Delphi Product & Service Solutions systematically keeps itself insulated from the vagaries of the automotive markets. It has innovative service offerings. It also creates niche product areas for its OE and aftermarket customers. In an exclusive interview, Vivek Palta, Vice President, EMEA, spoke to
T Murrali on the strategic moves of the company. Edited excerpts:-
Palta: We are actually covering a very wide range of products. Middle East and North Africa have been our focussed markets since a few years. We bring to these markets diesel and gasoline fuel injection engines, management of which Delphi is known for, and chassis with brakes and steering, where we have a legacy. This region is a very big part of our business. We educate the customers about the changing emission norms and the new products coming to the market as we have to be ready now for the market of 2020. Diagnostics is another area where we have the best in-class tools and equipment for passenger vehicles and heavy duty trucks. We support our customers with their trading partners as well. For us the theme is the 360 degree view of the aftermarket industry.
Q: What are the key segments that have been performing well in recent years; how do you service the aftermarket and what are the future prospects?
Palta: Diesel engine has been a strong performer. With the legislation on emissions and the reducing engine size, GDI (gasoline direct injection) is one of the areas where we see the growth. It is also very capital-intensive. The barriers of entry are very high. Technologically also it requires very high investment and equipment. We have lot of manufacturing in the UK, France and Eastern Europe.
For the aftermarket sales we have an authorised network and most of our sales come through these network which covers Europe and Middle East. For us the network is the advantage. They get tooled up, trained and certified annually. If they are not certified they will not get access to parts.
I think the passenger car growth in Europe will be more moderate, but the growth in commercial vehicles will probably be three times more than the passenger car.
Q: What is your take on the engine management systems?
Palta: Engine management is the emerging technology. It is something in the DNA of Delphi. We are very optimistic, especially with those cars which are more complex. The challenge for the industry is that more than 50 percent of the garages out there are not equipped well with the diagnostic tools or the knowhow. The diagnostic tool we provide will take them right to the roots of the problem. Even a small corner-shop can refer the customer to a specialist. I think we have the chain in place. This is probably our fastest growing segment.
During the last two years, we have seen that the industry has gradually come back to the OE manufacturer. They recognise that our warranty rates are probably one tenth of the grey market and there is less hassle of doing business. Not only this, we provide on-site or off-site training and we have the `how-to’ manuals. We keep updating based on the calls we receive. Most of the customers we work within engine management are very tech-savvy.
Q: What is the growth you foresee for engine management?
Palta: Definitely in the teens. As the vehicles grow more and more complex, the dependency on original parts also will increase.
Q: What are the other products that you bank on?
Palta: Steering and brakes are products that have significant place for us. Chassis again has moderate growth. For the last five years we have been doing significantly well on steering and brakes. The reason is that we spread geographically, and we added range. Going forward, industry sees this as a moderate growth area, five to six percent, steering may be less.
Q: Are you also working on what is called ‘DIY’?
Palta: DIY, `Do it yourself’. I think we have to approach this from the end-user point of view. It may be possible with an old car to replace a part by oneself. But with the modern connected cars, one may not know what will happen if one takes out a part. That is why we train our Delphi service centre technicians. There are workshops with fully trained service technicians with the diagnostic tools. They can get to the root of the problem and fix it. If not done from there, it is passed on to a specialist. Ultimately the customer is happy and the industry also is happy.
Palta: It is different by markets. Some emerging markets like China, I would say, will have double digit growth. Heavy duty segments in high teens. Globally the passenger car business would be growing five to six percent. For the diesel systems, since Europe is a matured market, the growth would be moderate. The commercial vehicle segment is growing fast. The new product failure rate is low. The aftermarket opportunity is based on the part and the diversity that is going in there. At the same time it dims the chances of the DIY market, because the customers can’t do it alone. That is why we offer this solution with trained technicians.
Q: How do you see the growth in the area you operate?
Palta: Diesel growth could be between five and six percent. Growth within Eastern Europe and Russia would be faster. Western Europe is moderate but the dollar value is still there. In Middle East and North Africa the growth would be in mid-teens. Even in the Middle East, the number of diesel vehicles are increasing.
Q: How do you fare in the air-conditioning segment?
Palta: For air-conditioning predominantly we offer compressors and we will continue to do that. The growth has been good. I think this would continue. In the Western Europe it is more about replacement. In the Eastern Europe and developing markets it is more about retrofitting. For us obviously Middle East and Africa are the markets that are growing faster. Central Eastern Europe is growing fast.
Q: With the changing technology, the life of the parts/products have increased phenomenally. There is only 1.6 percent increase in the number of new cars. Where do you see the opportunity for the aftermarket division?
Palta: If I approach it from the industry perspective, the global industry, we reckon, based on our research, is to grow by a little more than two percent. I refer to the whole aftermarket, including tyres, body parts etc. But within those segments, the segments we choose to play in are probably growing 2.5 percent faster than the industry average. So the first smart move to do is to choose the segments you want to play. The segments we have chosen are growing between five percent and six percent. Nobody will play in all segments, it is not possible.
We are winning and booking business with a wide range of vehicle manufactures. For us the path is expanding with the right customers and right product category. Another factor is the gradual shift, about one percent, from the OE dealer to the independent aftermarket because the level of qualification of the technicians have improved and the people are confident to take a car to them. I think these things, if managed well together, can give us good business.
Palta: In diesel we have in this region 2,400 authorised workshops. We will progressively increase in the emerging markets. It is a gradual growth. The customers in this region are around 4,000.