Indian auto parts makers brave a new electric world

Sunny Sen Anand Murali April 2, 2018 14 min

Story Highlights

  • The nearly Rs 300,000-crore Indian auto components industry sees opportunities in the challenge posed to it by the global shift to electric vehicles. They are trying hard to make EV parts.
  • Their fortunes will be linked to how quickly a robust market for EVs develops in India and there is some concern that policies are not yet in place to be able to support domestic demand.
  • Still, regulatory moves that will increase the penetration of hybrid vehicles in India could offer a path of transition for the parts makers from supplying to internal combustion engine vehicles to EVs.

Samvardhana Motherson Group, India’s largest component maker with revenues of nearly Rs 60,000 crore, had its moment of epiphany a little more than a year ago when one of its customers asked for wiring harnesses and junction boxes.Nothing was unusual about the enquiry because Motherson gets dozens of these every day.

But, this time, the customer – the Swedish automotive maker Scania – wanted the auto parts for its electric buses. “The truck maker designed the component and asked us to make it for them,” says Pankaj Mittal, director and chief operating officer of Motherson. “EVs are a reality — they are on the streets,” says Mittal, today in no doubt of the force of change in the global auto industry.

The demand for EVs has increased sharply in the last couple of years, early as the shift away from vehicles based on internal combustion engines is. And, like Mittal and Motherson, that is both an opportunity and threat staring India’s auto parts makers – who make nearly Rs 300,000 crore in revenues every year supplying to both domestic and global vehicle makers.

Despite regulatory flip-flops with its EV policy, India, too, will witness a gradual rise in EV adoption and auto component companies are gearing up. According to the component makers lobby ACMA, short for Automotive Component Manufacturers Association, and global automotive consultancy firm Roland Berger, the demand from vehicle buyers will result in a 15% penetration of EVs in India by 2025. With a regulatory push, it could be 18% and it could even double to 35% in the best case of a rapid transition.

By 2025, annual passenger car sales in India will be 6.7 million, according to German data tracker Statista. That’s double of what it was in 2015: 3.5 million. Add to that commercial vehicles, e-rickshaws and two-wheelers – an explosion of EVs is expected in the market in the next seven years. The government’s procurement of electric buses and e-rickshaws and the interest of taxi companies in electric mobility will further boost EV sales.

“You need to give time for an industry to evolve, and we support electric mobility… To begin with taxi services and buses,” says Vinnie Mehta, director general of ACMA. “For buses we expect it to be 100%, 40% for two-wheelers and 40% for passenger cars by 2030.”

If that happens the component business will go through a massive shift. An EV has 80% fewer moving parts compared to an IC engine vehicle. EV components also undergo less wear and tear, which will also negatively impact after sales revenue of the industry.

Opportunities in Challenges

Back to Motherson and Scania: the parts that Motherson would supply to Scania was to run the electric motor and high voltage component of the electric vehicle. The challenge was that the operating voltage of the IC engine vehicle is 12V (for vehicles in North America) and 24V (for Europe and India). Automakers are also now adopting a new 48V system to make way for newer electrical features in modern ICE vehicles. For electric-powered engines, the full EV operates at 600V to 800V. “That is a huge difference,” says Mittal.

The component was to be built ground up. “The size and the weight is different, the hazards are different. It can give an electric shock if it was not treated properly, and the vehicles need corresponding protection,” Mittal adds.

Globally, Mittal says that there is a clear pattern they want to start with buses, especially where there is high-density population. India is following the same curve, he explains.

Samvardhana Motherson group director Pankaj Mittal talks of challenges making auto parts that operate at 600 V or 800 V, compared to the 12 to 48 V that components in internal combustion engines run on
Samvardhana Motherson group director Pankaj Mittal talks of challenges making auto parts that operate at 600 V or 800 V, compared to the 12 to 48 V that components in internal combustion engines run on

Motherson isn’t the only company who is looking at EVs as a means to extend its business or safeguard itself if IC engines cease to survive in the years to come. JBM, Lucas TVS, Brakes India, Sandhar, Bharat Forge, Sona BLW, JTekt, Green Fuel, Paracoat, Rico and Mahle are among large component makers exploring opportunities in electric mobility.

Most of the companies are secretive about their plans in EVs – it is a difficult bet to make in a nascent industry – or are in the initial process of building capabilities. Most of them declined requests for interviews and comments.

Some of them show their concerns. “Our company doesn’t get affected but 45-50% of the component business, which is of building powertrain parts will be impacted,” says Jayant Davar, co-chairman and managing director of Sandhar Technologies, which counts TVS, Honda, Mahindra, among others as its clients. Sandhar makes plastic injection mouldings, vehicle electronics, and vision systems.

A senior executive with one of the component makers named above said that the impact on electric mobility will be pronounced on jobs in the auto parts business. “About 33 lakh people work in India’s auto components manufacturing business. About 15 lakh of them would get impacted if there is a complete shift to EVs because those components will become obsolete,” he added. The executive requested anonymity as his company is in a silent period and in the middle of a merger.

The good news is that the component industry will get enough time to shift and make EV components as the demand grows. “Several companies have got patents for electric motors and power management systems,” says Davar, without naming the companies.

Nearly half of the components business, which is of building powertrain parts, will be impacted by the shift to EVs, says Jayant Davar, co-chairman and managing director of Sandhar Technologies
Nearly half of the components business, which is of building powertrain parts, will be impacted by the shift to EVs, says Jayant Davar, co-chairman and managing director of Sandhar Technologies

At Sandhar he has set up a team of seven engineers working on various technologies to improve the efficiencies of EVs. For example, on the power management side, Sandhar is building components that will help in efficient distribution of power from the battery to the various parts of the car, including the wheel. “We need to find out ways to maximise the output of the batteries without any leakage… It is important to avoid wastage,” says Davar.

The company is also working on electric powertrains, of which 75% will be the battery. Then there is work on the charging infrastructure side – on having fast charging and portable chargers. Davar says that the big disruption will be if Sandhar is able to build something that will allow the battery to get charged in 15 mins.

That, to be sure, will take some serious development and breakthroughs. Tesla superchargers take about 75 minutes to charge 100% on the original 85 KWh Model S. Sandhar’s aim is to incrementally improve fast charging in steps of 5% and10%.

Another large component maker Nirmal Minda Group has brought together a team of 10 engineers working only on EV technology. The role of the engineers is to tear down the EV and map the components and find out opportunities. Two big areas that the group has identified is battery and electric motors. The other areas where work is happening is on switches, lights, aluminium and plastic – which will go into an EV irrespective of shifts in technology.

“Of the 20 different kinds of components we make two of them will be adversely affected if there is any shift to EVs,” says Sudhir Jain, chief financial officer of Nirmal Minda group of companies. “There are components that will have to be tweaked and modified for EVs… That work is going on.”

The group has finished building an R&D centre in Pune, which is looking at futuristic technologies, one being EVs. The other areas are AI, connected cars, and high-end electronics. “The idea is to develop technologies at the group level and then introduce them to the various divisions,” says Jain.

Many of there technologies, Jain says, will become useful for EV component development. However, everything comes at a cost. With EVs, the cost is fewer components, lighter vehicles and efficient design.

Perils of EV manufacturing

What really changes with EVs is the fewer number of components (see chart). Also, in a battery-powered vehicle, the fewer moving and wearing parts lead to lower maintenance costs for vehicles over their lifetime compared to a gasoline vehicle where the gearbox and clutch have high maintenance requirements after 150,000 km. In India, the average life of a car is seven years, many of them running for more than 150,000 km.

An EV gearbox is much simpler and maintenance requirements are lower unlike in an internal combustion engine where the spark plugs and engine oil need to be regularly changed. Most of these components are absent in an EV. Thus the requirement of maintaining or changing particulate filters, mufflers, turbochargers, and the like is just not there.

What is complex is the electronics. The semiconductor powertrain in EV is six to 10 times more than that in any combustion engine vehicle. “The vehicles are changing… the powertrains are not the same. Even the Euro VI is different from Euro I, II, III and IV,” says Motherson’s Mittal. He knows the stretch from IC engine cars to EV. For, Motherson makes the cockpit for the BMW i8 EV, for instance.

The powertrain is not the only challenge. For EVs to improve in efficiency, the vehicles need to be lighter. “Metals are changing into plastic. The interiors will become prettier,” says Mittal. Making the vehicle lighter will increase the range of the EV – one of the biggest problems right now. One of the areas where Motherson is working is using natural fibre to make door trims lighter.

While there are companies who are looking at designing products for EVs, there are others looking at a unique opportunity to convert IC engines into EVs.

Gasoline-turned EVs

Bengaluru-based Altigreen produces electric powertrains that can be retrofitted to existing ICE systems to convert them into hybrid systems. In October, the company partnered with engine maker Greaves Cotton to offer a range of clean energy powertrain solutions for three-wheeler and small four-wheeler commercial vehicles.

Amitabh Saran, founder and CEO of Altigreen Propulsion Labs, feels that there is no rational reason for electric or hybrid vehicles to be so expensive in India and that is one of the reasons why electric vehicles are related to high performance and as a premium vehicle in India. “When we work with the OEMs, we are ensuring that our systems offer higher power and better performance but at price points that should not be more expensive than a typical sedan sold in the market. There is really no reason. You can come up with a financing model for batteries and even with or without that, it should not be double the price of an existing car just because I’m giving you good performance,” says Saran.

He emphasises that the quality needs to be the best because suppliers have to comply with the high standards required by the OEMs and “because it has to go through all the warranty cycles and other certification requirements”. “It also ensures that from a customer perspective, there is a lot of confidence that you will get support and service,” says Saran. The company develops in-house motors, controllers, battery management systems, drives, electronics, software, and the IoT (internet of things) components for the system.

As a subsystem and component manufacturer, Saran feels that the challenges are similar to what startups have to tackle with an emerging ecosystem. “Once an OEM comes on board or once volumes are visible to anyone, then you always have an ecosystem develop very quickly and that’s the advantage in India. Once your ecosystem partners can see that there is a business in this and they got to invest in this, then you can set up either an assembly line, manufacturing line,” says Saran.

Saran also feels that since these ecosystems cycles are not two- or three-year cycles, but five- or six-year cycles and hence we need to get started moving in that direction today.

“I think we have time, it’s not something that is going to be like an overnight thing even if 2030 everything is electric… the important part is that the people are beginning to think about it and it is a possibility,” says Saran who feels that the introduction of corporate average fuel efficiency norms in India will also aid in building up the ecosystem. “You will start seeing the advantage of hybridising and electrifying your vehicle lineup… and I feel that will spur a lot of things.”

The new standards, known as the CAFE norms and aimed at reducing the carbon footprint of automobiles, come into effect April 1. They prescribe cars to increase fuel efficiency by 30% or more from 2022 and 10% or more between 2017 and 2021. The improvement will be measured on the fuel litres to run 100 km. Given the limitations in improvement in IC engines, industry experts see a shift to hybrid vehicles first and EVs next.

“If it goes hybrid, it will add to the number of components in cars. Hybrid is like inverter ACs and refrigerators and will be important to meet the CAFE norms,” says Amit Kaushik, India head of Detroit-based auto consultancy Urban Science.

Hybrids need to have more mature electric circuits, transistors, capacitors, inductors, and a more powerful battery. The car starts on petrol and after some time, the hybrid technology takes over while in motion. “But it comes at a cost – about 25-30% more than an IC engine. If there is a mass adoption, the technology can be less efficient. Most of the component makers are looking at EVs and hybrids as a new opportunity or extension of their existing business,” explains Kaushik.

ACMA’s Mehta shares the same view. “Hybrid is a via-media to evolve into EVs. The industry needs time for evolution,” he says.

Battery is the heart

There is still the big question mark around EV batteries. Range anxiety, battery charge time, and the distance to charge stations are concerns every EV buyer considers before buying it.

At present there are around 500 charging stations in India, while the country needs three million of them, says Davar of Sandhar. “Infrastructure is one of the three biggest challenges,” he says. Without charging stations, only green diehards will buy EVs.

Chetan Maini, founder of India’s first electric car company Reva and currently the vice chairman of SUN Mobility, points out batteries cost as much as 30% to 50% of an EV. | Photo: Rajesh Subramanian
Chetan Maini, founder of India’s first electric car company Reva and currently the vice chairman of SUN Mobility, points out batteries cost as much as 30% to 50% of an EV. | Photo: Rajesh Subramanian

According to Chetan Maini, founder of India’s first electric car company Reva and currently the vice chairman of SUN Mobility, to bring about mass adoption of EVs, it is essential to have appropriate charging infrastructure in place. This pattern is very visible in countries that have had higher vehicle adoption.

“Today, electric cars are significantly more expensive that petrol vehicles. The cost of the batteries is 30% to 50% of this cost. If we remove the battery from the equation, the prices become comparable to regular cars,” Maini had told FactorDaily in April last year. SUN Mobility has partnered with Ashok Leyland to introduce a swappable battery bus.

Most EV companies currently look to China for fulfilling their Li-Ion battery requirement but this trend is slowly changing as Indian companies have also realised the importance of having a local ecosystem of battery cell and pack manufacturers.

Incumbent battery companies Amara Raja and Exide are looking at putting capacity to manufacture battery packs. Suzuki in a joint venture with Toshiba is erecting a battery manufacturing facility in Gujarat, which will be operational by 2020. Earlier last month, Mahindra & Mahindra and Korean battery manufacturer LG Chem had announced a partnership to develop Li-ion cells based on NMC (nickel-manganese-cobalt) chemistry for Indian applications.

However, there are questions. “If I want to sell the battery and the car separately, then who gets the subsidy,” asks Akshay Kashyap, managing director of Green Fuel, which has developed its own battery pack, and is selling to two-wheeler and three-wheelers.

Akshay Kashyap, managing director of Green Fuel insists that without government support the market for EVs in India will not develop and this will adversely affect component makers
Akshay Kashyap, managing director of Green Fuel insists that without government support the market for EVs in India will not develop and this will adversely affect component makers

Kashyap also feels that there is a reluctance among Indian vehicle makers to work with Indian component manufacturers given the stage of the technology. He insists that without government support, the Indian market won’t develop – which will in-turn hurt the components industry. “There is a high risk of becoming dependent on international companies. We have never been able to build a Bosch or Delphi or Continental out of India,” he says.

Others like Motherson’s Mittal are a little more optimistic. “China is a leader in EVs, but the industry is nascent… There can be some opportunities in some of the components,” he says.

(A version of this story ran in Mint newspaper on April 1.)


Visuals: Rajesh Subramanian

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