The engineering services and product development IT services provider is enhancing its focus in China where has seen over an over-eight-fold growth in revenues in the past year.
12 Apr 2017 | 7708 Views | By Sumantra B Barooah
Engineering services and product development IT services provider Tata Technologies is in expansion mode, which is based on two key strategies – enhancing focus on China and acquiring companies in various locations, including China at a later stage.
Tata Technologies has had a presence in China for the last ...
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Engineering services and product development IT services provider Tata Technologies is in expansion mode, which is based on two key strategies – enhancing focus on China and acquiring companies in various locations, including China at a later stage.
Tata Technologies has had a presence in China for the last few years through its members working in customer sites and a small shared office, but starting this month, with a brand new office in Shanghai, the focus on the world's largest automobile market gets more trained. "China is growing exponentially for us and that’s a very exciting space," Warren Harris, CEO & MD, Tata Technologies, told Autocar Professional, in an exclusive interview. The company's revenue in China saw a whopping over 8-fold growth to $25 million last year over the previous year.
Lightweighting capabilities give new strength
Tata Technologies is working with at least 5 Chinese OEMs. What is helping the company is its capabilities in technologies such as lightweighting that are highly valued by vehicle OEMs, and more so by electric vehicle (EV) makers.
China, the world's largest EV market, has also devised policies to promote the electric vehicle industry. Harris 'sees' an inflection point in the global electric vehicle industry. "We anticipate in the next 3-5 years that the less than one percent market share EVs enjoy will, in some of the mature markets, get up to 3 or 5 percent," says Harris. And since industry players have to prepare in advance to tap the opportunities that could come in 3-5 years, Tata Technologies is among the "beneficiaries of many of the decisions that are being taken now".
Banking on the growth opportunities, Tata Technologies has set its sights on crossing the $100 million mark in China in 5 years from now. That would be the equivalent of the company's operations in US and Europe. "I would be disappointed if China is not the same size as our US and European organisations in 5 years' time," says Harris.
While the new office gets inaugurated in China later this month, Tata Technologies' new European headquarters building will see a formal opening on June 8. The $30 million building is also a "demonstration of intent" to the European market, says Harris.
Acquisition in Europe soon
Europe could be the region where Tata Technologies will make an acquisition soon, the announcement of which will be made this month. This would be followed by one or two more acquisitions over the next one year. "The plan is very much to replace what we are divesting with business and revenue that's aligned with our strategic goals," says Harris. Tata Technologies has divested some of its non-core businesses such as reselling of technology of other firms. $30-$40 million is the "sweet spot" in terms of size of the organisation that Tata Technologies would like to acquire.
There are four areas that the acquisitions would be intended to address or enhance – capability engineering capability mainly in embedded electronics and powertrain, IT (IoT , diagnostics, digital capabilities), add new customers (a German luxury OEM or two), expand geographical presence (Japan, China in the wishlist). "The fourth play is that we are in discussion with a number of our customers about how to manage their captive centres more effectively. A lot of our customers have made investments in low cost countries like India and they find it very difficult to manage them from Europe or North America," says Harris. The new acquisitions will also be key for the organisation to reach its earlier stated turnover target of $1 billion, which was set for this year. The turnover this year is now expected to cross the $500 million mark. Among other factors, the Brexit development also had an adverse impact on the plans.
With efforts to strengthen ties with existing customers and establish new business relations, the Tata Motors subsidiary has managed to reduce its dependence on its parent. The share of non-Tata Motors and JLR business has crossed 50 percent for the organisation for the first time even as it engages in some new projects from Tata Motors/JLR. "Our challenge now is getting the brand out there and building relationships with as many OEMs at the right level as we possibly can," concludes Harris.
Full interview published in Autocar Professional’s April 15, 2017 issue