KPIT Tech MD Expects Growth To Come From US-Based OEMs | NDTV Profit - video Dailymotion

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00:00Sachin Tikkar, who is the President and Joint Managing Director of KPIT, spoke to us about

00:06the quarter going by the outlook ahead.

00:08The most important point about KPIT is that they have said that quarter three and quarter

00:13four, the performance may be slightly subpar.

00:16The question only is whether that can change after FY25 is over.

00:22So that is the key point that people will be watching out for.

00:25Listen into a slice of that conversation.

00:28I think this is a great conversation, Neeraj, and we see the automotive industry had a bumper

00:37year last year.

00:38I think 2023 was a great year and there were signs of slowdown.

00:41I think there were a whole bunch of pressures on the industry, one, the whole sociopolitical

00:48thing coupled by the macroeconomics playing out in some of the countries and pressure

00:54from the Chinese car makers on the OEMs, especially the European ones.

00:58I think it was being felt.

01:00It's just that the OEMs were still producing cars and making money last year.

01:07And I think from the beginning of this year, there is a realization that things have to

01:11change.

01:12And many OEMs are trying to figure out what this change means to them, hence what kind

01:18of strategies they need to adopt in terms of, you know, the consumer preferences, the

01:24markets that they want to target and so forth.

01:29And I think that's where we believe that.

01:34And now, you know, in the last quarter or the first quarter, when there were some unpleasant

01:39surprises in terms of the OEMs announcing results that were not so favorable.

01:46And I think this quarter is going to be a mixed bag, too, and it may continue for another

01:50quarter or so.

01:51But at the same time, they are able to sort of make the adjustments and make sure that

01:55they are all set from the mid to long term perspective.

01:58So in all of this, what it means is some are taking a pause to revisit their priorities

02:06and you know, some are going forward.

02:09So let me just give you a color in the sense that how we read the OEM behavior in different

02:14countries.

02:16In the U.S., because there is a 100 percent import duty on the Chinese vehicles, the U.S.

02:24OEMs are doing all right.

02:25They know they are under pressure, but you see GM announcing fantastic results yesterday

02:30and the Ford guidance is also pretty solid.

02:34Tesla is looking OK, too.

02:37So the U.S. OEMs are OK because they are sort of protected in the immediate future.

02:43So they will continue to make their investments.

02:47The most impacted are the European ones, especially the ones in France and Germany, where they

02:51are feeling the pressure.

02:52They had a large chunk of their business coming from China, and they're also facing competition

02:58from China in some of their markets.

03:00So you know, we've heard news about Stellantis and Volkswagen Group about trying to take

03:07a step back and figure out what kind of investments they want to make and in which markets.

03:14That's what we are going through at this point in time.

03:16And so there is sort of, from KPIT's perspective, I think we continue to see closure of large

03:31engagements and we continue to have meaningful conversations of some long term engagements.

03:39It's just that given their strategic priorities, some of these decisions are being pushed back

03:46a little bit.

03:48And that kind of, we thought that it's always prudent to sort of let everybody know that

03:56this is the reality.

03:59Having said that, the conversations are good, the pipeline is great.

04:04So to us, it's just a matter of time before things start to really pick up from KPIT's

04:10perspective.

04:11Sachin, is that predictable, if you will?

04:14I'm guessing it is not.

04:15But the point I'm trying to get to is that do you reckon this, quote unquote, for lack

04:21of a better word, pain or uncertainty, could this last for a couple of quarters, could

04:27it last for longer or is it difficult to predict that right now?

04:31Our guess is, Neeraj, the OEMs will have to make decisions very soon.

04:35They cannot sit on some of these critical decisions.

04:38So our guess is, it's a matter of one to two quarters.

04:42I think, and we hope that in January onwards, I think there will be a lot more action and

04:47the momentum will really gather from April of 2025.

04:52That's what we expect.

04:53Right.

04:54Okay.

04:55Thank you so much.

04:56Thank you for joining in.

04:57You mentioned in the conference call last evening, actually, that the US will now be

05:02a good opportunity for you because, you know, US OEMs have largely banned the Chinese software

05:08makers.

05:09So what kind of growth do you expect in this vertical and do you expect the growth to be

05:13driven by this vertical in the second half or still there's some time to go for this

05:17one to revive?

05:18We feel that the growth, if you look at our growth in the last two quarters, primarily

05:24has been driven by Asia, you know, and we think that the growth going forward would

05:31be a little more balanced.

05:33And I'll talk specifically about the US.

05:35US, we think that the growth will come from two areas.

05:38One is the passenger cars because the software has been banned and, you know, fortunately

05:44GM and Ford for now are reporting healthy profits and growth.

05:49So we believe that the growth will come from, you know, the OEMs who are in the US from

05:56Pascar.

05:57We started to make investments also in the off highway, especially in the agriculture

06:03and construction vehicle sectors a few quarters ago, and there are some meaningful conversations

06:10and then there are a couple of fairly large players in the US and we believe that in the

06:15midterm, those engagements will also get initiated and that will actually help our

06:22growth in the US.

06:25So US moderate growth is what you are expecting.

06:28And what about Europe?

06:29In Europe, you call out that certain OEMs are still struggling.

06:33So will that affect the company's performance?

06:37It will not affect the company's performance.

06:39So let me reiterate that we are sticking to our guidance and we remain bullish for

06:45the midterm, including the next financial year.

06:48It's to us from the European OEMs, specifically the ones from Germany, we believe there are

06:56really meaningful conversations that are going on and we believe it's a matter of another

07:02one or two quarters before we see a longer term sort of engagement coming from the European.

07:11And there are two parts in Europe as well, the passenger car OEMs across Germany, France

07:17and Sweden.

07:18I think we'll see growth coming from all three.

07:22And we've also started really good conversations with some of the truck makers there, the commercial

07:30vehicle companies.

07:31So we believe that these two sub-verticals will bring back a sort of more vibrant growth

07:40in Europe, both pass cars and commercial vehicles.

07:43Which I think reflected in your comment that your investments in trucks and off-highway

07:47sub-verticals are expanding market opportunities.

07:50So Sachin, just to dispel one of the notions this morning, and at least from my end, the

07:55last point on this growth piece, because it becomes important, the belief is that delays

08:02in deal ramp-ups or deal closures, what have you, will result in a softer second half,

08:09which is now evident if you do 18 percent, of course.

08:11But the weak exit rate impacts FY26 growth.

08:15Do you think that's a misnomer?

08:17FY26 is still out in the open for a strong year as things stand?

08:24I would say so, you know, because right now it's looking pretty solid.

08:31The pipeline is looking good, the conversations are really good.

08:34And we also believe that the OEMs have to make some of these important decisions.

08:41And I think they are looking to consolidate things and they're looking for a partner to

08:46take up, you know, larger chunks of business.

08:49So, you know, we remain fairly optimistic about FY26.

KPIT Tech MD Expects Growth To Come From US-Based OEMs | NDTV Profit

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