When bankrupt automotive mirrors specialist Visiocorp’s assets were purchased by Motherson Sumi Systems Ltd (MSSL) last year, a relatively unknown Indian supplier was propelled to global Tier 1 status. Dave Leggett takes a closer look at Samvardhana Motherson Group and its main constituents.
Founded in 1975, India-based Samvardhana Motherson Group (SMG) has a diversified product range to serve multiple industries, though the automotive industry is its main customer. The group grew as a supplier mainly to India’s domestic automotive industry, but has – with the acquisition of Visiocorp last year – become a much more significant global Tier 1 supplier.
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The product portfolio comprises electrical distribution systems (wiring harnesses), automotive rearview mirrors, polymer processing, injection moulding tools, elastomer processing, modules and systems, machined metal products, cutting tools, IT services, design engineering, CAE services, sunroofs, vehicle air conditioning systems, lighting systems, cabins for off-highway vehicles, cutting tools and thin film coating metals.
SMG turnover in the fiscal year 2009-10 reached USD2.2bn.
Motherson Sumi is the ‘flagship’
SMG automotive supply operations are concentrated in its flagship company Motherson Sumi Systems Limited (MSSL), a joint venture between Samvardhana Motherson Finance Limited (SMFL – SMG’s principal holding company) and Sumitomo Wiring Systems, Ltd., Japan (a global supplier and manufacturer of wiring harnesses, components & wires). Sumitomo Wiring Systems, Ltd, holds a 25% stake in MSSL. MSSL has operations in 21 countries.
In 2009, Visiocorp became a part of SMG when it was purchased for EUR25m by MSSL and SMFL and renamed Samvardhana Motherson Reflectec (SMR). SMR is one of the largest manufacturers of external rearview mirrors for passenger cars in the world. SMR supplies exterior mirrors, interior mirrors and blind spot detection systems to OEM customers in North America, Europe, Asia and Australia.
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By GlobalDataSMR operates 16 production sites and 10 engineering centres in 12 countries.
Visiocorp acquisition brings broader customer base
Over the past decade SMG has moved from being a mainly domestic operations based company in India to becoming a multinational corporation headquartered in India. The strategic priority is to build on its recently acquired global footprint while also maximising the opportunities presented by projected market growth in India where it is very well positioned in the supply of wiring harnesses, rearview mirrors and plastic components/sub-assemblies.
SMG’s flagship auto supplier unit – MSSL – took a big leap to consolidate global Tier 1 status with the acquisition in 2009 of Visocorp. MSSL has also diversified its customer base at a stroke; the revenue contribution from the single largest customer came down to 15% from 80% in 2000 and sales to customers outside India increased to 70% of total sales in 2009/10. Sales from outside India grew at an annual rate of 304% in 2009/10, versus 42% growth on domestic revenues.
In 2009, MSSL’s automotive mirrors unit (SMR) picked up a number of sizeable orders with European OEMs – including Volkswagen and BMW. The orders from European OEMs were said to have been ‘stacked’ while Visiocorp’s future was uncertain.
MSSL is aiming to continue to grow its international operations further. Growing operations in emerging markets is seen as a strategic priority. South Africa has been identified as a key new market for MSSL.
More M&A opportunities sought
A core business strategy for MSSL has been diversifying product and forming joint ventures to stabilise the business and reduce risk to grow content per car. It will be looking for further opportunities to do that and get into higher value added areas, emphasising its role as a Tier 1 module supplier to global OEMs. MSSL claims it ‘has the ability to turn assets under distress conditions to profitable ventures’.
India market provides growth springboard
MSSL has around a 25% global share of exterior mirrors for passenger cars, but the domestic market remains highly significant. It estimates it supplies over 65% of wiring harnesses and 48% of rearview mirrors to the Indian passenger car industry. Besides that, it is also a major supplier of plastic parts and modules to the Indian automotive industry. Therefore, growth prospects for the Indian vehicle market remain very important to future prospects for MSSL.
Analysts note that India’s growing status as a global supplier of completed vehicles – notably in small cars – is also benefiting suppliers such as MSSL with growing scale economies and lower unit costs, aiding international competitiveness.
By 2015 MSSL is targeting revenue of USD5bn – up from USD1.5bn in fiscal year 2009/10. The firm says that markets in India, China and Brazil are showing excellent growth opportunities. By 2015 it says that sales outside India would continue to be over 70% of revenues.
By the end of 2015 MSSL is aiming to be present with manufacturing facilities in 26-27 countries across Asia, America, Europe & Africa – which compares with 21 countries today.
