In 2007, ArvinMeritor formed a regional office for Asia Pacific (APAC). Mr. Rakesh Sachdev, Senior Vice President - Asia Pacific, ArvinMeritor, spoke recently at an analysts conference on the company’s performance in the APAC region and outlined the future growth plans.
Mr. Rakesh Sachdev then said: “It has truly been an exciting experience – what is happening not just in China and India but all over Asia-Pacific, including Australia. There is explosive growth in China and India. In fact, in about 10 years, China’s GDP will have tripled and India’s GDP will have gone up about 2.5 times.”
The last few years has seen phenomenal growth in the Asian region and the next few years will see this growth accelerate even further. ArvinMeritor has got all its businesses together in the APAC region and has put in place a very strong management team, focused on the region. ArvinMeritor has eight wholly-owned operations, seven joint ventures, and five sales offices and technical centers.
Growth in AsiaArvinMeritor has doubled its revenues from Asia Pacific since 2003, and profits have been up sharply, almost doubled its profits in this region. Asia Pacific is probably one of the most profitable regions around the world for ArvinMeritor with close to 10 per cent in operating margin.
In 2007, ArvinMeritor revenues grew by 33 per cent in revenues in APAC, and in 2008 the company is targeting another 25 per cent growth. The growth is coming from across the board. The business in India is up 30 per cent, the aftermarket business in Asia-Pacific is up 30 per cent, off-highway axle business in China is up 40 per cent and even the doors business in Asia-Pacific, not including Japan, is up about 45 per cent.
The phenomenal growth is partly because all these markets are growing. The other reason is that the segments in which ArvinMeritor operates are growing faster than the overall market. Currently, about three-fourths of the overall business is from commercial vehicles (CVs) and about a quarter from light vehicles (LVs) related products.
China contributes to about 45 per cent of Arvin Meritor’s APAC business. In China half of the business comes from CVs and half from LVs. India is one of the fastest growing markets and accounts for about 30 per cent of the APAC business. The company also has fairly significant business in Australia with good growth in other markets like Japan and Korea. The whole Asian region will witness tremendous growth over the coming few years.
Mr. Sachdev further said: “The key initiative in 2008 for ArvinMeritor in the APAC region is to prioritize our growth initiatives. There is growth happening all around and within that we are targeting those initiatives that have the best chance of being implemented very quickly, and have the highest margin opportunities. A lot of efforts are underway in developing suppliers in the region. It is not just creating growth in the region but also creating supplier base for other markets, so we can reduce our cost”.
Commitments for 2008
In 2008, ArvinMeritor has plans to expand its commercial vehicle axles business in India. In China, it plans to expand its off-highway axle and brake business that has grown considerably during 2007 and continues to be very strong in the current year. This is mainly because the construction markets in China, whether it is mobile cranes or loaders and excavators, have been incredibly strong and that strength is now being witnessed in India as well, although ArvinMeritor sells these products only in China.
Mr. Sachdev stated: “The bus business is strong in China, where we will see significant growth in 2008. We are also witnessing significant growth in our truck business in Japan and Korea. Today, we supply a lot of products out of our Australian operations to our customers such as Isuzu in Japan and Hyundai in Korea, who export their trucks to the Asian and African regions fitted with our products”.
Arvin Meritor has also signed a JV agreement with Chery of China. It is for setting up a manufacturing facility for shocks, struts and other components at Wuhu, where Chery is headquartered. ArvinMeritor is also setting up a new sunroof plant in Shanghai. The company has won the order for a global GM platform.
ArvinMeritor is also increasing its engineering footprint in both India and China. The engineering work is not just for Asia, but also for markets like Europe and the US as well. “If we want to be successful in Asia we have to build our technical capabilities. We have a tech-center in Bangalore where we already have over 200 engineers working. We will be adding a lot more engineers and it is truly an exciting opportunity to create that base there”, said Mr. Sachdev.
He disclosed that the company has mapped out a growth plan for the APAC region. Based on the performance in the last few years, it has targeting $1 billion in revenues over the next five years. It has prepared a detailed plan to achieve this target from different markets and through different CVs and LVs products. The truck business would give 30 per cent of the targeted business, and the remaining would come from off-highway as well as other LVs business, including chassis and body systems business”.
Growth in India
The Indian company, Automotive Axles, is a joint venture between ArvinMeritor and the Kalyani Group with its manufacturing facility at Mysore. It is the largest independent axle manufacturer in India. An OEM to Tata Motors, Ashok Leyland, Mahindra, and Eicher, the Indian company’s revenues exceeded $200 million. “We are already looking at expansion plans and adding a lot more capacity, not just for the Indian market, but would be supplying the products to other parts of Asia, including ASEAN and Australia. The Indian facility is a fairly modern one with latest machining and gear cutting equipment”.
The company is currently witnessing more than normal growth in certain markets which create opportunities, like the truck market in India and the off-highway construction business in China. In India, there is a lot of work going on in improving the road infrastructure, something that China did several years ago. There is a major shift in demand for heavier trucks, which will in due course provide for growth for axle products in India.
In China
ArvinMeritor is the largest axle and brake supplier for off-highway and construction equipment in China. It also has a joint venture with Xuzhou Construction Machinery Group, which is the largest Chinese construction equipment manufacturer. Mobile cranes is a big part of ArvinMeritor’s business. ArvinMeritor has different types of fairly complex and heavily engineered products that go into equipments such as loaders, mining equipment, truck cranes, dump trucks, a whole host of different small volume niche applications.
In conclusion, Mr. Sachdev observed: “China and India are going to be amongst the largest construction markets in the world, and so, we are truly excited to have the capability of growing this business. As we look at our goals over the next five years, We want to add at least $1 billion in profitable revenues in the region. We want to increase the sourcing from the region to $1 billion plus, we are close to about half of that today. We want to be aggressive about enhancing our engineering footprint in the region, largely in India and China to help fuel our growth in Asia, but also help fuel our growth elsewhere in the world”.
