‘Nobody knows what impact the second wave of Covid will have on the industry’
India’s leading auto parts manufacturer Bosch posted a sharp V-shaped recovery with a net profit at ₹482 crore during the fourth quarter of the last fiscal. In an interview with BusinessLine, Bosch Ltd Managing Director and Bosch India President, Soumitra Bhattacharya, shares the company’s prospects in the current situation. Excerpts:
We do know that the semiconductor chip shortage will weigh on global automotive production growth in 2021. But are there any alternatives and how can such disruptions be reduced over a period of time?
We have to first accept that it is a global problem. That global problem has hit India as well. We don’t have a back-end facility in India. Without that, we have a challenge for the future. Can it be done immediately? No. It will take time. We also need several other things to come together for that. Someone suddenly cannot say we will build a chip factory.
Robert Bosch CEO Volkmar Denner recently said policymakers should not focus solely on battery EVs at the expense of other potential routes to decarbonisation. So, how will it play for Indian players?
Bosch is into electrification globally. Bosch is an agnostic technology-neutral player. Bosch is even today spending money on diesel and gasoline engines. At the end of the day, anything that you do especially in India should be affordable. In India, the affordability of electric vehicles is still a big challenge. We have always said electrification in India at the total cost of ownership, of buses, for example, will not be easy. We still believe that by 2030, 80 per cent of the vehicles will still run on IC engines. Based on the current situation, it might become 85 per cent. To say that 75 per cent will be IC and the rest will be EVs is something that will not happen.
What is the kind of conversation Bosch and car manufacturers are having now in midst of the second wave of Covid?
The Covid situation is currently an exercise in crystal ball gazing. Nobody knows what impact the second wave of Covid will have on the industry. However, we have seen a fantastic run for the auto industry from January to March. It has reflected in our results as well. If Covid wave 2 had not hit us, there would have been a slight impact in April and not as high as we have seen now. Covid has now entered into the rural area. We expect a massive disruption in supply-chain. If you take even basic supply chain issues, where the OEMs will require parts from all over India, there are disruptions happening already. May and June are going to be very challenging. After June end, we will have to see what kind of scenario will emerge…whether four weeks or in the worst-case scenario, even 12 weeks will be lost.
Looking at the quarterly results, did the company expect such a sharp V-shaped recovery?
I don’t think anybody expected such a sharp recovery. This V-shape recovery that happened in India did take us to the pre-Covid level but did not take us to the peak of 2018-19. We had earlier said that it will take from 2018-19 another four years to reach the same peak. However, tractor sales reached their peak in three years itself. In the case of passenger cars, the timeline was for four years but it may take five years to achieve 4 million unit sales. Heavy commercial vehicles will take five to six years to get to 4.8 lakh units while light commercial vehicles will take some more time to reach 7 lakh units. In summary, without the second wave, India had a chance to go near-about to the peak in certain segments. Now, we see another setback and whether it is one month or two months… we need to watch out.
Bosch India made some major investments right in the middle of the pandemic like picking up a 26 per cent stake in Sun Mobility. What does it tell the investors?
What it means is that we are on course and we are doing whatever is needed for the investment in the future. We will not deviate either in the organic or inorganic for defined bets. It could be in the areas of electrification, after-markets, power tools. Our bets on restructuring, deployment and reskilling have clearly paid us good dividends. We now have a clean balance sheet and a clean P&L.
Will Bosch look at restructuring the workforce?
No. We are not doing any pay cuts or layoffs. What we did in a planned way is already over. Whatever little we have to do, the employees have been given packages which are the best in the industry.