‘Our new plant in Mexico is an offensive move’:Vivek Vikram Singh | Autocar Professional

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Gurugram-based Sona Comstar, a leading exporter of EV driveline components as well as starter motors for ICE vehicles to Europe and North America, has recently set up a new driveline facility for battery electric vehicles in the Fipasi Industrial Park in Silao, Mexico. The Tier 1 supplier says the plant will enable it to expand its reach in the North American market, draw more customers and generate additional revenue. Excerpts from an interview with Vivek Vikram Singh, MD and Group CEO, Sona Comstar.

What is the capacity of the new Sona Comstar plant in Mexico, and how much has the company invested?
We like playing to our strengths. While we already had a plant in Rion, Mexico, the new facility around 40km away in Silao, is a step towards getting further into the North American market. While the existing facility is a starter motor unit, the new plant is an electric driveline facility.

We have taken the establishment and land on lease, and will now invest into putting in the machinery and equipment. It will take at around 9-12 months before we start supplying from this facility.

On April 19, Sona Comstar chairman Sunjay Kapur inaugurated the new plant in Mexico. This facility, which specialises in driveline solutions for EVs, will help the company enhance its supply chain efficiency and respond more effectively to customer demand in the North American region.

Our investment, therefore, will lie primarily into equipment, and it will vary depending upon how much capacity we will keep adding in this facility that will undertake finishing operations for some product lines, final assembly for the others, and basic packaging-repackaging jobs as well.

Therefore, at this point, it is hard to determine the exact capacity of this facility as some of the work will be basic processes such as machining, and will only represent just one aspect of the entire value chain. With respect to the Rion plant, we produce around 250,000 starter motors – entirely dedicated to the North American ICE market – every year.

What was the rationale behind setting up Sona BLW eDrive Mexicana given that there has been a slowdown in EV sales in North America?
Slowdown is a relative term, and while growth in EV volumes in the US market has reduced from what was being recorded a few years ago, ICE, on the other hand, has only been registering a very marginal uptick. So, being a supplier, one must look at absolute numbers from a business-case perspective.

This potential in the EV space, even if growing at a slower pace, offers us a huge opportunity to generate returns. While we registered 19 percent growth in revenue in FY2024, our EV growth was pegged at 34 percent. So, for Sona Comstar, our EV business is growing at double the rate of our ICE business and, therefore, a slowdown in EV volumes is not much of a concern for us.

Moreover, we are in 2024 and are already witnessing drastic effects of climate change, which will continue to make emission norms around the world more stringent. Therefore, we must understand the reason behind this entire drive towards EV. The transition is not happening due to the whim of some automaker, but because it is the need of the hour. In that sense, we are a long-term company, and while there may be a slowdown in EV offtake in the foreseeable future, or it might not even grow, but this is the way forward. In this light, we have also repurposed our plant in China from making starter motors to now produce traction and suspension motors. This transition should happen over the next nine months.

Sona BLW eDrive Mexicana will specialize in producing differential assemblies and reduction gears designed for battery electric vehicles (BEVs).

When do you envisage breakeven with the investments in the new plant in Mexico? Will it be over a 5-6-year horizon?
We will make returns quickly, and there is no way we would take as much as 5-6 years on any investment to break even. We will start making money because when we set up a new plant, we already have a certain number of customers in hand. We never depend on one customer, and no customer share in our portfolio has been higher than 20 percent, at least over the last 2-3 years.

We do not allow that kind of concentration as a highly-concentrated customer share would impact either growth or margin. And for a company like ours, which has been registering growth and margins of over 25 percent over the last decade, we cannot afford such concentration. Therefore, we must have enough comfort before we do something new.

Having said that, we would eye more customers in North America with the new plant, which is an offensive move, and not a defensive one. This is one of those moves to gain customers who we would have, in ordinary thought, not got out of supplying to the US market purely from India. Therefore, it is to capture that additional opportunity.

Do you see Sona Comstar’s North American presence giving it an advantage when EV makers like Tesla foray into India? Is the company also expanding its product portfolio?
While we do not comment on customer-specific plans, in general we are flexible in our manufacturing, and have well spread-out global logistics, including warehouses in key locations. Therefore, these things only matter when a company has localisation only within a particular geography.

We are constantly expanding our portfolio, and while three years ago we started out in the US with a range of 10 products, today we have 18 products to offer to the market. That is the secret of our growth being higher than the industry.

Will Sona Comstar also consider setting up an R&D centre outside of India, perhaps in North America or Mexico?
At this point, we are not aiming for an R&D centre outside of the country. More than 72 percent of our revenue already comes from exports, and all our product innovation is concentrated in India. While Sona Comstar’s gear innovation happens in Gurugram, aggregate and sister aggregate R&D in driveline systems occurs in Manesar. On the other hand, all our new product development in motors happens at our technology centre in Chennai.

Sona Comstar’s global presence enables it to provide tailored solutions to leading manufacturers of PVs, CVs, OHVs and EVs.

Therefore, we must take pride in our own talent, which is among the best in the world in most engineering domains, barring some areas like power electronics and semiconductor, of which there is no industry in India at this moment. And to bridge this gap, we acquired a company – Novelic – in Serbia, which has both chip design, and sensor competencies. We play on engineering-per-hour cost arbitrage and that reflects in our margins. 

At Sona Comstar, we think and act like a startup which is starved of cash. If one thinks they have less, they will generate more. People with less constraint on capital, almost, always, will waste it. That is our mindset, and that is how we run the company.

Why did Sona Comstar’s R&D spend decline in FY24, and what is going to be the approach towards correcting it in FY25?
Firstly, we felt we had let ourselves down a little, and cut down on our R&D spend, unconsciously. But when we analysed that our margins have shot up to 28.5 percent, and R&D has slid to 2.5 percent, we realised it is too low for a 10-year roadmap. Therefore, we have projected to invest anywhere between 3.3-3.5 percent in R&D in FY25.

It is more of a philosophy that if we need to do great things, we need to provide capital for it, and stop letting the outside world influence what is the right thing to do with the company in the mid- to long-term period. We also wanted to set our new CTO who takes charge from November, off with a robust budget, and a chance to hit success by equipping him with as much resources as possible.

Moreover, there are several things happening in the areas of semiconductor chip design, and Artificial Intelligence. While there is a lot happening at Sona Comstar in AI in the processes, equipment, how we analyse data, and in products themselves, a lot is yet to be done. For that, we need to fund people who are chasing those horizons. For companies that miss this AI wave, will feel they have been left behind, 7-8 years down the line.

All images: Sona Comstar

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