In an upfront conversation, Sanjeev Vasdev – Managing Director at Flash Electronics (India) Pvt. Ltd. spoke to Ashish Bhatia about the company strengthening its capabilities for realising projected growth.
Q. What is the direct bearing of the collaboration with Polish Group Elimen on your growth aspirations across the PV and CV segments?
A. Flash is one of the first companies in India to have started producing parts for electric two-wheelers. And we are already having a large number of parts right down from a traction motor to a controller to a DC-DC converter, and private charging station cooling applications. Having invested in EVs a lot over the last few years and also embarking on a very aggressive growth plan moving forward, we wanted to expand our product horizon to passenger cars and buses. The collaboration with Elimen makes us a company where we can start producing a motor and a controller not only for two-wheelers but also for e-buses. We are going to be the only company in India to be producing motors from a four-kiloWatt or two-three kiloWatt range up to a 300 kW range along with high-end electronics. That is why, we are very excited about this development with Elimen, a very strong company on the design front.
Based out of Poland, they have highly specialised engineers, a couple of them PhD holders, so we have a very strong connection with them now. And they are now going to be developing all these new-generation products to meet the requirements of our OEM customers with some of our products already being tested by a few domestic OEMs in the PV and CV segments. It’s an exciting period for us. Elimen has been our second collaboration in this field with the partnership earlier on in 2021, where we tied up with a French company called Energy Stone for Battery Management Systems (BMS). In fact, we displayed the products from that collaboration at Auto Expo 202. Flash also picked up significant minority equity in the company in September 2021. We are now developing products for various global requirements and India is going to be an exclusive manufacturing base. So India will meet not only the domestic requirements but also the global requirements.
Q. When we last met at Auto Expo 2020, you were buoyant about boosting EV revenues by 2024-25 and then came Covid-19. Has that altered the course of your projections (~10-15 per cent from EVs back then) and the execution itself for the segments relevant to you?
A. Within the first year of the launch of the EV product, there was a delay due to Covid-19. We had expected to touch a turnover of Rs.100 crore coming in from the segment and which will constitute nearly seven to eight per cent of our overall turnover. We now expect nearly 25-30 per cent of our turnover to come in from EVs by 2025 so I’d like to believe we are right on track and maybe a little ahead of our projections.
Q. How strong has the recovery been on a YTD basis and in the last fiscal when compared to previous fiscals?
A. Well, if I look at the first half of FY23 which we ended in September 2022, our profitability has gone up by 3x compared to last year (H1FY22). Our sales have gone up by about 48 per cent and we are very well on the verge of recovery. For us, we have lost the people. But I think, we have no more challenges as far as the sales side is concerned. But yes, challenges are there on the execution front because of the semiconductor shortages. In our opinion, we feel that the next three-quarters should see the semiconductors issue being normalised. The situation is improving gradually but of course, not to the extent we would like it to. I think by mid-2023 things should reach a certain normalisation level and then we expect the next growth phase of Flash to commence. We will be able to go much higher on our current production volumes but are nowhere close to the scale needed to fulfil the order book as a result of the shortages.
“We are going to be the only company in India to be producing motors from a four-kiloWatt or two-three kiloWatt range up to a 300 kW range along with high-end electronics.”
Q. How have the technical integrations with Italy-based Askoll and France-based, efficient energy-storage company Enerstone progressed? Are there any more partners that have come on board since then?
A. With Askoll, we are now developing certain customised products in the lower segments. These products are already at various customers for testing and we would like you to know, the customers have the option to come out of the current design of the motor they are using and work towards the Askoll motor. That product currently is not being produced in India yet. We are on the verge of setting up those lines which will only be in the latter part of 2024 because we are concentrating more on India-specific segments to fulfil a large order book right now. That will be on a low-speed EV variant.
There’s too much current development going on with Enerstone with the development of the new battery BMS against the backdrop of the new battery norms which have come in by the Government. It is a big boost to our plans because Enerstone is already meeting the majority of those requirements being a European company. We will be among the first in India again to meet the complete requirements as per the BMS rules specified by the government which has a deadline of April 2023 to be met. I think we will be ready with that complete requirement model as early as January 2023.
Q. Is the retrofit segment of interest to you? What is the current progress level on the design front of EV motors and controllers?
A. No, the retrofit market is not a business case for us. Currently, we are designing all the electronics and the BLDC motors given to us for manufacturing. And now some are being designed by our collaborator Elimen. So, we have various business models in place, and today customers are also taking up a lot of design work. We would like Flash to produce this part of the business set of requirements. We are very open to such collaborations, and it’s a win-win situation between the customer and us. When we work on such models, we follow a very specific flow.
“We now expect nearly 25-30 per cent of our turnover to come in from EVs so I’d like to believe we are right on track and maybe a little ahead of our projections.”
Q. Is there an interest in the afterlife of batteries given the demand for energy storage systems?
A. We are not looking at any recycling at this moment in time because that is a different domain altogether. We want to remain very specialised. We’ve been manufacturing electronic products for the past three decades, and we want to stick to our expertise. To make sure that we take this to the next level. Our presence in the passenger car market was negligible. Whatever passenger car market presence we had was mainly attributed to our German subsidiary. Out of India, it was next to negligible and it was either through one of the big boys where we supplied certain components to them. Today it is easier as everything has changed for us. We will be building our exposure to the PV and CV segment to a respectable scale.
enerstone, Meylan
Q. How do you look at your foray into purebred CVs in a cyclical upturn as of the present?
A. We are looking at electric buses. We feel that with the current set of problems, many cities are weighed down by high pollution levels. There is a business case for us and we see white spaces that can be addressed. The collaboration with Elimen introduces us to that range of motors, for instance, the 300 kW capacity and above. This will give us a complete upper edge over the competition in terms of meeting that demand with a made-in-India focus. Flash has really focused on the made-in-India initiative of the government and I will say that we follow that in letter and spirit.
“We will be among the first in India again to meet the complete requirements as per the BMS rules specified by the government which has a deadline of April 2023 to be met.”
Q. A word on International markets like California finding it hard to tune the power grids to meet the daily EV needs? This is when ~30 per cent of their needs are met by renewable energy.
A. You’re absolutely right! I think there are many technological changes to be undergone before we are able to shift to a particular system which will be widely accepted by every manufacturer on the charging side. Things will get more clear over the next couple of years. Right now, I think we are not fully equipped at all to come anywhere near the requirement of the charging infrastructure that should have been in place.
Q. What is your assessment of the market sentiment with a healthy festive season and high investments committed by the components segment alone?
A. The PLI scheme is more for the OEMs, right? You cannot have a double benefit doled out to the OEM as well as to the auto suppliers for the same, its the product owner that can claim the benefit. I think PLI will mainly benefit those exporting their products or selling to customers who are in turn not covered under the PLI scheme. We haven’t qualified for PLI or have not opted for it. I think we have various state subsidies and incentives which have been given to us. We are quite satisfied with those.
“Right now, I think we are not fully equipped at all to come anywhere near the requirement of the charging infrastructure that should have been in place.”
Q. Do you wish for the entry barrier to be lowered under the PLI scheme?
A. Our investments are going to cross Rs.250 crore. We didn’t see any value in those schemes. You can’t when it’s not a double incentive. These incentives should not last forever as they are value-based incentives. They can be there for one year, two years, three years, or four years depending on the sustainability. It’s the right approach for the government for kickstarting the investment cycles. I cannot build up a business model based only on certain incentives. It has to be sustainable without incentives.
Q. Is there a level playing field in the OEM and supplier contracts?
A. I think OEMs have been very supportive. We have really had a lot of support from all our customers. We really value the relationship and I think it is something which can only develop more, going forward. When it comes to EVs specifically, there are a lot of supplier investments that the customers value. It is backed by a long-term understanding.
“I think PLI will mainly benefit those exporting their products or selling to customers who are in turn not covered under the PLI scheme.”
Q. Any particular trends that have the potential to trickle in maybe in the next half a decade or so?
A. I think clean fuel is going to be continuously evolving. And I think the next step is going to be hydrogen for the country. Companies like Flash have already started working on products for hydrogen vehicles. So that is done through our German subsidiary, their R&D vertical is working specifically on such products. You will see a lot more products coming in the near future. And India can also be a major manufacturing hub for larger auto components suppliers worldwide for those kinds of products out of India because the cost competitiveness will be required for such products.
Q. A word on the government interventions on your wishlist?
A. The Centre needs to define clearly the infrastructure roadmap. But I think the state governments also need to define it from their perspective. Especially the new technologies, for whatever ambiguities there are currently. Some of them are there and they should be thrashed out so the sub suppliers know exactly what they need to do to benefit from, setting up an industry in a particular state. And so I think clarity is very important.
“When it comes to EVs specifically, there are a lot of supplier investments that the customers value. It is backed by a long-term understanding.”
Q. To sum it up, what are the growth and challenge areas for the foreseeable future for Flash Electronics?
A. I think our challenge right now is only semiconductors. So I think, other than semiconductors, I don’t see any challenges that are not applicable to everyone, globally. Secondly, we have an exciting time ahead as far as flash is concerned in terms of new product launches and new product announcements. We will make a few more announcements under the new partnerships spoken of. We are going to go much beyond the EV range of products to various others, in the advanced stages of artificial intelligence and telematics in the future. ACI
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