Maruti’s diesel phase out plan not good news: Schaeffler India CEO2 min read . Updated: 07 May 2019, 08:29 AM IST
- Schaeffler India CEO Dharmesh Arora was speaking about the impact India’s largest carmaker’s decision would leave on Schaeffler India’s annual business next year
- Maruti Suzuki is Schaeffler India’s largest customer in the PV segment
Maruti Suzuki’s plan to phase out its diesel car portfolio from April 2020 is not a positive development for us, Schaeffler India CEO Dharmesh Arora confirmed in an analyst conference call on 6 May. He was speaking about the impact India’s largest carmaker’s decision would leave on Schaeffler India’s annual business next year.
Arora said that the change in diesel mix (vis-à-vis petrol) alone will impact about 3% of his company’s (automotive) topline as he sees a drastic drop in the penetration of the diesel vehicles in the overall passenger vehicle segment.
“Declining production of diesel cars is not good news for us as there is a lot more content that goes in a diesel engine as compared to the petrol engine. No production of diesel vehicles from April 2020 will result into loss of big volumes (of associated parts) for us," he said while responding to an analyst.
According to Arora, a diesel engine consumes additional content worth ₹3,000 – ₹5,000 more than that in a petrol engine, and is costlier in the range of ₹75,000 – ₹100,000 over its petrol counterparts. To put this in perspective, diesel vehicles contributed about 23% to Maruti Suzuki’s total sales of 1.75 million vehicles in FY19. Schaeffler India’s revenues will be impacted as per its share in Maruti’s order book, which remains undisclosed at the moment.
“The diesel penetration in the passenger vehicle (PV) segment has declined by 10% when compared to the corresponding period a year ago. It now stands at 26% of the overall PV segment. Upcoming quarters this year may face increased level of volatility in the market during the transition to the BSVI emission norms," Arora added.
He, however, is also expecting fresh orders via newer content that may be mandatorily required for petrol engines to ensure compliance with the BSVI norms going forward. On 29 April, Mint had reported that suppliers of key parts such as that of the powertrain and others are facing business uncertainties following Maruti Suzuki’s decision of phasing out its diesel portfolio from, April next year.
Responding to Mint’s query, Schaeffler India said that it supplies several engine and transmission components to Maruti Suzuki. “We supply several engine and transmission components – right from wheel bearings to clutches." The company, however, did not disclose what new petrol engine specific parts it is looking to supply to Maruti Suzuki to compensate for the outgoing parts business.
Maruti Suzuki is Schaeffler India’s largest customer in the PV segment. The company also supplies parts to Tata Motors, Hyundai Motor India, Mahindra & Mahindra (M&M) and others. Schaeffler India posted total turnover of ₹4,562 crore in CY18 and ₹1,172 crore in Q1 CY19 (up 8.2% year-on-year). According to its sales mix of Q1 CY19, mobility solutions contributed 80% while the remaining 20% came from others. Revenues from automotive, industrial and exports stood at 48%, 42% and 10% respectively during the period.