch, Magnus Pro, happen last month.

There are lots of components “with a scale efficiency” coming from China or Vietnam in the Ampere business. “We are telling ourselves that we can localise components and get them designed/developed in India. We are really getting ready to look at the future,” said Basavanhalli.

Key component

Ampere will be a key component of the Greaves Cotton business model in the future given the huge potential of personal and affordable mobility in the post-Covid era. “On the Ampere side, we can accelerate our initiatives since people will hesitate to go in public transport over the next 3-4 quarters,” he added.

The work-from-home (WFH) experience has also reminded the leadership team of the significant cost savings possible on travel. “Of course, there will be the occasional personal meetings which cannot be replaced,” clarified Basavanhalli. The company is now examining office and warehouse space across the country to check if optimisation can be done through shared facilities, WFH etc.

“We have noticed during the pandemic that people’s productivity has not come down. If we trust them and allow them to work from wherever, a lot an be done. It has also opened us to a lot of opportunities in terms of collaboration, digital and so on,” said Basavanhalli.

Business side

On the business side, Greaves Cotton is upbeat about its all-new BS VI diesel engine. On the non-auto part, its small engines are getting traction both here and overseas in sectors like construction, machinery and agriculture.

“We have invested over the last two years in a fuel agnostic strategy in terms of diesel plus CNG plus electric which will continue in a judicious manner,” said Basavanhalli. The diesel part is “behind us” and the focus now is on the CNG engine which “looks promising” and in electric where Ampere will lead the way.

Published on July 20, 2020

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