Warren Buffett backed auto parts maker Wabco Holdings has cornered most of several market segments in India, but the business tells us that it is only beginning its plans in this country. Intensifying competition and new laws for mandatory advanced braking systems in the auto world will certainly enhance the need for Wabco’s products in the country, said its top official.
“We see opportunities related to safety which will emerge from the government mandate, such as antilock braking system, as well as other technologies that increase vehicle efficiency like automatic manual transmission,” Jacques Esculier, chairman and CEO of Belgium-based Wabco Holdings, told in an interview with ETin.
He mentions that it’s going to lead to a content increase per vehicle, which is a major metric in the automobile sector. “Our market is $3,000 (Rs1.8 lakh) of product and systems in Europe. It goes down to just a few hundred dollars in India. So that gives you the room to progressively bring those technologies to India.”
Just four years ago, Wabco got out of a 40 year old joint venture with Sundaram Clayton, owned by Venu Srinivasan, when they acquired the majority stake in Wabco – TVS, which makes air braking systems.
Since this took place, many Wabco Holding’s products are now available to Wabco India.
Listed on the stock exchanges in India, Wabco India has grown its top line at a 12.5% compounded annual growth rate since the end of fiscal year 2013. Profits have risen by 13.3%, even with a slowdown in the commercial vehicle industry. “Our objective is not top line or bottom line. It is to outperform the market in every region we are in and India fits in perfectly,” Esculier said. “Last year, Wabco outperformed the global market by 8%.”
The company, worth $2.7 billion, gets 19% of its sales from Asia and 62% of its sales from European countries. Aftermarket sales consist of about 23% of their revenue. Wabco owns a massive 85% share in the market of air braking systems in India for heavy to medium trucks. Now Wabco India intends to bring more technology like automatic manual transmission and antilock braking systems into the country, which is a key strength of the parent company.
Wabco believes that the commercial vehicle landscape in India, now changing and consisting of 12 major players compared to just two only 10 years ago, will boost the demand for the newer fuel-efficient technologies. Wabco looks at Volvo and Daimler as two of its major customers, on a list of companies that include Scania, Tata Motors, MAN and Ashok Leyland.
“The entry of new players has accelerated the phase of standardization of technology, safety and reliability. While foreign players are eyeing the local market, Indian players looking to become globally competitive,” said Esculier.
Analysts believe that immediate benefits for the company will come from the government mandate that makes antilock braking systems a requirement. ABS is a safety system put into place to prevent uncontrolled skidding when braking. The US-made ABS mandatory in 1999, while Europe did so in 1997. It is currently mandatory for trucks carrying hazardous goods in India, but it will be extended to other vehicle types as well.
“ABS is obviously the major contributor to safety on the road for commercial vehicles. It has been proven that way in different areas of the world so far. In India, it is taking shape,” Esculier said.