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Next couple of years bode well for growth in the Indian industrial market, says Cummins India’s MD, Ashwath Ram, Auto News, ET Auto

by The Editor
April 10, 2021
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Next couple of years bode well for growth in the Indian industrial market, says Cummins India's MD, Ashwath RamIn an interview with ET Now, Cummins India MD, Ashwath Ram talks about the company’s plans for the future, the problems created by the COVID-19 pandemic and the future of clean energy.

ET Now: 2020 was a challenging year for manufacturing, do you think the sector is better prepared this time around?

Ashwath Ram: I certainly believe the impact will not be as severe, we are lot better prepared, we’ve been dealing with the pandemic for over a year now, so our infrastructure’s in place. We have also started vaccination drives within the company and the government has been supportive in allowing our factories to be centres where we can administer the vaccine to all of our employees.

ET Now: Export growth in telecom has gotten positive traction on the back of investments and 5G, how are you planning to leverage it?

Ashwath Ram: Cummins has always targeted exports significantly in our India strategy and we’re one of the major manufacturing hubs. Cummins has three major hubs around the world – United States, China and India – which it leverages to serve markets around the world. India has certain advantages compared to our other hubs, in terms of capacity and cost structure.

The telecom sector rebounding certainly bodes well for us, with demand increasing, we’ll be able supply more markets. As opportunities open up, be it 5G or infrastructure, we are well poised to take advantage of it.

ET Now
: What are your plans to improve global market share? Any new products? And what kind of capex are you planning?

Ashwath Ram: Cummins India has had significant investment in capex over the last 10 years, we’ve invested close to a billion dollars to set up capability and capacity. Going forward, we might not have to make an investment of that scale to meet demands around the world. We’ll just have to make incremental investments in the form of new product introduction or a few balancing investments.

The bottom line here is that we are ready with investments and with products as well, to meet the demand of tighter and tighter emission norms. Much of the world is eyeing electrification and a zero-carbon target, we are also ready to make those investments happen.

ET Now: Some analysts suggest that they don’t expect performance in the power generation segment to sustain, what is your outlook?

Ashwath Ram: There are favourable mega trends for us at Cummins. The first, of course, is the continued investment in infrastructure whether it be in India, China, America or Europe. Every country – in the process of getting out of the pandemic – is pumping in huge amounts of money into building infrastructure. Look at India, for example, we are pumping in huge amounts of money in building roads, infrastructure, ports, and all of those products involve Cummins at some point, so it is great for us.

There are other things happening, from favourable government policies. For instance, the government has introduced a vehicle scrappage policy. That signals an approach towards a cleaner environment and also an intent to phase out older polluting technology.

The second area is that there is much more relaxation in FDI norms, and PLI schemes have come in which means that there is lot going on in favour of people investing in the capex cycle. Putting money into India to build capacities is beneficial. In the bargain, Cummins gains from both the power generation business as well as from the construction and industrial ones.

An infrastructure boom is not a short-term boom, and I disagree with analysts who think that the market is going to slow down. I think we are at an inflexion point especially in the construction segment. The next couple of years bode very well for growth in the industrial markets in India.

ET Now: What hurdles and challenges is Cummins facing in the supply chain? Especially with countries getting stringent about export and imports again?

Ashwath Ram: It is dual problem right now. The first, of course, is that India is ramping up production, but so are other countries, there’s a pull in terms of components – like steel, castings and copper – that are being sacked up around the world. So there are supply chain challenges but we have significant scale and capacity to overcome them.

Now, where we are struggling quite a bit – and I do not think we are going to get solutions in that space very quickly – is in the electronics space. Automotive electronics are a very small percentage of global electronics consumption, so there’s a problem there and it is likely to take at least a couple of quarters before that is resolved. It is a constraining factor, as far as supply is concerned.

ET Now: In Q3, you were operating at 80-90%, what is the current capacity at plants and how is this impacting your overall business?

Ashwath Ram: So, demand continues to be strong, we continue to operate our plants at the same level we were at Q3; as a matter of fact, we see demand strengthening in most market segments.

We’re trying to balance out this constraint in our electronics supply chain by trying to push more of the products which have different types of electronics or more mechanical products. We do see a positive outlook for Q4 and moving forward even though, typically, for a company like Cummins Q4 has been a weaker quarter mainly due to inventory correction at the end of the quarter but overall the situation still looks positive.

ET Now: With the government’s push towards cleaner and greener power and use of hydrogen, setting up the National Hydrogen Energy Mission as well, how much of a boost do you see for your business?

Ashwath Ram: The global push for cleaner energy is great for us, we think it is a 20-40 year journey where fuels will move from pure diesel to a combination of gas and electric, a combination of hybrid and eventually to fuel cells and a hydrogen economy. We are gearing up to play a part in the entire cycle.

In the short term, over 95% of what we sell or will continue to sell will be from the clean diesel space, where we are the market leader while we continue to put more investment into hydrogen as well.

We think as things open up gradually, we will be rightly positioned in India and in other markets around the world to have a significant impact. We are pretty much bidding for every tender that is put out by the government whether it be for rail, buses or hydrogen electrolysers (they produce hydrogen). We have products available in each of those spaces.

We continue to look for the opportunity to partner with different agencies around the country and different OEM partners. The outlook is positive, though I must stress that this is not something which is going to happen overnight, it is a 20 to 40 year journey, this the way we are looking at it.



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