Auto engineering company Sona Comstar is planning to invest INR 1,200 crore over the next three financial years to productionise its INR 22,600crore order book of which just under INR 18,000crore are EV segment orders.
According to the company management, Sona Comstar has just inaugurated its second plant in Mexico and will likely next look at a greenfield plant in India even as it expands its product range. However, the Red Sea crisis has hit its margins by 0.35-0.4% this quarter, adding 9-15 days of shipping time and a three-fold jump in freight rates which is a temporary headwind.
Vivek Vikram Singh, MD & Group CEO, Sona Comstar, said: “From FY22 to FY24, the order book has gone from INR 14,000 crore to INR 22,600 crore of which 79% or just under INR 18,000 crore is from the EV segment. Of the EV orders, 80% is global business and 20% is domestic. Of the INR 18,000 crore EV orders, 63% is e-passenger vehicles, 10% for e-two wheelers and three wheelers and 6% for commercial and off highway vehicles. EV growth is high priority for us,” he added.
The INR 1,200 crore capex spend will be almost entirely EV driven. From 2 plants in 2016, the company now has 10 plants with north America commanding 40% of its revenue, India 28% and Europe 26%, he added. In terms of products, Sona Comstar, which makes starter motors and differential gears among other parts, has seen the EV share of its revenue go from 14% in FY21 to 29% in FY24.
However, the geopolitical issues in the Middle East and the Red Sea crisis have pinched margins and hit production cycles, said Singh. “We make 28% margin so it is a relatively smaller pinch this quarter at 0.35-0.4% of revenue as extra expenses, but freight rates have gone up almost three times,” he added.
