The Triple Threat | Article on Global Resession | Harsh Kumar
Sona BLW Precision - Best Proxy to EV Transition theme
1.
2. Key terminology
BEV : Battery Electric Vehicle.
BLDC : Brushless DC.
PMSM : Permanent magnet synchronous.
DA : Differential assembly.
DG : Differential Gears.
BSG : Belt starter generator.
3. How serious are the auto companies about EV transition?
Source: Nomura Report
4. § Global EV sales have risen by ~7x since 2015.
§ Push by OEMs to meet stricter emission norms.
§ Government support by way of subsidies.
§ Improvement in technology and falling battery prices.
§ Improvement in the charging infrastructure to subside.
Global EV demand at the cusp of rapid growth
6. § Annual global EV sales are expected to
grow at a CAGR of ~37% over FY20-25E.
§ EV Industry volume make up ~3% of global
PV sales which is expected to rise to ~10%
by 2025 and 20% by 2030.
Electric vehicle adoption to drive strong growth
3%
12%
28%
45%
2%
5%
12%
20%
17%
5%
21%
28%
26%
97%
86%
55%
24%
12%
2015 2020 2025E 2030E 2035E
BEV Full Hybrid Mild Hybrid ICE & Micro Hybrid
Source: Nirmal Bang Report
7. Capture market opportunity in the growing EV space?
Differential assemblies and gear market likely to grow with increase in share of battery
electric vehicles (BEVs)
Particulars 2020 2025E CAGR 20-25E
ICE 25 16.0 -8.5%
Micro Hybrid 35.7 34.1 -0.9%
Mild Hybrid 3.5 19.1 40.3%
Full Hybrid 3.8 11.0 23.7%
BEV 2.3 11.2 36.9%
Global PV market (Mn units) 70.3 91.5 5.4%
Source: Nirmal Bang Report
9. § SONACOMS is a new generation India auto ancillary Company involved in design, manufacture and supply of
differential assemblies, differential gears, conventional and micro hybrid starter motors, BSG systems, EV traction
motors (BLDC and PMSM) and motor control unit to automotive OEMs across US, Europe, India and China for both
electrified and non-electrified powertrain segment. Each component and its function will be explained in this
presentation.
§ Company is a leading supplier of driveline and electrical components for ICE, hybrid and EV vehicles globally.
§ Its products are used in PV & CV, off-highway vehicles, electric cars, electric light commercial vehicles, and electric 2-3
wheelers. The Company has developed a product portfolio which is tailor made for EV i.e. Motors and Gears, two of
the five main components which are essential parts of EV.
§ The company is among the top ten players globally for the supply of bevel gears to PVs, CVs and tractors. The
company is also among the top 10 players in starter motors supplies to PV. The company has market share of
5%/3%/8.7% for the differential bevel gear/ starter motors/BEV differential assemblies respectively.
About Company
10. 1995-2005
2005-15
2015-18
2018-19
2019-22
Sona Okegawa JV with Mitsubishi
was established.
The journey began with
differential bevel gears.
Acquired Thyssen Krupp’s
precision forging business and
rechristened as ‘Sona BLW
Precision Forgings Ltd’
Received investment from JM Financial.
Terminated agreement with Mitsubishi.
Won First contract for supply of
differential assembly for EV.
Blackstone acquired controlling stake.
Acquired Comstar Automotive
Adopted ‘Sona Comstar’
Increasing Presence in
EVs, and got listed.
Timeline
11. Segment
Driveline Technology Electrical (Motor) Technology
§ The driveline of vehicle transfers power from the engine
and transmission to the wheels.
§ It is the axles, driveshaft, wheels, joints and
differentials.
§ These components handle the full force of vehicle.
Without the drive line, vehicle won’t move.
§ An electric vehicle (EV) has a battery instead of a petrol
tank, and an electric motor instead of an internal
combustion engine. The electricity stored in its battery
powers the electric motor.
12. Driveline Segment
Product Portfolio
Differential Assembly: A mechanism including
gears that transmits power to the wheels
differently, allowing them to rotate at different
speeds while executing a turn. These products
finds their usage in passenger, heavy commercial
and off-highway vehicles.
Differential Gears: Gear arrangement which goes
into the differential assembly.
The e-axle, or e-drive, combines an electric
vehicle's gear, motor, and power-control
electronics. It's the “brain” that controls how a
vehicle manages energy stored in its battery and
transforms it into power.
Source: Company IR/AR
14. Driveline Segment
Source: Company IR/AR
According to Ricardo Report, global BEV market reported sales of 2.3mn unit in CY20 which was 3.3% of total global vehicle
sales. Going forward, BEV global vehicle production volume is expected to grow by five times in the next five years from
2.3mn units to 11.2mn units over CY20-25.
15. Driveline Segment
§ Revenue contribution of this segment in H1FY22 is 52%.
§ Sona started supplying differential gears in the global EV market in 2016.
Sona is the market leader
in Indian differential bevel
gears market.
§ Sona designs and manufactures gears in-house using its proprietary technology, which leads to lower raw
material consumption, giving it a significant cost advantage.
Global market
share in Differential Gears.
Source: Company IR/AR
16. Driveline Segment
§ Sona started supplying differential assembly (DA) in the global EV market in 2018.
§ Global BEV DA industry is expected to grow at a CAGR of ~37%/~33% in volume/value terms,
respectively, over 2020-2025E.
§ The domestic differential gear market is likely to grow at a CAGR of ~15% over FY21-26E.
§ The global BEV differential gear market is likely to grow at a CAGR of ~35% over 2020-2025E.
Global market share
in BEV DAs
8.7%
2020 12.5%
H1CY21
Source: Company IR/AR
17. Electrical (Motor) Segment
Product Portfolio
Starter-Motors (Micro-hybrid and conventional): An electric device
that apart from cranking the engine, automatically shuts the engine to
reduce engine idle time.
An alternator is a type of electric generator used in modern
automobiles to charge the battery and to power the electrical system
when its engine is running.
Drive Motor: an electric motor and auxiliaries for driving a machine or
group of machines.
BSG stands for belt-starter generator: New application in the fight for
improved fuel economy.
Motor Control Units regulate the power given to motors for providing
the torque and speed to vehicle, and it also charges battery during
braking.
Source: Company IR/AR
20. § Company aims to reach a domestic market share of 15-20% in the segment in the long run.
§ The company has also tied up with Israel-based IRP Systems to produce a high-efficiency, low-cost,
magnet-less powertrain (motor + controller) for E-2/3Ws, for the global market. Additionally, it is
developing controllers in-house for these motors.
§ Revenue contribution of this segment in H1FY22 is 48%
§ Sona started supplying BLDC (Brushless DC) motors for Indian E-2Ws and E-3Ws from Nov’20 and has
become one of the leading suppliers in the country.
Electrical (Motor) Segment
Global market
share in Starter
Motors
Source: Company IR/AR
22. Why Sona Comstar?
Source: IDBI Capital IC
Content per vehicle for SONACOMS to go up substantially:
§ Scope of revenue realization (Content per Vehicles) of its components for usage in EV increases significantly
compared to IC vehicles. Content per vehicles for IC Passenger vehicles based on its current product portfolio
stands at ~Rs6000.
§ For the pure EV segment at the top end, the content per vehicle (for Differential assembly and Traction Motors in
100KW+ category) can reach as high as ~Rs1 lakh.
§ Company is yet to enter into High Voltage Traction Motor market which is used in EV. Currently it has presence only
in Mild hybrid and Hybrid vehicle segment wherein the content per vehicle (for Differential assembly and Motors)
has a potential to go up to ~Rs20,000.
§ Global transition trend from IC vehicles to EV, not only provides volume growth opportunity but increased content
per vehicle as well.
23. Why Sona Comstar?
Details IC Vehicles BEV
Differential Assembly Cost $40/ Unit $50/ Unit
Electric Motors Cost $40/ Unit
(Std 12V Starter Motor)
$1400/ Unit
(High Voltage Traction Motor – 110KW - $14/KW)
Content Per Vehicle for Motors + Differential Assembly $80/ Unit $1450/ Unit
Content Per Vehicle for Motors + Differential Assembly ~Rs. 6,000/ Unit ~Rs. 100,000/ Unit
Source: IDBI Capital IC
Overall Potential SONACOMS Portfolio in EV
24. Why Sona Comstar?
Indian BLDC Motor Opportunity
Launch of BLDC Motors for Indian electric 2W market- New Opportunity & Horizon:
§ The Company has launched and commenced commercial supply of BLDC motors for Indian electric 2W and 3W EV
in November 2020 and has become leading supplier of the same in Indian market.
§ In the electrical business, it currently supplies BLDC traction motors for e2Ws and e3Ws, which is likely to witness
strong growth on account of the rapid EV adoption in India.
25. Why Sona Comstar?
Particulars CY15 CY20 CY25
Global Mild Hybrid Vehicle Market 255,000 3,500,000 19,200,000
Global Mild Hybrid Market (% of total Vehicles) 0.30% 5% 21%
48V BSG Systems 242,000 3,200,000 11,500,000
Unit Price of BSG ($) 235 150
BSG Market Size ($Mn) 752 1,725
Source: IDBI Capital IC
BSG Motors Potential
Launch of BSG Motor for hybrid PVs to be a major milestone for Motor Business :
§ Currently, in its Electric Motor division, the Company has developed a Starter Motor product portfolio for Micro Hybrid
and IC engines vehicles. However to move up in value chain and address lucrative opportunity in hybrid and EV vehicles,
SONACOMS has developed 48V BSG Motor for the application in hybrid PVs and LCVs.
§ 48V BSG Motors is currently undergoing rigorous testing in compliance with international specifications. The Company
plans to offer this technologically advanced BSG hybrid motors as a hybridization solution to its customers and increase
its sales globally.
26. • In the driveline business, company
currently focus on the performance and
high performance segments of the EV
car market.
§ In the future, company intends to cover
the small and mid-segment battery EV.
§ In motor business company core
strength is making lower voltage with
high power density and high
performance for traction motors and
controllers in EV 2W & 3W.
§ The longer term aim for motor business
is to keep moving upwards along the
power axis and get into traction motors
for BEV.
§ The strategic intent of the company is to
focus on existing products and
eventually grow both the categories or
products to all segments of all markets.
Electrification: Sona Approach to Market
28. Particulars EV Non EV Total EV as a % of total
Started 8 16 24 33%
Yet to start 7 27 34 21%
Total 15 43 58 26%
Order yet to start as a % of total 47% 63% 59%
Strong order pipeline
As of March 2021, Sona has won 58 programs from 27 customers across product portfolios from
Indian as well as global OEMs, with production (SOP) starting from FY21. As on 31st March 2021, ~59%
of programs are yet to start. Of the total 15 new EV programs, 47% are yet to start.
Source: Nirmal Bang Report
30. Increasing BEV share in revenue
§ Battery EV increasing as a % of revenue and company believes that this will continue to be a secular theme.
§ Pure ICE dependence continue to reduce steadily from 35% in FY19 to 19% in H1FY22
Source: Company IR/AR
36. § Company has developed strong in-house R&D
capabilities to deliver evolving technologies for
future mobility.
§ With its proprietary technology, it can generate
higher material yield and thus, more cost-
effective products as compared to its peers.
§ Company has spent an aggregate of Rs. 156 Cr
(including Comstar) on R&D development in the
last 3 years.
• Many occasions, client approaches the Company
with specific auto component requirement and
the Company assists in the designing of
respective parts and subsequently supplies those
components. This enables the Company to enjoy
strong competitive strength and pricing power
with its customers which is reflected in its high
operating margins and leadership positions in its
key products.
R&D capabilities
1.70% 1.70%
3.30%
5.80%
FY18 FY19 FY20 FY21
R&D Spends
37. Why this Development?
§ Company has technical collaboration with Israel’s IRP Nexus group to develop magnet-less drive motor and the
matching controller for 2 and 3 wheelers.
§ IRP have competencies in control algorithm, hardware, software and Sona have competencies and expertise in
motor design and manufacture.
R&D capabilities
§ Magnet supplies is a problem, it's a global problem because, 95% of the magnets come from China. So the
prices fluctuate a great deal. A big portion of the cost of the motor is this rare earth magnets.
§ So if company can make a motor magnet without magnets, definitely, they will have cost advantage and
more importantly, they will have the security of their suppliers and they are not at the mercy of somebody
who will dictate the prices of raw materials.
38. Competitive Landscape
Product Line Competitor Name
Differential Assembly Borg Warner, JTEKT Corp, Dana, American Axle, GKN and Hyundai WIA
Corporation
Differential Bevel Gears American Axle, Showa Corp, Musashi Seimitsu Industries, Meritor and GKN
Starter Motors Denso, Borg Warner, SEG Automotive, Hitachi and Valeo
BSG Valeo, SEG Automotive, Continental, Hyundai and Mobis
High Voltage Traction Motors Bosch, Valeo-Siemens, GKN, Schaeffler, LG, Hitachi, Borg Warner and ZF
BLDC Motors Lucas TVS, Virya Mobility, EMF Innovations and Compage auto
Source: Company RHP
45. § Company is strong in China & US and in Europe they are gaining strength.
§ Company is in talks with 7-8 customers for starter motors.
§ Raw material prices pass through: Copper & aluminum prices is passed through fully, Steel prices is not pass through
§ Payment Cycle: Domestic business 60 days payment cycle, International business six month cycle. Overall there is a
leg of 3-4 month.
§ Guidance: 27% EBITDA Margin & 14% PAT Margin.
§ Company has never lost a customer. 13 of top 20 customers have been with company for over 15 years.
Management Commentary
46. § Customers takes 2-4 years to onboard as lot of investment, time and engineering department involved; so switching
cost is very high.
§ Capex plan: Rs. 450 Cr for this year, Rs. 320 Cr for FY22 and Rs. 150 Cr for FY24 looking at current order book.
§ Company is increasing BLDC & PMSM capacity to stay ahead with curve to capture the fast growth in the segment.
From 1,00,000 units to 4,00,000 units by the 1st quarter of FY23.
§ For BLDC company is in discussion with 15 customers.
§ Company is building new plant in Chakan, it would be the largest plant spread across 10 acres for Differential gears &
assembly. Company is shifting a small plant in Pune to this area, they are planning to complete this plant by the end
of March or April 2022.
Management Commentary
51. Risks
Concentration and FX risk:
§ Top ten customer dependency: For FY19, FY20 and FY21, the top 10 customers of the company contributed
79%,80.8%, 79.6% to its sales respectively. Thus the company’s business is highly dependent upon its top 10
customers and therefore loss of such customers or a significant reduction in purchases by such customers will have
a significantly adverse impact on the company’s business.
§ The Company has export centric business model wherein it derived 75% of its FY21 sales from international
markets.
Infrastructure:
§ Lack of availability and access to relevant and adequate charging infrastructure.
