How Motherson Sumi Became a Giant Auto Parts Manufacturer
Image: Kamran Jebreili / AP for ForbesIndia
ivek Chand Sehgal, 56, runs a crazy schedule. He travels almost 300 days in a year. We met him at the Motherson Sumi’s corporate office in Noida, where he’d driven down straight after landing in Delhi that morning. He told us he’ll be in town for a couple of days before leaving for Australia. Sehgal is an Australian citizen. A day ago, he was in Chennai meeting some customers. The week before, he was in Germany meeting some of his other customers. That’s how far back he can remember. “After some time, you stop counting,” he says.
With a lifestyle like this, you would expect Sehgal to complain of jetlag. But there’s none of it. He says the secret lies in sleeping well. Nevertheless, if the schedule does get to him, all he needs is a cup of truckers’ tea—lots of milk, lots of sugar and lots of ginger. “For the next three hours, your headlights are on. Bright! You should have one,” he adds.
We did. But while the tea was good, it wasn’t essential. The growth story of Motherson Sumi is interesting enough to draw attention. Motherson’s turnover has grown from Rs 10 crore in 1993 to about Rs 14,702 crore in 2011-12. In 1999, Maruti Suzuki, India’s largest car manufacturer, accounted for almost 80 percent of Motherson Sumi’s total business. Today, Motherson has spread to 25 countries with 124 plants. And 76 percent of the company’s business now comes from outside India. The company’s stock price outperformed the Sensex almost five times in the last year.
Add to this, in the last decade, Motherson made nine acquisitions. “Whenever we made such projections, the analysts were laughing. No company can grow 10 times in five years. Well, here we are and we have our projections ready for the next five years,” says Sehgal.
With the birth of Maruti Udyog in 1983, several auto component manufacturers came into existence in India. Almost everyone started with a technology collaboration or joint venture with a Japanese counterpart. As multinationals started coming in, new collaborations were formed with either American or German companies.
But while most of its peers were content with their India business, Motherson Sumi went global with gusto. The only Indian company that comes close is Bharat Forge, one of the largest forgings companies in the world. “Our exports in 2000 were less than $10,000 a year. Then we thought of a policy called 3CX15. Which means no commodity, no country and no company should constitute more than 15 percent of our turnover,” says Sehgal.
Several component companies, who stick to a particular manufacturer or a market, go through a rough time when the industry goes through a rough patch. The only way to beat it is to diversify your risk to several geographies across multiple manufacturers.
Motherson has followed this to the T. Today, Samvardhana Motherson Group (SMG is the holding company with nine business divisions) is one of the world’s largest manufacturers of wiring harness, mirrors and cockpits (plastic parts), among other products. “The Daimler Benz C, E and S class cockpits and instrument panels are all done by Motherson,” says Sehgal.
The financial world has taken note of Motherson’s rise. A fund manager who has followed the company says Motherson has three big trends in its favour.
“One is that the company’s content per car is increasing. Second, the Indian market is moving towards bigger cars, which means more electronics. So we see an upside for its wiring harness business. Finally, exports out of India by global manufacturers like Hyundai and Nissan are on the rise. We see Motherson’s products getting in those,” he said.
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