Q4 should be better for auto sector but for coronavirus scare: Vivek Chaand Sehgal, Motherson Sumi

We expected a better set of numbers this time especially on the back of SMP margins revival. How much are lagging on the greenfield expansion? Can we expect Hungary or Alabama startup cost to perhaps end in Q4? Is that going to help?
We are working very hard to ensure that the greenfields come out very strong. We are nearly there. Kecskemet is almost all broken even and doing better now. The Tuscaloosa plant has a little bit of this thing over there. But basically, quarter four should be good, better than what we had shown up till now. We are very pleased with what all the other companies, all the other divisions, all the other plants are doing. They have all been working together to make sure that the results are better.

I am sure quarter four is going to be hopefully better but with these challenges which are there in the world including the coronavirus and all that, I do not know how much that will impact the global production of cars. Those being as it is, from our side, we are working very hard to make sure that our performance is better than ever.

Have you seen any impact of the coronavirus so far?
Well, it is not a question for me to answer but we know that till the 10th of February, there were holidays in China and now I hear they are extending those holidays also. I do not know what the real impact would be. It is only to be seen but there is going to be some effect globally on that because so many vendors, so many people are buying products, tooling and everything from China. I am sure, there is going to be some effect over there. Barring that, quarter four should be better.

Once the adverse impact of lower utilisation and higher startup cost is dealt with, how much of an improvement can we see in FCF?
The results would be known in another two months’ time but there is a huge effort from the group to ensure because this is the last quarter of our five-year plan. Everybody is ready for this and all the costs and the capexes and things like that. Definitely, we will see something which is a bit better.

Are you on track with the timelines of the five-year plan as well as the targets amidst the myriad of disruptions that one is seeing in the industry? Once the capex cycle is complete, what then would be your debt cutting schedule or target?
I am not too much into numbers but basically, our target of 18 billion is intact. We have a lot of things that are in the offing. We still have 45 days to go that is enough for us to make the announcements.

How did the BS-VI transition play out for Motherson? What is the increase in content seen on the back of opportunities like this, even EVs for that matter?
In the Indian context, you will have this general fear about going from Euro-IV to Euro-VI. People are a little bit confused and we can see that. But as far as the customers are concerned, they are very much aligned to what the government wants, I think there is hardly anything that we are making of Euro-IV. We are already supplying Euro-VI. I personally feel that April onwards, the demand should be better because the confusion would have gone. We are looking forward to the next five year plan.

With clarity on Brexit and BS-VI playing out, are industry disruptions over now?
The world has become that much smaller. Anything in one particular country can affect multiple other countries and all that. So barring all that, yes. I am a born optimist. I am hoping that everything is going to become better from 1st of April onwards. But still the world is coming to terms with the new requirements on sustainability. What are the new requirements on environment and all those things? They will continue to play a part but by and large, more stability will come in. The way I look at it, it should be more stable.

Maruti has seen a production improvement. What is it that you are gathering from some of your key clients? Has there been any pickup in demand?
Generally, the upper models which require Euro-VI and all that, you can see some green shoots over there but there is a combination of a lot of models. A lot of product variety, which is there, depends on how the Indian customer will actually adapt and adopt these particular products. We hope the new customer is going to be very aligned with sustainability and environment.

What about the EU car sales? They hit a record in December. Was it fuelled by an end of the year buying frenzy or is demand really bottoming out?
Europe definitely has improved after the WLTP number two has come out. So, October-November-December numbers are much better. That is the same thing which I was referring to in India as well.

In April, there would be no more confusion between Euro-IV and Euro-VI. The same thing happened in Europe also. Now, the confusion is gone. There is total clarity and the customers are coming back and picking up what they want.