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Coimbatore’s automotive firms view EV transition with trepidation, but see an opportunity as well

Posted on January 21, 2025 By admin


 

Antony Raj employs eight workers and runs a computer numerical control machine and lathes in Coimbatore in Tamil Nadu. He receives a stable monthly income supplying components that go into grease pumps in fossil fuel based automobiles. For almost 24 years now, he has been making 48 of the 112 components that go into these pumps.

“The demand for these components will continue even in electric vehicles. I do not see any impact in business with increasing sale of electric vehicles and I have no plans to upgrade my unit to make the entire pumps,” he says.

Antony Raj is among the thousands of Micro, Small or Medium-scale Enterprise (MSME) owners who form part of the supply chain in the automobile sector in industrial clusters such as Coimbatore.

A 2022 report from the World Resources Institute, India wagers that the transition to electric vehicles from internal combustion engines, or ICE vehicles, as fossil fuel-based automobiles are increasingly being referred to in popular parlance, could detrimentally impact the MSMEs that supply to the auto sector.

The report says 35,000 to 45,000 MSMEs in India employ almost 15 million people who manufacture 2,000 components for the ICE vehicle quoting a 2013 report by KPMG. WRI goes on to say that MSMEs have low access to formal sources of capital to plan their business beyond short-term deliverables and hence cannot invest in new technologies or upskilling and reskilling its workers.

An ICE vehicle has almost 2,000 moving parts whereas EVs have only 20. So, the share of components suppliers in the value chain of a car can reduce from 50%-55% in ICE vehicles to 35%-40% in EVs, WRI India, says in its report.

However, micro unit owners such as Antony Raj see no threat to their business.

Society for Smart e-Mobility (SSEM), a Coimbatore-based electric mobility advocacy body, says the city’s automotive clusters supply almost 35% of auto components made in Tamil Nadu, and that they are gearing up to tap the opportunities and face the challenges that come with efforts of decarbonise the transport sector picking up pace. SSEM has prepared a roadmap to support MSMEs to tap the opportunities in the EV sector.

At Alphacraft, among the 400 workers on the shopfloor are women like Revathi who shifted from the textile sector to foundries. These workers are on eight hour shifts at the aluminium casting foundry and the machine shop, making high precision aluminium components for ICE and EVs in India and abroad. They are largely unaware of the shifts in the industry.

39-year-old Revathi moved to the machine shop at the foundry from a textile mill. She works on a CNC machine for eight hours a day. With an education up to Class VI, she says she does not know what the components are for. But, she wants to educate her two sons and hence works at the foundry.

Alphacraft is investing heavily in automation to tap the opportunities in the EV and ICE sectors as it says there is worker shortage and a need for high precision in components supplied to EVs.

“Almost 80% of workers on my shopfloor are from other States. They go home for Holi, Deepavali and family functions. I can absorb 100 more workers immediately. But, they are not available. Hence, I am investing in automation,” said Ramesh Muthuramalingam, Managing Director of Alphacraft.

K. Ilango, former president of the Coimbatore District Small Industries Association, says MSMEs that supply to ICE vehicles are doubling up and taking on additional business by tapping into the EV segment. Heavy electric vehicles, however, will take more than five years to see growth on Indian roads. Mr. Ilango wagers. So, the MSMEs supplying components to ICE vehicles will not see any major negative impact for at least another five years, he says, confidently.

While Nithyanandan Devaraj, who is involved in the foundry sector for almost three decades, acknowledges there is trepidation in the industry with the rise in EVs, especially two wheelers on the roads, he says this has not affected the supply chain for ICE vehicles.

He says close to 70% of the castings manufactured at the foundries go to the auto sector, but the current growth rate of 7% of the sector, will keep the auto supply chain busy. Mr. Devaraj also believes that the transition to EVs is neither linear nor immediate. He points to hybrids and compressed natural gas vehicles that are also entering the market aside from EVs – vehicles that will continue to run on ICE.

The ongoing shift is mainly for two wheelers and to a marginal extent four wheelers, Mr. Devarajan says, and that the current growth of the ICE sector is expected to sustain the existing supply chain. Coimbatore’s MSMEs also supply components for trucks, tractor and four wheelers and hence the transition in two wheelers has not impacted these component supply units, he says.

Even manufacturers of electric two-wheelers (e2w) say they prefer to source their components from MSMEs that are already part of the auto supply chain. This adds to their existing ICE business, e2w manufacturers say.

Meanwhile, start-ups that have entered the EV space are recruiting engineers and training them to suit the requirements of the automobile sector. Ozotec, which makes e2ws in Coimbatore has young engineers whose first job is in the EV sector.

“We have 15 vendors. If it was a regular moped, we would have had 150 vendors,” says K. Barathan, CEO, Ozotec. But, there are jobs in EVs for hardware designing, data management, data analysis, and so on, as all information of EVs will be stored in cloud and this data will be used to improve the vehicle’s performance. “We are training mechanics and electricians so they are able to service EVs at the customers’ doorstep,” Barathan adds.

(This is the first of a two-part series)

Published – January 21, 2025 07:02 am IST



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Business Tags:and have begun taking on orders to supply parts for the electric vehicles as well, but they view it as an opportunity as well, Coimbatore’s auto components supply firms are nervous about the ongoing shift to EVs

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