FAG Bearings India to strengthen manufacturing footprint
Fag Bearings, one of the 3 Schaeffler Group companies, the other 3 being INA and LuK, has announced that it is confident of sustained growth in India through its whollyowned subsidiary, FAG Bearings India, which was established in the mid-60s. Specialising in the manufacture of automotive and industrial products, the company has a presence in the OE as well as the aftermarket.
The automotive product portfolio of the company comprises ball bearings, wheel bearings, cylindrical roller bearings and spherical roller bearings ranging from 35mm to 320mm. For the commercial vehicle industry, the company supplies a wide variety of bearing types including tapered roller bearings, insert units, hub units, axle modules, etc. The company also supplies seals and sealing kits for heavy commercial vehicles. The wheel bearing repair set WheelPro, which the company offers, is part of wheel bearing sets that find use in trucks. Bullish about sustained growth in India, the company will continue to focus on high volume business.
Performance in 2016
In its Annual Report for 2016, the company in line with its strategic concept, ‘Mobility for Tomorrow’, has stated that it will focus on 4 areas – ecofriendly drivers, urban mobility, inter-urban mobility and energy chain. In 2016, the company’s total income was Rs 18,821.6 million, up 5.7%, as compared to the previous year’s income of Rs 17,805.9 million. Profit before tax (PBT) was Rs 2,984.5 million, and marked a growth of 1.6% over the earlier financial year owing to the adverse sales mix. The company’s sales to mobility sectors grew in line with the market growth. Sales to technology and innovation driven sectors registered above average growth too. If technology and innovation driven sector sales registered good growth, the sales performance of aftermarket and distributor sector suffered on the back of price and cash pressure. Exports growth was stagnant last year. Out of the overall export pie, Asia-Pacific constituted of 46% followed by Europe closely at 42%. Remaining exports are credited to America.
Strategy
The strategic approach of the company is expected to result in strong long-term gains. The proven success factors of quality, technology and innovation and a robust and systematic organisational orientation towards the future are expected to contribute to the sustained growth of the company. Continuing to focus on high volume business, the
company expanded production of ball-bearings at its Savli plant. It will continue to invest in expansion of manufacturing and engineering footprints in the country as per the report. Emphasising the importance of efficiency and cost control as critical success factors in India, the company accelerated implementation of Schaeffler Group programmes like, ‘Fit for quality’ and ‘Move’ across all areas of operations with a view of realising operational excellence. A structured hedging policy is also said to be used as a fire-wall against volatility in foreign currency. This is expected to help to curb negative Forex impact.
Last year’s outlook of continuing replacement demand in the medium and heavy commercial vehicle segment, apart from the return of light commercial vehicles to positive, has made FAG Bearings India confident of good growth. Last year the company benefited from an investment of Euro 150 million undertaken over the last 3 to 4 years. Almost half of the Euro 150 million was invested in the construction of the FAG Savli plant, which went on stream in 2012. Some amount was also invested in the modernisation and expansion of the Vadodara plant.
Involving the expansion of other Group plants in Pune and Hosur, the Euro 150 million investment is in-line with the Group’s strategy to strengthen the manufacturing footprint in India as well as continuous development of R&D and advanced engineering capability. FAG Bearings India products find use in crucial assemblies and modules like drivetrain and chassis. These are known to be not just crucial to the safe and smooth functioning of an automobile, but also subject to adaptation and design changes to meet the local demands.
Competition
The bearing industry is a highly competitive one. The slowdown of economy in China, and the underutilisation of global capacities have intensified competition in India’s bearing market. Besides competition from reputed global brands, the market is wary of the growing presence from Chinese bearing brands. The Chinese brands are looking to leverage their large domestic capacities, together with nontransparent economic environment by offering very low prices.
Relief on the cost front came from the protective duty support to steel manufacturers and processors the government provided in 2016. The inverted duty structure, however, does not support competitiveness of the Indian bearing industry. The weak implementation of Intellectual Property Rights (IPR) in India continues to result in counterfeit products proliferating. These pose unhealthy competition to most reputed brands.
Outlook for 2017
With the Government thrust on development of rural and agricultural sectors, continued investment in infrastructure projects, implementation of GST and diminishing negative impacts of demonetisation are expected to accelerate economic growth, and in-turn lead to spurt in demand. The company’s long-term strategy to realise profitable and sustainable growth rests on key initiatives like growth in high volume business linked to automotive and offhighway industries. Investments are expected to be made in appropriate technology.
Keen to offer high value-added products and services together with continued expansion of competent distribution channel in a bid to ensure long-tern success in the aftermarket, the company is also making regular investments to expand its manufacturing footprint. It is also investing in talent and training, and continues to emphasise on operational excellence through Schaeffler initiatives like ‘Move’ and ‘Fit for Quality’.