Companies

‘Govt should lay down emission roadmap and let industry decide on tech’

G Balachandar Chennai | Updated on July 01, 2019

L. Ganesh, Chairman, Rane Group, during an interaction with Business Line in Chennai.   -  Bijoy Ghosh

City-based auto component major Rane Group saw its revenue cross ₹5,000 crore for the first time in 2018-19. The group managed to end the fiscal with around 12 per cent growth despite a challenging second half. Even as the group is preparing for a tough ride in the domestic market, its Chairman L Ganesh, spoke to BusinessLine on a range of subjects including the international operations, BS-VI migration and electric vehicles. Excerpts:

How do you view the current slowdown in the auto sector?

While political uncertainty due to the general election could have contributed to the slowdown, liquidity was a major factor. A very quick recovery may not happen. In the past, whenever we have had a slowdown, it has taken at least a year to see some positive signals for the inventory to get corrected and sentiments to change. So, expecting a quick turnaround could be too optimistic. I would be very cautious about 2019-20 and we are preparing ourselves a little for a tough year.

Are regulatory norms adding to the challenges this time?

Yes. The slowdown is real, there is no question about it. The regulatory issues add to the complication. BS-VI transition is an issue in the sense that the industry is unable to decide on the product mix for the year. How much of BS-IV (vehicles/components) to build and when to switch over to BS-VI? This is going to be more crucial in Q3 and Q4, and our understanding is that in the fourth quarter, there will be almost no build-up of old inventory.

Do you expect any kind of stimulus coming in the upcoming Budget?

A lot of representations have been made. But there is only so much that the government can do. There could be a general stimulus in terms of more push in infrastructure and allocation to certain sectors. But a direct incentive for vehicle purchase... I doubt it.

What are your views on the government’s deadline for switching to electric vehicles?

I believe that the government should specify an emission roadmap, and leave it to the industry and customers to find a solution. This is because a push towards going fully electric has wider implications – the infrastructure needs to be set up, there must be recycling processes or facilities, strategic sourcing plans have to be finalised, etc. I don’t know if anybody has done a study on which vehicle will be more polluting in the long term. Yes, the emission has to be cut. Instead of (the government) telling us to make only electric vehicles from a certain date, it can discuss with all stakeholders and come out with an emission roadmap for say, 10 years. Maruti may produce CNG or other alternative fuel vehicles. Some others may go for hybrids. More technologies will come. The end goal is to cut emission – but for that, the government should not fix the technology; it should leave it to the market and customers, and allow some technology to evolve by itself.

What is your growth outlook for FY20? Will you have a capex similar to last year’s ?

We spent about ₹300 crore in capex across the group companies last fiscal. This time, we have planned ₹250 crore. It will mostly go into setting up of new lines for Rane Madras and in Gujarat. But we will watch closely and plan the capex cautiously. We are also working on a Plan B, because several companies have started working on deferring the capex if things don’t improve as expected.

Do you see opportunity in the light of the trade war?

In the short term, we do see some opportunities coming. Some US companies, which were importing parts from China, are looking to source from the US itself or from other countries. Signs are there. But having said that, I think the trade war itself has global repercussions, especially in the auto industry where everything is interconnected. If the trade war continues, there could be a slowdown in the global economy. That is not good. But India can seize the opportunity that arises, only if the government takes up reforms in the areas of labour, land acquisition and in ease of doing business.

Published on July 01, 2019

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