Sona BLW Precision Forgings (Sona Comstar) has adopted a three-pronged strategy: leveraging the protectionist policies of the US and Indian governments to exclude Chinese competition, adjusting their product mix in response to demand fluctuations, and strategically shifting their geographic focus.
Chinese component manufacturers are intensifying their efforts to dominate the emerging battery electric vehicle (BEV) sector as they expand into global markets, even as the EV industry starts to experience a slowdown in certain regions. In response, what strategies should Indian suppliers like Sona Comstar, which have international aspirations in the BEV market, employ to counter this aggressive expansion?
Sona BLW Precision Forgings (Sona Comstar) is implementing a multi-faceted approach. This includes leveraging protectionist measures in the U.S. and India to limit Chinese competition, adapting their product mix in response to fluctuating demand, and diversifying their operational geographies. Sona Comstar plays a critical role in supplying essential systems for both electrified and conventional powertrains for BEVs and internal combustion engine (ICE) vehicles across global markets. Notably, BEVs contributed nearly a third of Sona Comstar’s total revenue in the March quarter of FY24, marking a 34% increase and setting a new record in absolute terms. Over the year, BEV-related revenue accounted for 29% of the total.
Addressing the issue of Chinese competitors’ expansionist tactics and their strategy to build more capacity outside their home country, Vivek Vikram Singh, MD and Group CEO of Sona Comstar, remarked that he anticipates continued competition in North America and India from local and other international firms, excluding Chinese companies. He pointed out that Europe presents an interesting case as Chinese EVs are currently making significant inroads there. However, he noted ongoing discussions in Brussels about potentially imposing a 50% tariff on Chinese EV imports to Europe.Â
Sona Comstar operates manufacturing sites in China, Mexico, the USA, and India. The North American market represents about 40% of its total revenue, with India contributing another 28%.
Singh explained that despite the unpredictable geopolitical landscape and the aggressive expansion of Chinese firms, Sona Comstar’s strategy is to secure as many customers as possible, regardless of their location or nationality, by offering a broad range of products.
In China, Sona Comstar is recalibrating its product offerings at its local manufacturing plant, transitioning from producing starter motors to focusing on traction and suspension motors. This change is in response to the significant growth in EV adoption in China as the market for ICE vehicles diminishes. The company has also recently established a new manufacturing facility in Mexico aimed at providing driveline solutions to the North American BEV market, which aligns with its strategy to offer competitively priced products from a location proximate to its clients.
Sona Comstar has committed up to INR 1200 crore for capital expenditures over the next two to three years. As of March 31, 2024, the company’s order book stood at INR 22,600 crore, with 79% of these orders pertaining to EVs. In FY24, only a tenth of the company’s revenue relied on ICE technology.
