Bosch Limited (500530) Earnings Call Transcript & Summary

Welcome to 1Q FY '21 post results conference call of Bosch India Limited. We have with us today Mr. Soumitra Bhattacharya, Managing Director; Mr. Jan-Oliver Röhrl, Joint Managing Director and Chief Technical Officer; and Ms. S.C. Srinivasan, Chief and Executive Director. I will now hand over the call to Mr. Soumitra Bhattacharya for the opening remarks to be followed by the question-and-answer session. Over to you, sir.

Thank you, Mr. Jayaraj. Ladies and gentlemen, a very good afternoon, and thank you for taking part on this call. I hope you are doing well in this current turbulent times that we have. I would like to start with a brief about the macro economy and the policy highlights for the quarter affecting our business. The world economy in the second half of 2020 and with the COVID 2019 pandemic, the economic recovery for this year looks weak. I would only say that overall global GDP is expected to contract sharply for the fiscal year 2021. The macroeconomic environment has been challenging also for India. And even before COVID 2019 hit us, it had impacted adversely and resulting in a slowing GDP growth rate and weakening in the consumer sentiment, sluggish demand. The Indian economy is expected to see the sharpest contraction in 40 years and the GDP decline is actually anywhere around 8% over last year. And the GDP for the fiscal year 2021 is expected to be anywhere in the region of minus 4% to minus 5%. The rural economy is expected to lead the demand on the recovery, driven by better MSPs for the upcoming Kharif harvest and increased MGNREGA spends and alike business activities. As most of the COVID impact till date has been largely in urban areas. With this background, let us look into the automotive market development in the last quarter, that means April to June. Most of the manufacturing facilities for Bosch Limited have opened in May 2020 and are operating at different levels of capacities after the relaxations in the lockdown. Overall automotive market production decreased by 78% owing to COVID-19 lockdown. Meanwhile, in June 2020, tractors, 2 wheelers and including, to some extent, pass cars have shown positive trends as compared to the June 2019 production. We see further improvements in July, both in tractors and 2 wheelers. Heavy Commercial segment declined by 91%, a majority of this is on account of minimal demand and including in March, if you remember, there was a lot of push into the sales of the inventory, a low economic activity and finances are also cautious on the fleet operators. We expect heavy commercial vehicles to have a slow recovery. Passenger car segment declined by 84% due to capacity -- fall in capacity, utilization of OEMs and also the discretionary purchase added to the lower recovery. We expect some movement in the upcoming festive season for compact pass cars. Tractors, however, have shown a decline of minus 40%, relatively far lower due to liquidity support from government as well as increased MSP price and higher procurement of the Rabi crop. And very important, focus by the government on the agri sector. You'll be happy to know that tractors in July had minus 18% only as compared to minus 40% for the quarter. Amongst the other market segments, three-wheeler segment declined by a whopping 77%, LTV, massive 84%. And demand in the domestic market for 3 wheelers are still very low. And we also find stringent financing norms and very importantly, we also see due to social distancing challenges, this can remain low for some time. Now that we have settled the context, let's have a look at how the company has performed during the April to June quarter amidst these turbulent times that we have had. Revenue from operations is INR 992 crores, which is a reduction of 64% as compared to the corresponding period of the previous year. Mobility business sector declined by 70%, whereas the business beyond mobility reduced by 60%. The domestic sales for this quarter witnessed a decline of 70%, wherein the mobility business sector declined by 72% and business beyond mobility sector declined by 59%. Exports declined by 46%. Other operating income declined by INR 38 crores, which is mainly on account of asset-related government grant received at our Nashik plant in April-June 2019. Material cost as a percentage of total revenue from operations has increased to 57.7% from 54.4%, partially disturbed by the increase in freight, unfavorable ForEx variations and change product mix. Employee cost has declined to INR 243 crores in April to June 2020 from INR 352 crores in April-June 2019, a decline of 31%, mainly driven by transformation restructuring projects, greater salary reductions that we've done due to COVID lockdown and other HR-related measures. Depreciation has marginally declined by 2.8% in April-June 2020 as against April-June 2019 on account of low additions during April-June 2020. Other expenses stood at INR 280 crores in April to June 2020 as compared to a INR 418 crores in April-June 2019, a decline of 33%, which is mainly attributable to reduction in turnover during the quarter compensated by additional costs incurred for COVID-related expenses. Our operating loss stood at INR 175 crores compared to the operating profit of INR 410 crores in April-June 2019. This has resulted in the due to lower turnover accounts of COVID-19 lockdown. As you know colleagues, April was a complete washout for the industry, and also for Bosch. Other income has increased from INR 99 crores in April-June 2019 to INR 173 crores in April-June 2020. The substantial increase is due to mark-to-market gain on marketable securities. In the quarter ended June 2020, the company posted a loss before tax, before exceptional items of INR 3.3 crores now this is -- you can call it a loss, you can call it a breakeven, as compared to INR 507 crores profit before tax in April-June 2019. As a percentage of total revenue from operations, loss before tax stood at 0.3% in the current quarter as compared to PBT of 18.4% in the corresponding quarter of 2019. Profit after tax before exceptional items stood at 2.7%. During the quarter, the company has made a provision of INR 197 crores towards various restructuring and transformation projects and disclosed this as an exceptional item for the quarter ending June 2020. Loss before tax after exceptional items stands at INR 200 crore, which is 20% of total revenue from operations. Loss after tax stood at INR 121 crores, which is 12.1% of total revenue from operations. The COVID-19 situation has caused severe impact to the Indian economy with the complete stop of almost all economy captivity due to the world's most stringent nationwide lockdown in the months of April and May, and gradual recovery and opening up in June. The government has stress on balancing lives and livelihood. Mr. Modi calls it Jaan and Jahan, and opened the economy in a phased manner. However, state governments have been implementing short lockdowns in red zones and hotspots leading to a ban on activity other than essential services. This has led to disruptions in the supply chain that's delay the industrial recovery. At Bosch, we are aiming to strike a balance between health and well-being of our associates, while ensuring business continuity. In this regard, Bosch inaugurated the automated mask line on June 22, 2020, at our Naganathapura plant. The line will manufacture up to 1 lakh masks per day. And we will be giving 2/3 of these masks free of cost to COVID warriors across India to -- and these are to government COVID warriors, not only in the 8 states that Bosch participates in, but also all the metros. Also, we are doing ventilator repair projects, approximately 125 ventilators will be repaired. And these are being scaled up now due to the increase in demand from hospitals. As a caring and concerned employee -- employer, Bosch has also set up a special COVID care centers with approximately 150 beds, mix of internal and external facilities across locations for its employees. And you are aware that Bosch is a socially responsible and value-driven company. And we will continue to make our commitment to the nation for COVID-19, where we have already pledged INR 50 crores fund. Automobile industry was already reeling under the pressure in 2019, has been deeply impacted by COVID-19. It is projected that the industry will be pushed back in certain sectors to 2009 to 2010 levels. However, we see some positive signs in industry and either gradual recovery or strong demand. Example, we see a strong demand in tractors and a good recovery in sales. Tractor segment, both retail sales and production is expected to be steady, leading up to a good monsoon right up to the beginning or middle of November. And we see a clear pent-up demand, including we see a clear government focus in agri. The demand for our compact passenger cars will also start picking up for festive season. And recovery is expected to shift from the preference towards personal over shared mobility. Of course, as you have mentioned, heavy commercial vehicles will remain sluggish and will have a slower improvement rate in trade demand due to the reasons indicated before. At Bosch Limited, we embarked on a transformation journey well before COVID started. The government is clearly committed to bringing down the dependence on oil imports. And hence, there is a need for increased share of electromobility. We believe at Bosch that the ICE, or the internal combustion engine, will continue to dominate other segments. If you remember, we had already mentioned that up to 2030, we still see ICE to be 80% in India and 20% as EB at max. Bosch is following the 10:3:1 approach, where we have said that if 10 people are required to work on diesel ICE, 3 on gasoline and 1 on electromobility. We will continue with our programs of deploying restructuring initiatives under our 3R program of reskill, redeploy and restructure. We have been provisioned to the tune of approximately INR 800 crores till date for various restructuring initiatives. As we speak with you right now, around 1,000 workmen are currently availing benefits under this program this year itself. Of course, we had also done a few hundred last year. We believe the benefits are much better than the industry average that we have given to our colleagues, keeping in mind the Bosch way of doing things of care and concern for our employees. These restructuring initiatives, while they are cost intensive, have a very clear plan in our transformation journey and have a payback period of just 5 to 6 years. And these are very necessary for making Bosch Limited fit for the future. Under these challenging market environment, our short-term focus is on cost containment, on conservation of our liquidity position, and we have also taken a decision to reduce and keep CapEx only for the essentials, and we are reducing CapEx approximately by 50% for FY 2021. However, our long-term focus, as I've mentioned before, for India remains positive, while we will have a turbulent 2021 for the industry and improvement looking forward for '21-'22. We will -- we are continuing to invest in Bosch Limited as tech-agnostic neutral technology provider, and we are investing in our new-age topics like electrification and mobility solutions and with more announcements to come in the future. Upgradation of infrastructure and e-commerce will also play an important role, and this brings opportunity to our companies beyond mobility divisions, where we are dealing with building technology, consumer goods, power tools and including in our mobility area of aftermarket. Thank you for your contribution, and thank you for listening patiently through the call, and we would now address your queries. Over to you, Mr. Jayaraj.

[Operator Instructions] We take the first question from the line of Pramod Kumar from Goldman Sachs.

My first question is on the gross margin for the quarter, sir. We had a 3.8% slippage in the gross margin on a sequential basis. Just wanted to understand how much of this was due to the BS-VI cost transition? And how much of this is because of lower business activity levels because of COVID, which should be kind of recover as we go forward?

If you could kindly stay away from the mic and make it sharper. We cannot hear you or understand you.

Sorry, is it any better now, sir?

It is better. Whatever you're doing is better?

So my first question was on the gross margin movement in this quarter. We had a 300 -- 3.8 percentage point slippage on a sequential basis. I just wanted to understand how much of this is because of the BS-VI cost transition pass-through impact on the percentages? And how much of this is because of the lower business activity, which should kind of ideally reverse out as we go forward? If you can just help us with that, sir.

So Pramod, first, you have to understand that our reduction in turnover is marginally better than the market reduction. And if you see the market reduction, in the first quarter, just if I take two-wheelers out, it is 78% for the production, which is what we try to focus on. And our reduction turnover is 64%. That's first point. The second point is this quarter for any industry, including Bosch Limited, you cannot compare sequentially or with previous quarter. This is an exceptional quarter in the history of India and also in the industry of automotive. April was a complete shutdown, May was a very slow start of a recovery. And June, it was limping back. And July has been decent. So if you look at just the production figures, Pramod, for all the sectors, other and two-wheelers, the quarter April-June had a minus 78% reduction and July had a minus 34% reduction. So if we try to analyze, you will find it's very difficult. I end by saying just 2 things. Please look at our costs. They have had a steady reduction. And though we could not keep it completely variable to our mass fall in the turnover, which no company can do, the reductions in personnel and other expenses have been pretty good. Second, please have a look at our bottom line without exceptional item, where we broke-even. And going forward for the future quarters, we believe, especially, seeing certain segments like tractors, two-wheelers and hopefully, with compact cars coming back strongly, we believe that the quarters will be better.

Fair enough. Sir, on the related bit on the cost side, now the fit-for-future charges now total up to almost 10% of our last 4 quarter revenues, where we have kind of provided for almost INR 800 crores or INR 8 billion, just wanted to understand, is there a time line you can put as to how many quarters more will we see this because this is basically employee and other expenditure moving from the above EBITDA line to the exceptional line item. So if you can just share because this has kind of become a norm now. Last 5 quarters, we are having these exceptional charges, quarter after quarter. So if you can just help us understand, is there a time line you have wherein by after which you will not have such a lumpy exceptional items?

So Pramod, for the fiscal year, I can only say there may be max a quarter or 2, most likely 1 more quarter. But most important that you must understand, Bosch as an ethical and conservative company, we have created our provisions where we are both doing care and concern for our employees and our business. So when I say 1,000 workmen, you can imagine, with a payback of 5 to 6 years and with this change in the restructuring, the future situation for Bosch Limited is going to be far, far stronger. Second, Pramod, you must remember, we started our transformation journey well before COVID. So in summary, we are doing a focused look at restructuring, reskilling, redeployment. We have done a few hundreds last year. Already this year, we have done 1,000, and we will announce later as we come forward in this 1,000, half of them have already taken the package and half have applied for it. And lastly, with a payback of 5, 6 years, you can understand the company is going to be far fitter and far stronger. So this is where we are. It's a very clear game plan. And we are biting the bullet in a planned way. And we are steady and good in our cash results.

Fair enough, sir. And final question on the liquidity bit. You did stress on focus on conversing liquidity in the current environment as a clear target. So given all that, is it fair to assume that as investors, one shouldn't expect a buyback which we've have been -- you've done on past few occasions and at least for the foreseeable possible future, shouldn't be expected given the state of the business and the state of the industry?

So Pramod, first of all, I think I will twist the question to say, are we ensuring liquidity and looking at cash conservation? Yes, answer is yes. We are highly focused on free cash flow. And we are ensuring -- while we have a decent cash reserve, we are ensuring that even this year, we are cash positive. Second, regarding future guidance, I would not like to venture. While there is no current plan, I would not like to venture.

The next question is from the line of Sonal Gupta from UBS Securities.

So just on -- in terms of the demand outlook, like you've pointed out. But I mean, like, could you give us a sense of like you talked about a lot of gains on the BS-VI side in terms of -- I mean, so could you give us a sense of how that is panning out? And there was also some comment a couple of calls back on the construction equipment space and that was going to be a big opportunity where things have been pushed out by 6 months. So could you just talk about how are we looking at this BS-VI and how the revenues could sort of -- during the course of the year?

So Sonal, we had given a number, which you have already in the auto expo. We have talked about the BS-VI acquisition for the period 2020 to 2025, which is acquisition sales of around INR 24,000 crores plus. Now that was a pre-COVID number. So while the acquisition projects all hold good and we have further acquisitions in 2020 happening, the post-COVID stage with the numbers in the market coming down, the INR 24,000 crores looks more like INR 18,000 crores. But now, the moment the market recovers, again, the INR 18,000 crores will look differently and go up. So I think you have to first appreciate and understand this was an all-time high on acquisition. It is a very holistic acquisition where the market depends very strongly on Bosch Limited to take us through the BS-IV. We are bullish since the pricing in BS-IV has been very, very decent and not -- and just incremental as compared to BS-IV. And finally, we see certain shoots of recovery, and if that continues in '21-'22, the same numbers will look further positive. And Mr. Jan Röhrl, who is the Chief Technical Officer and responsible also for Powertrain, his team is working on the remaining acquisition period -- remain acquisition for this year also in 2020, which we'll announce later.

Right. So just on that INR 24,000 crores versus INR 18,000 crores, so I mean, what is the average lifetime of the contracts we're looking at typically?

You normally look at acquisition period of 5 to 6 years and which are foreseeable and really calculable. And sometimes, it could be a little better, sometimes it could be a little more -- but in the region of 5 year or so.

Okay, sir. And just -- I mean, like you mentioned 2 things. One is on the CapEx you said you've started with 50%...

You have to go away from the mic and speak a little slower.

Okay, sorry. So you said CapEx would be about 50% lower. So could you tell us what the number will be.

[Technical Difficulty] Sonal?

Sorry sir. Can you -- is this better now?

Sonal, you have to speak slower and go a little away from the mic.

Okay. I have the handset. Okay. Okay, I don't know the issue is, but I was just trying to get what is the CapEx number for this year?

CapEx, I already told Sonal. We are -- Bosch doesn't look at quarterly results only. We are continuing our CapEx on our must-have projects. We are investing steadily in electromobility. We are investing in data lake, including on our cloud working. So, you know, we have the Project House Mobility Solutions and Services. And we also have CapEx on select areas which we are investing in, including our autobody project. So 50% down overall compared to our plan. But on essential areas continuing to do it.

So it should be somewhere in the range of $2 billion to $2.5 billion? I mean, like that should be the number.

Yes. You can back calculate on our average CapEx that we do here.

Okay. And sir, just last question was on your 10:3:1 approach. Sir, could you -- I mean, like sort of shed some more light here? I mean, like is this sort of like also closer to -- I mean, the EV is obviously starting right now. But 10:3 would be sort of our diesel to gasoline revenue mix also?

No, no, no. I didn't mean 10:3: 1. It was meant directly on direct workmen on the line. And that's why I talked about 1,000 people. So Sonal, it has to be understood that if you need 10 people to manufacture diesel, you need 3 people for gasoline and 1 for electromobility. And this is about people. This is not about margins or turnovers or values or anything. And it is for this reason, well before COVID, while knowing that ICE will still remain dominant and while being catering for electromobility for the future, we are reducing our spans and controls, both in white as well as in blue collar. And in workmen, we are this quarter announcing that we have done a restructuring, but in a very, very humane, fair and caring manner, including for our colleagues to have regular income flows and possibilities for future employment. And while ensuring that the company becomes far tighter and including getting the benefits within 5 to 6 years. So the next colleague on the line.

The next question is from the line of Pramod Amthe from CGS-CIMB.

First one is, this is the first quarter where you had gasoline [wins] going through the revenue. So would you give some sense about what was the mix of gasoline? What is the growth? And what is the customer response to your gasoline products?

So we don't give customer mix and product mix. But current state of gasoline, I'll hand over to our powertrain CEO as well as CTO, Mr. Jan-Oliver Röhrl.

Yes. Only a quick comment from my side, I hope I am audible. We have seen the BS-VI, for 4 years, the acquisition numbers were given from our pre COVID and post COVID, of course, not limited to diesel, but this is including also the gasoline part of it. And by the way, this is not the only four-wheeler but this is, of course, also two-wheeler, for which we have, of course, also holistic solution, basically, in the management system. And the launches have started in time with all the customers. We have a quite good response from the market with regards to the -- not the take rate in this regard, but predominantly with the quality of our products and the system solution that we provided. So from that perspective, the BS-VI acquisitions are materializing now in sales as per the very low market demand. This market demand is, of course, driven by, finally, people who are buying these cars. While what we see a little bit in the recent weeks that we have pipeline filling events, simply by the fact that the BS-VI transition happens in the middle of the lockdown, 1st of April 2020, where nothing moved within India. And of course, auto production came to a complete standstill and hence, there is maybe a pent-up demand in that regard. But more linked to the production pipelines and dealers network and this is linked to gasoline and diesel involvement.

And the second question is with regards to the manpower deployment you said for diesel versus gasoline and EV. Is it also because the complexity of the system reduced and hence you will need to deploy lesser? And what will be the further repercussion in terms of value addition if you have to capture the way the manpower reduces for each of these segments?

Look, Pramod, you must understand this ratio that I've spoken is a ratio which is spoken worldwide, not just in India, including our parent of the 10:3:1. Yes, this is a simple equation based on, in diesel, how much -- how many parts do you need here as compared to gasoline, where the number of parts are far lower. And then when you look at electromobility in a vehicle. So it's as simple as that. So it's not very complicated. It is 10:3:1. It is -- diesel is relatively in terms of machining, in terms of parts production has the highest intensity relative to the other 2. So keeping that in mind, and keeping in mind the mix change for the future and keeping in mind that you need far higher productive workforces, you need leaner workforces, you need simplified automation, and most of our factories are industry 4.0, we are rightsizing our factories. It's a part of our transformation story. And yet we are doing it in Bosch way, which is doing something which is far better than the mean of the industry standards and taking care of our people also for the future likelihood and, of course, the financial flows. So short point, this 1,000 people that we talk is not just an endpoint. It is part of our restructuring of our core, of rejigging our adjacencies and launching of new edge businesses, including having brought the electromobility and mobility solutions into the listed company. And I mentioned that there are a few more announcements, which will happen in the near future.

Sure. And if I can ask you 1 question regarding to your annual report. If I were to look at your other operating income -- I was saying, can I ask a question with regard to your annual report?

Pramod, your voice has garbled.

The next question is from the line of Priya Ranjan from Antique Limited.

First of all, congratulations for industry beating number. So if I have to dissect that, I mean, as you pointed out, that around 78% of your -- I mean, the production decline was 78% and 64% is your decline. So if I have to dissect that, how much do you attribute it to the, I mean, 14% out performance to industry? And how much attributable to the new businesses, which you have announced before in the -- during the -- I mean pre lockdown and post lockdown? And how much do you attribute it to the content gain because of BS-VI? First of all, and that is number one. And the second question is on the -- I mean, CTO's thought on 2.5 PM if that happens in terms of the emission norms.

I can't understand the second question. What is 2.5, Priya Ranjan?

So PM, I mean the particulate matter if that happens in gasoline, which is -- I mean, there is a lot of talk on that. So if that happens then what will be the kind of content gain or content requirements will happen in the gasoline side?

A particulate matter, you're asking in relation to, if diesel has a certain norm, what is the gasoline? Okay. The second question will be answered by our CTO. The first question, I'll quickly answer. Priya Ranjan, we are -- our adjacencies like mobility solutions or our electromobility, that you are aware, we started a couple of years ago. So that's going on track. Now you need to compare directly the industry directly with our core in its original form or rigid form. And you know in the core, we also continuously change our core. Example, we did a major mix change between BS-IV to BS-VI, where we had very high levels or record acquisitions. So in that relation, I had mentioned to you, different segments of the market will come back at different periods of time. Some may take 4 to 5 years to come back to the peak of '18, '19, some many take 2 years, example, today tractors we are seeing. Earlier, we were seeing tractors in '20/'21 would be INR 4.5 lakhs. Now we are seeing tractors is likely to be INR 6.5 lakhs to INR 7 lakhs and the peak was INR 9 lakhs. So -- and you know, Bosch Limited has a strong say in tractors. So different segments, we will see different recovery levels depending on different intervention. In tractors, the intervention was monsoon, agri focus, government focus, MSP. In two-wheeler, the focus is on regulation change, but more importantly, due to COVID, people want individual mobility rather than shared mobility. And compact cars may also happen. Now if the government gives the scrappage policy, then we'll see a major change in HCV and LCV, even perhaps pass cars. If the government gives the GST reduction from 28% to 18%, we'll see a different change in the offtake and consumption. So we and Bosch want to come back a year or 2 before the market to the peaks of '18/'19. So I think we should leave it with that, and that's our focus. And one part of the game is the transformation journey, where we are putting the optimal money for the restructuring, where we are also changing the face of the company as I gave you an example. On particulate matter, over to our CTO?

Yes. So I'm not 100% sure, but I understood the question. So as far as I understood, it was about to what extent the particulate matter emission norms are affecting the one or the other powertrain diesel compared to gasoline? So first, we have to acknowledge that on the diesel side, we have 2 dominant emission criteria, the first one is NOx and the second one is [indiscernible] both are addressed and resolved from the emission criteria, but also, I would say, from a public reputation of the diesel completely with BS-VI. And that's by the simple fact that with regards to particulate matter, we have a diesel particulate filter as a standard for all passenger cars, commercial vehicles, customers who have lock-in with Bosch. I cannot speak about competitors, but for us, I can 100% confirm that. Now on the gasoline side, the emission criteria are looking a little different dependent on the combustion system that you finally have. And there we have power fuel injection, which is, in India, still the biggest for the market, and we have a gasoline direct injection, which is related to a far higher pressure, and it's also direct injection as the name already suggest. And for the later one, we are working dependent on the pressure of the system also with a gasoline particulate filter. While for the power fuel injection, which is, in India, again, the mainstream of the market still, this is not the case because it's not quite as per the legislation. So hence we have different approach and different strokes for different folks. So these are 100% diesel particulate filter, power fuel injection is not required as per the emission criteria and gasoline direct injection. We are working with gasoline particle filter dependent on the pressure of the injection system.

Yes. So related to that, I think when I go back to say -- or I mean, when I look forward, I mean, in RD. So do you feel that, I mean, even, say, a smaller car might require GPF, I mean the gasoline particle filter because if we assume that the proximity factor is probably 1.4.

Look, my perspective is that independent of the technology that we choose, we should have the same emission criteria and also similar to the same limits. And that is exactly what we are seeing from a BS-VI perspective. And also, if you look into what is happening in Europe, which discusses about Euro 7 that these criteria and the limits to these criteria, they are converging. So that means of course that the technological approach to resolve the emission criteria gets also more and more similar, again, dependent on what you choose as a technology. And again, if you will ask me about the compressed natural gas, it would look, again, different, yes, because the question is at the end, what kind of fuel you also burn. But yes, in a sense of that if we are going forward in India, moving also towards more and more gasoline direct injection, we will also see more and more gasoline particulate filters. And your assumption with regards to the conformity factor is still an assumption because we do not know yet how the IRDE regulation will be looking like. Whether this will be in 2023, a conformity factor of 2.1 or conformity factor mainly of even 1.43 as you are quoting it. But in either way, our customers are very well prepared together with us to meet these requirements with the less necessary efforts or the least necessary effort.

And lastly...

Priya Ranjan, I think you have to give it to other colleagues. I just want to say one sentence. I think the main message, which our CTO is saying is that Bosch is well prepared to meet the road map that India government has laid down, and we want it to continue because that gives credibility to India. And we have partnered with our customers earlier, and we'll continue to partner. And we'll continue to give affordable innovation. So Priya Ranjan, I think you need to let go for other colleagues now.

The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services.

My question pertains to the supply side issue. We believe there was some issues on the fuel injection system for tractors. Have that been resolved?

Yes, our CFO will answer the supply chain.

This, I mean, due to the lockdown situation in the early part in April. Of course, everybody was having problems and shutdowns and subsequent to that, there were issues of migrant labor and we also had some start-up -- slow startup in our plants. I think by and large, these are now resolved. In the month of July, we see a much better situation. And of course, there will be hiccups in certain elements of our supply chain, but all of these are being monitored very, very closely.

Okay. But because most of the tractor company has indicated that in July, there were breakdown in supplies. So now it's back to normal in August, as we speak? Or there's still some middling issues here or there?

We are pretty much at normal.

Yes. So I mean, right from second half of July, things have improved significantly. In August, we are at normal.

Got it. And secondly, because of the BS-VI being -- this quarter being the first quarter of BS-VI supplies in a big way. Is iron cost higher also because of the higher import content? Would that be the right way to look at it, at traded content?

I think, yes, as we said in the last con call as well, with BS-VI, some of the exhaust gas systems are currently being imported because -- and as the volumes pickup, the localization program is already set in place, and they will be manufactured in India as well in the coming years.

[Operator Instructions] The next question is from the line of Shashank Kanodia from ICICI Securities.

Sir, just, say, INR 24,000 crores of BS-VI acquisition, I believe this is a gross figure. So I just wanted to understand what gives a net figure of incremental revenue that we'll do because of BS-IV to BS-VI transition?

Shashank, this is a standard way of expression in the market. And based on the acquisition of a defined lifetime. When I mentioned to you that defined lifetime is anywhere between 5 and 6 years, though it may continue for longer. So -- and the acquisitions are based on a certain volume. And all of us know pre COVID, the volume for automotive markets in India were very different post COVID. So I just gave you 2 numbers of INR 24,500 crores and INR 18,500 crores. And I think beyond that, we don't need to look. As the volume further pick up then INR 18,500 crores will go up. It just gives you an indication, Shashank, on a very high level of acquisitions, where Bosch has partnered with customers from holistic end to end way and the further acquisitions are continuing.

But sir, we must be present with the customers prior to BS-VI as well, right, on the same line of businesses. So I was just trying to understand what incremental businesses does it give it to us, incremental business?

Shashank, we don't dissect it that day. This is the BS-VI business, additional business that we have got. We could -- we may not have got this also. It could have gone to other competitors. It just gives you a direction for the years to come of assured business based on pre COVID or post COVID, that's all.

Secondly, sir, there is a going talk globally about hydrogen cells being a cheap alternative to electrification. So any views on this, can it kind of be a big game changer for the industry going forward? And will it kind of overtake the entire EV thing?

Overtake, I doubt very much, but I give it over to our CTO

Okay. So that would be -- maybe more for a panel discussion, now a question. But I try to keep it very short. Hydrogen for the combustion engine or for fuel cell because these are the 2 options that you have now. The advantage of hydrogen is of course, that you do not have any carburetor inside. And hence, you do not have any CO2 emission, but you only have kind of water at the end after the combustion process. But you have a lot of challenge along with that. And these challenges have to be addressed from an engine perspective, but -- and this is then the point as well for any kind of future. The question is always how you produce the hydrogen. So do you do it out of methane, for example, by using coal even for that. So either way, it would be both energetically, but also from a perspective of CO2 target achievement, not a very smart way. And as well, it is still quite expensive. So for 1 kg of hydrogen, you can easily rate EUR 8 to EUR 9. So hence, for India, I do not see this in the very near or near-term future.

Yes, sir, just 1 thing, lastly. You are obviously seeing the revenue. If you can share a breakup of revenues between CV, PV and two-wheelers and between CV and HCV and LVC?

Shashank, we don't give breakup, but I can tell you HCV is at a very low level having the pipeline filled last year at March. And year '20/'21, HCV movement, unless there is a scrappage policy, it's not going to be massive, with hopefully your demand coming back in '21/'22.

I was referring to your shape of revenue for last year, probably, FY '20, if you can give some flavor?

We don't break it up, Shashank, on revenues either customer wise or segment wise. We tell you on mobility and beyond mobility, and this we have already mentioned. I can repeat it if you want.

The next question is from the line of Priya Ranjan from Antique Limited.

My last question is on the -- what do you see in the different cities like the Delhi and earlier Telangana has launched the electromobility road map. So what's your thought on, I mean electromobility road map between different segments? And with the free bid kind of structure coming up in different segments, so do you see that the cost of acquisition of IC engine vehicle is also going up. So that will automatically get switched to electromobility side. So your thoughts on that. So like, I mean, did Kejriwal's Delhi government has announced it and now before that, I think, Telangana has also done.

So Priya Ranjan, whatever we mentioned before holds good. If you remember, when we had the global summit on mobility called MOVE, where our Bosch Global CEO had given a keynote address. And also Mr. Kant quotes that because Bosch always talks agnostic neutral technology and not linked with our company. It was stated very clearly for a country like India, the electrification process would start with two-wheelers and three-wheelers, because that's cost effective. And also effective from battery, which is nearly 60%, 65% of the cost of the vehicle. And if later things improve, it can go into buses, not inter-city, intracity, example, NCR, Mumbai, New Mumbai, Ahmedabad and so on, so forth. And when pass car comes into play, it's going to be fleets. Now in fleets, of course, now shared mobility is having a question mark. So basically, in India, it's going to start slow. It has to be competitive. And it's going to start with two-wheeler, three-wheeler. Now different states are positioning themselves in different ways. But we don't see a direct road map right now on EV for pass cars at individual level, making a very big dent as a percentage of the total market, which had peaked at 4 million. Does that answer your question?

Yes. And related to that, I mean, what kind of road map do you see for Bosch Limited to go forward in terms of, say, if, as you mentioned, in terms workmen, 10:3:1. So what kind of revenue road map we can see in next 10 years?

So you know that we announced only after the OEMs announced, and we have already announced that for two-wheeler, we have already worked and launched with Bajaj, the Bosch system, also TVS. In three-wheeler, we are good to go, but when the OEM announces, we will announce. And right now, we already told you, 80/20 up to 2030. And keeping that in mind, unless there are interventions, example, direct incentives beyond same 2. It will take its normal course on being price competitive. Currently, there are challenges on affordability. However, final statement, we are preparing ourselves to be far tighter in what we do and far more efficient and far more productive. And therefore, spans controls including head count, we have evaluated and that's part of the transformation story, one small part but an important part. And since you had -- all of you had questions regarding exceptional items, I gave you that example of the 1,000 people.

Correct. Okay. So Bosch globally -- I mean just last -- sir, last one. I mean Bosch globally also does some bit of batteries. So any thought on putting or investing in batteries in India as well?

We will make announcements at the right time on what we do. We are -- already I have told you, we are doing different models within Bosch Limited. And you know that we are bringing in various elements in Bosch Limited. And there will be some announcements in the future. However, I can tell you, worldwide, we have decided not to do cell manufacturing. But Bosch is very strong related to the battery, including 48 volts. And when and if we do, we will let you know.

Well, ladies and gentlemen, due to time constraint, we take the last question from the line of Shyam Sundar Sriram from Sundaram Mutual Fund.

Thanks for your elaborate answers for the prior questions. My question is on the aftermarket. How has the aftermarket behaved during the first quarter? And are you seeing a sharp improvement in the aftermarket given some reluctance to buy newer vehicles also there in different segments therein? And post BS-VI, has the BS-VI volumes improve? Do you see more acceptance for Bosch products in the aftermarket?

So of course, aftermarket, all India basis, is not having a major positive growth nor are we. Of course -- it's, of course, nowhere near the steep degrowth that you see in the market on automotive. So we feel, in a quiet way, positive that this year we should be improving on our aftermarket. While we do not see that there'll be any major massive growth in the industry in aftermarket, it'll definitely would not be the negative growth that you currently see in the automotive market. What we have improved in aftermarket is reach. We have looked at secondary and tertiary levels. We have looked at improving our supply chain, and we are finally looking through our field representatives on the final sale, including the garage mechanics or what we call, Ustadon Ke Ustaad. So our focus has also been to go digital. And because of the pent-up demand, we see in different subsegments within aftermarket, a very strong demand and Bosch has a good brand name. So overall, we see with our strategy that we have put in aftermarket that we will, relative to the past years, have improved bounce back. But what you can't beat is -- you can be better relatively, but you can't beat the industry and say that you'll have a major positive growth where the industry in 2021 is going to go through a massive degrowth.

Understood, understood. Sir, on the two-wheeler side, 1 OEM has launched with the electronic carburetor. So is there any rethink among the major two-wheeler OEMs to either introduce e-carburetor variance? And will that mean any reduction for our business per se, any thoughts from that?

I will add 1 sentence and hand over to our CTO. You see, this is a very controversial topic. So we are not going to name any names who are doing e-carburetor, but we are clear that the route that we have taken, and which is not the e-carburetor, is meeting all emission norms under any condition. And we also know that we are giving a superior product with a very affordable solution. But over to our CTO.

Yes. Our MD said it to you already, we don't see the e-carburetor as a robust solution to meet the emission criteria in a normal use case for two-wheelers. While there is no RDE regulation out for two-wheelers, but we, as a very ethical company, is not only trying but achieving targets that are set for normal use cases here in the powertrain domain. We will not follow that path. And we also do not see that this is a certain solution that would sustain also in the Indian market.

Understood, sir. So you're saying there's no major rethink among the other two-wheeler OEMs, that is what you are trying to explain?

The main stream is EMS or BS-VI, and I do not see this to change, while of course, we all have to support the industry to work on the [EAV] measures to not only meet market and policy requirements, but also customer requirements to get best value products.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Annamalai Jayaraj for his closing comments. Over to you, sir.

We thank all the participants. We thank Bosch management for taking time out for the call and providing us the opportunity to host the call. Have a good day.