The merger comes at a time when the domestic automotive market is expected to witness drastic changes in regulations.
The merger comes at a time when the domestic automotive market is expected to witness drastic changes in regulations.

Japan's JTEKT merges its India auto parts units to improve financials

  • Japan's JTEKT expects as much as four-fold increase in the revenue share from India following the merger of two local units
  • India makes up 2.2% of JTEKT's overall revenue and the firm wants that to grow to 5% in the medium term and 10% in the long term

New Delhi: JTEKT Corp., one of Japan’s biggest auto parts makers, expects as much as four-fold increase in the revenue share from India following the merger of two local units to create a bigger entity. Hidekazu Omura, chairman, JTEKT Group India, said Indian operations comprise just 2.2% of the parent’s overall revenue and JTEKT would like to see the figure grow to 5% in the medium term and 10% in the long term.

“We would like to manufacture more in India and have also invested in a technical centre so that research and development (R&D) of India-specific products can be done here. We would also like to supply to the other markets from here," Omura said.

The merged entity is expected to clock a revenue of 1,750 crore in this fiscal year, increasing it to 2,000 crore in the next few years, according to senior executives of the company.

On 16 March, the board of JTEKT India Ltd approved a share allotment proposal to absorb JTEKT Sona Automotive India Ltd to focus more on investing in research and development of its products in the automotive steering business, optimum utilization of assets and manpower, and cater to demands of vehicle manufacturers.

The merger comes at a time when the domestic automotive market is expected to witness drastic changes in regulations.

Auto makers are also urging their vendors to invest more in research and development and strengthen their financials to keep pace with the changes in the auto industry and sustain their businesses.

JTEKT India started manufacturing automotive steering systems with India’s Sona Group in 1985 and was one of the first component makers to supply to Maruti Suzuki India Ltd when it opened its Gurugram plant.

In 2017, JTEKT took a majority stake after buying 25.1% stake in Sona Koyo Steering Systems Ltd held by the Sona Group and later renamed it JTEKT India.

Sudhir Chopra, director corporate affairs and company secretary, JTEKT India, said the upcoming technical centre will be the first major investment by the company in India for research and development.

As of now, a large chunk of the R&D related work is done in Japan and with the new technical centre, the Indian unit’s reliance on the parent company will be reduced.

JTEKT India is also exploring options to build a factory in Gujarat near Suzuki Motor Corp.’s existing plant, said a senior executive of the company.

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