How Tata Auto Comp plans to mount the ambitious $3 billion revenue target?
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Arvind Goel, MD & CEO, Tata AutoComp
Arvind Goel, MD & CEO, Tata AutoComp

Pune: Tata Autocomp System (TACO), a Tata Sons-owned auto parts manufacturing company worth Rs 6,000 crore, which has announced its ambitions to be a $ 3 billion (about Rs 20,000 crore) company by 2024, is adopting a fresh strategy to deal with the impact of the slowdown.

According to Arvind Goel, Managing Director and Chief Executive Officer, the company has re-aligned its focus on electric vehicles for major future growth.

While exports and aftermarket are seen as other drivers of the $3 billion aspiration, the company expects to generate $2.5 billion from the domestic operations, even though the time doesn’t seem so favourable.

We are making electric batteries, electric motors, chargers, full gamut of electric vehicles, parts. Virtually everything required for electric vehicles, we’ll be producing~

In the immediate term, Goel’s priority is to get the RoI on the major investments the company has made in the last 18 months. According to him, TACO has invested about Rs 800 crore for the group in the last 18 months despite demand remaining under stress.

The company, in October, on an average had about 50-55 per cent capacity utilization and it is trying to tap new customers to increase the utilization. Goel fears that the revenue may go down in the financial year 2019-20.“Revenue will be negative in FY20, profitability should not be. Profitability, we have to see. We have to work on it (profitability). Lot of improvement projects are happening. Every company (within group) is trying to reduce cost and improve efficiencies,”pointed Goel. The company has also deferred from any new hiring.

How Tata Auto Comp plans to mount the ambitious $3 billion revenue target? In terms of recovery in the Indian auto space, Goel opined,”Commercial vehicles will take 18 months to recover; passenger cars maybe seven to eight months, tractor is already coming back. Two-wheelers will also revive in five to six months.

Upping Productivity

Goel says most of the companies have managed to get their productivity improved by almost 25 per cent in the last one year. So how do they do it?

The company has set up war-rooms in every plant, that’s where all the improvements are tracked. Each plant takes its standard for improvement, review and then put it in the system.

Goel claims, TACO, in some departments, has software and technology much more advanced than those in Europe and America. The company has put a lot of data analytics, artificial intelligence and machine learning which resulted in enhanced productivity.

“It is not only a question of automation. Automation is put in only improving productivity altogether, the existing people output also has to go up. That is going up quite well. The rejections have to come down in a big way,” he added.

Table 1: Tata AutoComp Financial Statement (Amount in Rs Lakhs)

Element Name 2015-16 2016-17 2017-18
Operating Revenue 89,623 1,00,466 1,13,915
EBDITA 4,265 3,089 8,091
PAT 3,510 5,966 9,808
Total Revenue 94,649 1,08,679 1,21,542
Investments 60,565 69,656 60,309

Other big factor to increase productivity is through high employee engagement. “Employee engagement is the top cord line in the Indian industry, done by external people. We have been constantly rated as the most engaged employees in the auto manufacturing industry. Overall in India, every industry put together, also we are in the top,” Goel asserted.

In order to counter the slowdown impact, the company is looking at increasing its exports and aftermarket business. The company’s current share from exports is only five per cent of the total revenue which it aims to increase to eight percent.

Talking about the constraints in aiming for a substantial hike in exports, Goel said, “It’s quite a number for some companies. From all companies we can’t export because we’re joint ventures. Some of the joint-ventures have plants in those export markets. So how can we export? The companies which don’t have joint-ventures can export. Sometime joint-venture partner also agrees.”

Table 2: Revenue from Operations in the fiscal year 2017-18

Domestic turnover Revenue (in Rs Lakhs)
Domestic Sales – Manufactured Goods 95,568
Domestic Sales – Traded Goods 4,069
Domestic Sales – Services 4,590
Export turnover
Export Sales – Manufactured Goods 1,163
Export Sales – Traded Goods 6,725
Export Sales – Services 1,421
Other operating revenues 378
Total Revenue From Operations 1,13,915

Despite the slowdown, the component maker asserted that some of their group companies are actually running at 100 per cent capacity utilisation. “Like battery companies (lead-acid batteries) are already running at 100 per cent, we are expanding in a big way,” he pointed.

The company currently gets 50 per cent of its business from commercial vehicles while passenger vehicles contributes about 35 per cent and rest others. It supplies to home-grown automajors like Tata Motors, Ashok Leyland and Mahindra.

TACO also has an overseas company TitanX which is expanding. With plants in Sweden, U.S, Mexico, China, Brazil, the company currently contributes about 25 per cent to the total revenue share. Going forward, the company expects the contribution from global to go down gradually. “Overall the existing operations in India is much bigger. Those companies will also grow. The percentage will come down but as a company, they will grow,” Goel explained.

The aftermarket contributes about 10 per cent to the total revenue which the company aims to sustain between 10-15 per cent of the increased pie size.

The component maker is also trying to diversify its focus into tractors, two-wheelers and off-road businesses. Some of its products also go into gensets. “All of these opportunities are huge, which we had not explored in a big way. We are planning to build on them now,” he said.

The aftermarket contributes about 10 per cent to the total revenue which TACO aims to sustain between 10-15 per cent of the increased pie size..

The company expects to get the business in these new sectors in the next few months. Though it will largely look at organic but some inorganic will also be there which it will consider next year.

“First and foremost we need to perform much better before doing any major investments, even though we are growing and have been able to reduce cost etc. but there is still a long way to go to have a good performance. So it all depends on how well we perform before taking major jump,” he said.

TACO currently has business in interior, exterior, seating, engine cooling and batteries. It aims to increase the lead-acid battery and mirrors, stamping business in a big way.

TACO will manufacture battery management systems, AC-DC converters, inverters, motora and chargers.
TACO will manufacture battery management systems, AC-DC converters, inverters, motora and chargers.

EV Focus

The Pune-headquartered company expects to get major share of revenue from the electric vehicle space in the near future.

“We are making electric batteries, electric motors, chargers, full gamut of electric vehicles, parts. Virtually everything required for electric vehicles, we’ll be producing,” said Goel.

The company will make Li-ion battery packs whereas the cells will be manufactured by some other Tata group company. TACO will also manufacture battery management systems, AC-DC converters, inverters, motora and chargers.

It has already started supplying batteries to Ola and Sun Mobility in Gurgaon. In the last six months, TACO batteries have been powering 100 vehicles on swappable platform with Ola.

The company expects to generate $2.5 billion from the domestic operations, even though the time doesn't seem so favourable.
The company expects to generate $2.5 billion from the domestic operations, even though the time doesn’t seem so favourable.

“We are doing both lithium iron phosphate (LFP) and lithium nickel manganese cobalt (NMC) battery chemistries. Most of our fixed batteries preferred by customers are LFP because they have a longer life, though a little heavier. The customers who are buying the battery themselves are preferring longer life batteries and swappable batteries are mostly NMC because they are light,” Goel explained.

Talking about investments in the EV space, Goel said, “It depends on how the electric market evolves in India. We will be ready to serve the market. We will watch how the industry is growing and then keep investing at that point of time. I don’t want to invest and then see India’s electric market growing. That is one way to look at it, we don’t want to take that route.”

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