Eaton plans to manufacture UPSes in India

Eaton plans to manufacture UPSes in India

Eaton Corp., a US-based diversified power management company, is wary of sharing its market figures, but concedes that it has had a slow start in India. But now, the $16 billion maker of battery backups and power distribution equipment is stepping things up a notch. Thomas Gross, vice chairman and chief operating officer of the electric sector, talks about his company’s plans and explains why they want to carry out more research and development in India. Edited excerpts:

How has the Indian market performed for Eaton in the last five years?

It’s performed very well. We’ve enjoyed a lot of growth in India since we started and that start was due to the acquisition of a company named Powerware, a UPS company. The business was quite small when we acquired Powerware because they had limited ability to invest globally. Then we had a couple of years when we had huge progress and also diversified our business and entered the telecom space as well... We implemented a couple of projects with Reliance (Anil Dhirubhai Ambani Group) and saw considerable growth. We’re now getting into a stage where we can call ourselves a truly national supplier of UPSes.

How big a share of India’s $500 million UPS (uninterrupted power supply) market are you aiming for, say, two years from now?

I would like to be at our national average of marketshare (in other countries where Eaten operates), which would be in the 30% range. The market size you just referred to includes both telecom, which requires a different kind of UPS and the data centre oriented UPSes. I think we would highlight that we would want to have the highest share in the data centre UPS market.

You currently only assemble UPSes at Gurgaon. Do you plan to start manufacturing at some stage?

Absolutely. In fact our strategy to expand in India must include that. We think it is a great opportunity because the technologies we have that were primarily developed in Germany and the United States for power distribution and even the power quality technologies developed out of China we think offer great capabilities for the Indian marker. But without manufacturing here, they’re not cost competitive.

What are your plans on localizing components for products?

I think there are two answers to that. There’s a cost answer relative to the basic components of power distribution, and we see a requirement to localize the products. Then there’s an assembly or customization of the final product, which has a lot to do with customer service. And so the fact is that you really do need to localize end to end to be one of the top three or four players. In the few places we haven't, we’re not a top player.

Do you have any specific manufacturing plans?

I can’t disclose that now but that’s one of the things we’re talking about today and we hope to make a lot of progress on that in the near future.

How do you compare the Indian market to other markets that Eaton operates in?

Clearly today the prices in India tend to be lower than almost anywhere by a magnitude of 10-20% than even prices in China. And so you have to come into India with a different product philosophy. Quality can’t be compromised. We’e talking of products that protect human lives... But maybe the feature sets are a little different. So the market tends to be a bit unique driven by a lower price. The growth rates are terrific. We expect growth rates in India to be higher than the average.

Do you see your company using the Indian market as an export base?

I think there is a possibility. We have generally taken a manufacturing strategy of primarily manufacturing for the local market and then there are exceptions to that that tend to be subsets of the product where we decide to make critical components maybe in just one area. And our expectation would be that India would have its share of that. Today, for us, most of that is coming out of China, Germany and the United States. We want to add India to that list.

Does Eaton plan to enter any joint ventures or tie-up for the power distribution business in India?

We’re always open to those kinds of things. We’re today thinking about our opportunities here as Eaton investments and sell people technologies and so on. Look at our acquisition record and you’ll see we do that when it provides us an advantage. There’s so much we have to do on our own in India that I don't think that will be a focus.

What sort of innovations are being done by your research and development wing in Pune?

Most of the activities in Pune are architecture, software and metering. So very much the high-end capability of our solutions are being developed in Pune. And so we’ve seen a number of great additions including something we call the power expert architecture. The majority of work for that is done in Pune.