Text: J Srikant
Auto Ignition, one of the well-known names in the tractor industry for starter motors and alternators, after catering to almost all the majors in the agricultural equipment industry, is now training its guns at the Commercial Vehicle (CV) segment. The move comes at a time when the CV industry is looking to get back on its feet after a long slowdown.
In the business of starter motors and alternators since 1971-72, Auto Ignition has already roped in Mahindra for its three-wheelers and is testing their motors with Ashok Leyland. The company is also in talks with other majors in the CV segment including Eicher for starter motors, and wants to provide solutions to Volvo as well.
“In the next five years, we should have a significant share in the commercial vehicle market also,” said Mohan Narayanan, President & CEO, Auto Ignition. “We are looking at getting around 30% of our revenues from commercial vehicles.” The company had registered a turnover of Rs 225 crore in FY 2013-14.
Narayanan said the time is ripe to leap into the CV segment as there is a lot of activity happening in the economy, which is having a positive impact on the sector. The opening up of infrastructure with a strong push to get delayed projects back on track is expected to revive the demand for commercial vehicles in the near future.
The bad times have also affected a shift in the thinking of big CV makers who are now willing to look at smaller suppliers as well for components. “The main reason for us to look at this segment is that the CV makers, who up till now have been supplied by the likes of Lucas-TVS and Bosch, are now looking at cheaper alternatives because recession has had a role in their way of thinking. They also want to cut costs and thus are opening up to new players like us now,” said Narayanan.
When it comes to product technology, Auto Ignition claims to be at par with global leaders in starter motors but is better as far as frugal technology is concerned. He attributed this to the fact that the company makes its own machines and has its own tool room. Auto Ignition has received government approved engine testing facility because of which they are able to produce machines that are suited for small batch production.
Despite the agricultural equipment industry being one of the very few segments which stayed afloat during the downturn, Auto Ignition, which caters mostly to this segment, did not come out completely unscathed, especially this year. The tractor industry saw a negative growth this year because of unseasonal rain and poor monsoon which led to a slowdown in company sales. “But we were compensated by getting into lean manufacturing and have reduced our rejections which have lead to savings. Our plant operations are far more efficient now,” said Narayanan. “The bottom line will definitely get impacted as it cannot be compensated with such activities. However, it would have been far more had such activities not been implemented.”
Auto Ignition has combined certain operations which have helped it reduce manpower. They have brought about automation which reduces rejections and improves productivity; poke- yokes have been put in place, waste removed, and improvements done in existing machines to still further lower the downtime. This year, Auto Ignition might see a negative growth as the monsoon had destroyed crops but next year will be positive as the tractor industry is expected to bounce back.
Auto Ignition has two manufacturing plants, one in Prithala and one in Rudrapur. Prithala plant is built over an area of 9.5 acres with an annual capacity of 580,000 starter motors and 270,000 alternators. The Rudrapur plant covers 1 acre and has an annual capacity of 220,000 starter motors and 180,000 alternators. The two plants combined are working at 70% utilisation on single-shift basis. Narayanan says the current installed capacity will be enough to meet growing demand from the CV segment. “We have an extra shift to work with if we feel the need to increase production. We also have land available in the plant where we can expand capacity.”
The current customer base of Auto Ignition in the tractor segment includes Mahindra, TAFE, John Deere, Escorts, ACE and Sonalika. Most of the company’s revenue comes from the domestic market, close to 80-85%. The rest 15-20% comes from exports.
The company expects increasing export business from Western Europe and North America primarily because China, one of the main competitors, is losing out due to increasing labour cost. Although Auto Ignition is going it alone at present, the company is open to a collaboration, merger or acquisition. The main geographies that Auto Ignition is looking at for partnerships are Japan, Europe and North America.
Narayanan believes a technical collaboration might not be a necessity in the tractor and CV segments as the level of sophistication in these segments is not that high, but the tag does help. He also informed that starter motors have recently gone through a technology change where it has moved from direct-on starter motors to gear reduction starter motors as they were bulkier and costly. The advantage of gear reduction starter motors is that they generate the same power from a smaller motor as there are multiple gears in it, which is cheaper for the customer.
The penetration right now of the gear reduction technology is 10% in the tractor segment and in 2-3 years it could be as high as 50%. Auto Ignition has the entire range from 2.2kW to 3.2kW which could be used in tractors with a power range of 25hp to 75hp.
In alternators, the technology is shifting from external fan to internal fan. Internal fan alternators increase efficiency and are more compact. The company spends around 3% of its revenue towards R&D, operates in the 23 amps to 90 amps range with bulk production in 35-60 amps, essentially because most of the tractors which are sold in India do not have any additional accessories and do not require higher ampere alternators.
