Transition from ICE to EV is great news for Minda as kit value increases manifold: Sunil Bohra

“We have built a very big product profile from an EV perspective, which is unparalleled in the industry. Our kit value already is almost Rs 25,000-30,000. It is under production, and we are working to take this kit value to almost Rs 50,000. So, it is a six-to-seven-fold jump in our kit value. Any transition from ICE to EV is great news for us because we are putting more energy in increasing our kit value,” says Sunil Bohra, CFO, Minda Industries

The general outlook has been that things are improving and that has been visible in the overall numbers. In terms of demand momentum, how have the last two to three months been for the company? If you could break it down, which segments are seeing the strongest growth?

The sector has been facing some headwinds in the last three to four years, starting with a lot of safety related changes, increases or the BS VI transition or the COVID etc. As of now, for the last few months, we are sensing some improvement in volumes month-on-month in both the sectors – be it passenger vehicle sector or the two-wheeler sector.

The two-wheeler sector has been facing a lot of headwinds in Q3 and Q4 of last fiscal but as we speak, for June-July, we are seeing some improvement in the volumes in two-wheelers as well.

We all know EV has been the segment where the demand has been very robust, but the supplies have been constrained because of one reason or the other and primarily the semiconductor issue and things have been improving daily.

That creates demand for people like us where the volume is improving. So in both the segments – be it two-wheelers or the passenger vehicles – we are definitely seeing an uptick in volumes on a month-on-month basis.

Will this be a new cycle where first companies will start building inventory, then they will start getting demand back or right now these are just initial phases?

It is very difficult to say whether the people are building inventory, but the fact remains that the inventory levels for at least PV has been very low compared to what the long-term averages are.

Some of those productions will go into building inventory but we all know that for some of the models, the waiting period has been almost like six to eight months. So, I would presume initially the supplies should go in meeting the end customer demand because one tends to normally reduce the waiting period so that the supply chain gets streamlined. One never keeps building inventory and has customers waiting for the delivery.

While for the majority of the models where there is a wait period, it should go in meeting the demand and then gradually, we might see some build up in inventory to normal levels.

A lot of change has been happening within the passenger car market. SUVs are doing much better, entry level cars are falling off the radar. The Indian customer is tilted towards EVs. How does your business or revenue projection change because trends are changing so fast?

This is a very important point which you have raised. As a country we have seen a transition from A segment car to a B segment car where the volumes for Swift etc are growing more than, I am taking names because be it the lower end cars, so that transition and also people are preferring from a low platform car to a high platform car which we call the SUVs or the five-seater SUVs.

When we see this transition from A segment car to B segment or B to a C segment car for people like us, it is actually a great thing because even though industry volumes remain same for a moment, our kit value which goes into A segment versus a B segment to B is higher than A and so on.

Any transition from a low-end car to a mid or a premium transition that bodes well for people like us. From a manufacturing perspective there is not a big shift, so if I may give you an example, for a switching system B segment volume if I have to increase it is not a problem, I already have the entire setup, so it is addition of more features, more kit value etc.

Similarly, the wheel ware might get a little heavier or light a little bigger. So for people like us, there would not be any significant challenge whenever you shift from A segment to B segment or a low platform to a high platform car. In fact, it is great news for us.

In the two-wheeler segment the demand seems to be coming down. Is this good news for you people because it means premiumisation?

From a two-wheeler perspective, it is a little different from a four-wheeler perspective because in four-wheelers, EV is a little far off.

Any transition premiumisation, increase in kit value, steel wheel to alloy wheel or a halogen lamp to LED lamp all bode well for us because it increases the kit value. From a two-wheeler perspective or a three-wheeler perspective we all know that the India mart also is gradually transitioning to EV.

While today volumes are very low, as we move forward, we do expect volumes to grow significantly. Our products are agnostic to either EV or ICE engine, for all our existing products mostly, which are part of the group consolidated financials. No product faces any headwind or any risk for transition from ICE to EV, barring maybe some small casting products.

However, from an EV perspective, a few months back we were working on increasing our kit value significantly for a two-wheeler or a three-wheeler perspective. For a two-wheeler, our kit value for ICE engine has been something around Rs 7,000-7,500 which goes to almost Rs 9,000-9,500 for an EV.

On top of it we have built a very big product profile from an EV perspective, which is unparalleled in the industry. Our kit value already is almost Rs 25,000-30,000. It is under production, and we are working to take this kit value to almost Rs 50,000.

So, it is a six-to-seven-fold jump in our kit value. Any transition from ICE to EV is great news for us because we are putting more energy in increasing our kit value.