Harneet Kochar is joint managing director at Pfeda, which serves a diverse group of companies outside the mainstream automotive sector. “We make handles for Daimler Trucks in India, and Volvo-EICHER Trucks in India,” he said. “Every JCB has a steering wheel made by us for the past 10 years. There is a niche. The people who work for car manufacturers are not interested in small volumes of tractors.”
He says that business has been growing at approximately 12% this year. “The tractor business in India is growing at an amazing rate, faster than cars,” he said. “It is maybe 15-20%, with cars around 10%. We got into that sector at a very good time. We are making around 20,000 steering wheels/month for tractors.
The market for Pfeda’s steering wheel products in the tractor sector is “growing crazily” Kochar claimed. “We introduced polyurethane into the Indian tractor market for the first time four years ago,” he said. “People were using polypropylene, and we now supply three or four main tractor producers. There is a comfort and aesthetic factor. Polyurethane looks good, it is tactile, and you get a better grip. Polypropylene steering wheels looked scrawny and thin.”
Just as the Indian car-buyer is demanding greater levels of comfort, so is the tractor sector, he added. “There is a growing demand in India for tractors with a cabin,” he explained. “The idea was to buy the cheapest machine available, but now they can spend more, buyers are looking at air-conditioning. There’s one cabin being developed with floor mats, side panels, bottle holder and a cell phone charger, and above the driver there are controls for the stereo.”
He believes they have created a polyurethane market out of nothing in the tractor industry. “Side covers, grab handles and about hundred different types of NVH foam are supplied by Pfeda for tractors,” he said. However, the company is not in the public bus sector. “The tender concept is for each year at a fixed price and with isocyanate prices the way they are, it is not an easy business to be in,” Kochar said.
Rohit Rohan is managing director of Bharat Seats, which has a joint venture with Maruti Suzuki to make automotive seats. The company turns over more than $68m, and was floated on the Bombay Stock Exchange about nine years ago. “The offer was oversubscribed eight or nine times,” he said.
“The flotation really helped to drive the industry in India,” Rohan explained. “Now, after nine years, there are many younger firms.” He estimated that there were perhaps 50-60 such companies at flotation, but now 140 are dedicated to seating systems. “Their motivation was how to make profit, from quality, technical components,” he said. “This is the second generation. We gave them the opportunity.”
Rohan’s aim is to help local production where possible. Having given the opportunity to smaller supplier, now the seats are 75% Indian. “Machines and customers are making an impact on all kinds of features in the industry,” he said. “We were the first to help the second generation, who now supply to other competitors.”
This is driven by economics, as Maruti’s Bhargava said his firm was losing $1 bn a year because the yen appreciated about seven years ago. “We started motivating suppliers to localise production,” he said.
Previously, Maruti was importing about 4.5% of its parts but its vendors imported up to 26% of their components. “Now that number is down to 14 to 15%,” he said. “It has meant that our margins and profitability has improved substantially.”
Utility, for now
Like the footwear sector, though, the automotive sector in India is more about utility than luxury.
According to Huntsman’s Naik, German carmakers are making a small number of cars in India, but not all the components have been localised. “We are working closely with customers understand the benefits of MDI in India,” he said. “The large market for smaller cars, they still operate with blends for seating.”
His colleague Hansen added that Korean and Japanese OEMs are present in India, which make small, mid-size cars for the Indian market. “The Indian automotive seating market is mostly TDI/MDI blends,” he said. “It’s just a matter of time before the Asian market car makers move upmarket to MDI.”
The growth of the automotive industry in India is closely tied to the growth of suitable infrastructure, and this is on the way. “Prime Minister Modi announced a 4,000bn investment in infrastructure in India in highways, airports and trains,” according to Hansen. “We believe that PU has the durability to make that a good investment.”
Improved infrastructure, the growth of the urban middle class and with it the growth of supply chains of chilled and frozen food all offer opportunities for polyurethane. “We feel there will be growth of cold chain, in construction panels and spray foam,” said BASF’s Huguenard.
Dow’s Muthupandian added that the energy efficiency and insulation market is big as are industrial appliances, and energy efficiency is in a good state of growth, averaging around 15% over the past two years.
“Some customers are growing at 30 to 35% – that is huge growth,” Muthupandian said. “Some of it is going into cold storage because the government is focusing on food processing zones. India wastes a lot of food. It wastes what the UK consumes every year.”
Penrice added that Dow is heavily invested in the cold chain, with a big agrochemical business in polyurethanes and packaging materials to keep fruit and other food fresh for the retail market. “The only piece missing is the road infrastructure,” he said. “We see the cold chain growing as quickly as we can get the infrastructure.”
In the domestic appliance sector, Dow’s Shennoy said, India has adopted standards that force manufactures to upgrade performance to retain star rating every few years.
India is also in a good place to introduce best-in-class regulations for building insulation, Penrice argues. “We will try to get the right standards established early, rather having a standard upgrading every five years,” he claimed. “We can go with world-class standards now, and bring our experience of standards around the world. Emerging markets have the advantage of being able to stand back and choose the standards that fit them.”
Building trust and understanding
Erman Tan of Singapore’s Asia Polyurethane, said India “has grown tremendously” over the past few years, but the main difficulty many non-Indian companies encounter is how to add value, and how to increase it. “Customers want the “lowest possible prices,” he said, “but MDI and TDI price rises make all players in the PU value chain think about the value proposition.”