Bosch Limited analyst Q&A

Sure. So, the first question is with regard to the growth outlook. When I see your volume outlook of next year, it looks to be flattish in many cases, except for 1 or 2 segments. So, in that background, do you see a scope for Bosch in any of the segments to increase content per vehicle and out-beat the industry volume growth? If you can talk about subsegments.

Yes. So, I think the -- to answer your question, I would put it in 2 parts. The first part on content per vehicle is a constant increase, and this is happening, and we've discussed this couple of times also in the past. So, this is a thing which continues all the time for us. And we expect this trend to continue also in the upcoming fiscal year. The second part of the question, I would say we are a bit cautiously optimistic, cautious because of the potential headwinds that are in front of us specifically the West Asia crisis now going on, which could have serious impact on crude oil prices and therefore if the pass-throughs are high, what is the negative impact on the economy and the rest of it. So there, we want to be a bit cautious. So, we currently maintained a flattish outlook. But that doesn't mean -- like the year we closed, we have no issues ramping up when required or going much beyond as required.

And the second question is with regard to the joint venture route you are taking for some of the new product lines. So, this is a second in that series after the eAxle and now for the brake systems. I wanted to know, what is the thought process? Why this format taken for each of these cases? What do you feel are advantages? Because these are like -- it looks like you have a superiority of R&D. Bosch is global epitome of R&D and products. So why to go for an equal joint venture, what advantages you are looking at versus a shareholder, who looks at loss of medium - to long -term revenue and the profit potential-wise if you executed these businesses on your own?

Yes, I think it's a fair point from your perspective. I think, we've previously answered why we went into a joint venture on the eAxles. I'll now focus on why are we doing a joint venture on the air systems here for commercial vehicles. Look, the -- as Bosch, we have huge engineering capability, huge capability of manufacturing and selling products and solutions across the world. But in this area, specifically electronic control, software -driven modules for air compression processing or suspension, Bosch is not a player at all. We have capabilities to get in and do everything ourselves. But we felt that the commercial vehicle market works with established players. And the TSF Group is a very strong player in pneumatics and hydraulics for commercial vehicle suspension, braking and air systems. Now the market worldwide is quickly moving towards electronically controlled software-driven modules. And we have that side of the capability. So, we thought it's good to partner, good to put the efforts of 2 companies together and get to market quickly. This is the starting point of the equation, and we can see how this develops and we can change. I would say the -- this is for us, in India specifically and also globally, we are not playing in this portfolio at all. And through this joint venture, we actually get into this portfolio. So, in that sense, it's a new entry for us. And we felt this is a good, quick and effective way of combining forces of 2 companies with good capabilities in a new area and getting to market as quickly as possible.

If I can ask further on that, does it -- do you look at it as compared to a Tier 1 OEM, which you are with the pricing power and technology which you offer, with these joint ventures, both these, if I have to look at eAxle and Brakes, does it become Tier 1 minus or Tier 2? And hence, you feel that is not a problem as long as you are addressing the business opportunity?

No. Actually, we do not see this as any change from -- any change in our tier position to handle this topic. We will continue to play the same Tier 1 role, specifically all details on the current announcement are being worked out. But as a quick input for you, this is a venture, which will also help us scale globally because the market for this air systems today is largely global. India will come in at some point of time soon, but currently, it's largely global. And when we take it global, we take it as Bosch. When we take it local, we take it through joint venture. And of course, the TSF Group also can do this similarly. So, we do not see this as any change in our tier position at all.

If I can request one more. Since you now have 2 joint ventures, along with the capex outlook, would you also incrementally going forward and talk about what is the joint venture requirement for funding in a particular year so that can help us do the financial model better?

Yes. I think, we can look into this. The joint venture details are anyway going to be published and they're all available already. It's already -- we've already notified the regulators on this, but our own capex, we've also specified. So, the details are out there.

Mumuksh Mandlesha, you can unmute and ask your question.

Just on the -- continuing on this JV question, I just want to understand -- I just want to clarify, will this JV focus more on the advanced brake systems or also will cover the traditional braking system and suspension system, sir?

This is more for the advanced brake suspension systems. They are electronically controlled software-driven modules for air compression, air processing and air suspension and air parking brake solutions.

No, no, this is commercial vehicles. So, this can be used across the range, and this will be for commercial vehicles, trucks and buses, both ICE and BEVs.

And also, it would cater to LCV, MHCV across the segment, right, sir?

Yes. That's correct.

And just on the operation ramp- up, sir, how do you see the ramp- up and investment phase sir, for this JV?

We currently see this JV commencing operations end of 2026. We will still have to fight to win projects in this wing. We're working on that already. And as we go further with the further setup and establishment of the JV, we will provide more information.

Mr. Ronak Sarda, you can unmute and ask your question.

Am I audible?

Yes, you are audible.

I just had one question. If you could just share the full year performance for Bosch Chassis for F '26 in terms of revenue margins, profitability and that would be great, sir.

Yes. Thank you very much for the question. We have published, of course, the valuation report, but due to that we are not through the process for the whole CV report, etcetera, we can't before the closing and not disclose figures here for the company, Robert Bosch Chassis Systems. Thanks for your understanding. But as you could see out of the valuation report and out of what we have published, what we intend to do with the acquisition and you see how the market is currently going in RBI and we see overall i n the mobility also that we are meeting our original plans.

Just to expand a little bit on that. We've informed you of our intent to get into this JV -- sorry, to buy this company, it required shareholder approval, which we have got in the meanwhile, minority shareholder approval is obtained. But we're still waiting for regulatory approval on proceeding further. So, till we formalize that we would resist from giving you this kind of details.

Mr. Chetan, you can unmute and ask your question.

Can you hear me, sir.

Yes.

Sir, since you mentioned that we are going to fill a major product gap where Bosch is not present in this category, in India and globally as well. So, if you can help us understand the size of this particular system or market for us in India, globally, OEM versus aftermarket, just a broad touch will help.

In India, this is very, very nascent, very early stages for -- let me see if we can give you anything. Actually, the air processed braking and suspension systems in India is a brand-new portfolio. So it's something that we see upcoming in the coming years. But the interest currently is largely global. And across the world, many countries have legislations and even they are already adopting fully electronically controlled software -driven modules towards air compression, suspension and braking. So at this point of time, the market is largely global. And in the coming 2 years or so, we see more adoption of this in the Indian market. As we go further in the coming months, we'll share a lot of information on the JV and the market potential and opportunities around this.

Okay, okay. But ballpark, what would be the content per vehicle for us in this product in a global market? And how much would Bosch India contribute to it? Roughly.

Yes, I mean -- No, I do not want to speculate and give you a number now. The project details are in the scope of finalization. I will -- we will certainly share more information probably in the next call with all details about the market opportunity, content per vehicle and the exact scope.

Sure, sir. And by what time frame we are expecting this JV to start ramping up the business? And will the TSF Partners, will they set up a dedicated manufacturing -- or are they going to utilize their existing plants for this? I mean, if you can...

So, the joint venture aims to start first operations late '26. So of course, all this is subject to regulatory approvals and us being operationally ready. The JV will offer according to customer demand, of course, samples in '27 and series readiness by 2028.

Okay. And similarly, sir, any other JVs with respect to, let's say, wind or any other segments that we are exploring? Or any thoughts on that?

Yes. I mean -- see, we do not speculate in calls like this. As we've informed multiple times in our calls, we are always working on portfolio expansion, portfolio decluttering and enhancement. So, this is a constant endeavor for us. And as and when we have some information -- any information worth sharing to you or through regulatory approvals, we will certainly make it a point to share it immediately. So, there is continuous work happening on many different aspects.

In the meantime, Mr. Vedant, you can unmute and ask the question.

So, one thing on the other expenses for this quarter, I can see a 9% year -on-year decline and 10% sequential decline. So, can you just maybe guide me through like what has led to this decline? What sort of expenses are there? So just a broad idea, I'm trying to understand.

Thank you very much for the question. One part of our other expenses is customer projects, which you can find under revenue, other income from services. And we had in the last year, a very big project with a customer, and you saw the reflection in the other expenses. Furthermore, if we look then, of course, you can see here the forex gains and losses due to the INR fluctuation. Overall, we are also working generally on our budgets, on our cost progress in the other expenses. So, we had a better fixed cost absorption. So, if I summarize it, the customer projects, we had the big projects in the last financial year. We had a better fixed cost absorption in this financial year. We went ahead with the cost progress and the offset, of course, by the forex impact.

And one more question. So, looking at the commodity cost environment or the -- or the recent energy crisis, like how are you seeing in terms of the overall cost outlook in FY '27?

Well, of course, we know that we are in a competitive market. Of course, we are working on the one side on the material cost via localization, via negotiation, via working on our design RPP so-called. On the other hand, of course, we are working on our productivity strongly in the plants. We have a very good productivity progress again in our plants. We are ramping up our AI in the plants to gain here productivity and efficiency. So overall, yes, competitive market. And yes, we are working on the cost progress in accordance.

And just one last question. So, coming on to your outlook across the segment, so it is kind of like flattish. So just trying to understand that your customers are guiding for like a high single - digit type or double-digit type growth for FY '27. And why is like a flattish kind of guidance for financial year '27?

As Guru already mentioned, we see a very strong last quarter of the financial year '25-'26. What we are seeing going forward, as Guru showed is that we are currently a little bit careful and more on the conservative side looking at the overall geopolitical environment like the Strait of Hormuz, like the Ukraine war, like all the other things and aspects going on worldwide. So therefore, we are carefully optimistic.

Mr. Rajit, you can unmute and ask your question.

My question is related to the joint venture with Tata AutoComp. I believe it was supposed to start operations in mid -2026. So, if you can share some update on it and how much have we invested till date? When are we going to see some sales from the JV?

Yes. So, it -- the establishment of the JV was mid -'26 and it's on track for that. The SOP from the JV is most likely third quarter of next year, and everything is on track for that.

So, third quarter of next year means, third quarter of next calendar year?

Yes. Next calendar year, sorry.

So, Q3 FY '28 is when the revenues will start to come in.

That's correct. The first shipments from the JV will happen from the third quarter of next year.

Yes. Yes. We have orders from clients based on which the whole concept was worked on and we will share more details on the exact orders, what's going on within the JV once the JV is set up in the coming months.

All right. And just one quick clarification. It was said that the valuation report has been published. Now could you help me where can I find that valuation report for the acquisition of Chassis?

Yes. It was published together with the postal ballot notice.

So, it's there on the stock exchanges.

There is a link, but we can talk back to you afterwards. If you leave your name and everything, then we can help you to find the link.

Otherwise, I'll drop an email as well.

Yes. Perfect. Just drop an email -- a mail to our Company Secretary, and then we can help you with the link that you have the access.

Yes. Before going to the next caller, I'll read one question from the chat box, sir. So, in the presentation, you indicated that we are helping customers on the CAFE 3. So, on CAFE 3, will our content per vehicle improve meaningfully?

Yes. Content per vehicle will increase. We can share more details about this in the upcoming calls.

Mr. Akshay, you can unmute and ask your question.

Am I audible?

Yes, yes.

Okay. So, my question is, in the larger scheme of the Bosch Group -- Robert Bosch Group globally, can Bosch India became a global manufacturer for some of the product or a preferred low-cost supplier for the group globally in the supply chain?

Yes. So, I think, we have also answered this a couple of times in the past. Yes, certainly, there is an opportunity for us to become a player in the overall scheme of things, as you described. But I would start this answer this way. Bosch operates in what we call international production network, where production centers are typically set up in the region where consumption happens. So, Europe for Europe, India for India, we are normally set up. There is, of course, a little bit of export happening from each of the regions based on shortfalls, based on extra demand and so on. That's the current situation. So, you will also see that from India, we already do export a small percentage to the rest of the world. This is definitely not possibly how this will be over the coming years. And this is currently work in progress on how the production architecture changes for us. And when this changes, what role we can play and how can we have a bigger role in the overall scheme of things. There are, of course, some preconditions to this. Everything has to make economic sense -- commercial sense. And of course, it also has to make sense in the context of landed cost for customers. So, when we export something from here, the landed cost has to be same or cheaper or in line with contracted obligations in the locations they receive. So, we have to work on this, and we are constantly looking at opportunities based on this.

That was very helpful. So broadly, do you have any assessment how much would be the difference, let's say, Bosch India is manufacturing a product here in India and something is being produced in Europe. What is the gap right now? On the production cost or on the landed cost, what is the metric?

So, it's very hard to give you a percentage. And of course, we cannot speak for the Bosch Group. But I would like to give you an idea is that we are working on our cost competitiveness regarding material via localization, the overall efficiency for the value add. I would like to give you two important aspects in addition. We -- Guru mentioned already the landed costs where we have also the logistic costs, and therefore, you have to see where is the final customer and what are the logistic costs. And for sure, what we also have to consider is that the current situation by the Strait of Hormuz and the logistic costs are not supporting us, not giving us a tailwind. Nevertheless, we have also -- we are going forward to increase our export share. For example, we started the NOx sensor in our plant in Abu Dhabi, and therefore, we have a quite good export share, which is going back to Europe. So, depending on the product, we are fighting, but you have to see the whole supply chain in the end to be competitive.

I will read a question from the chat box, sir. So, what is the alignment for Bosch on the upcoming BS7 norms? What is the preparedness and the opportunities on BS7?

See, as already stated, we are an agnostic player. We support all technologies and the European version of BS7, which is Euro 7. We've already demonstrated technologies and working with OEMs for quite some time. So, in terms of technology preparedness, it's not a challenge for us in terms of manufacturing capabilities and competence, that's also not a challenge for us. So, we are well prepared to handle movement towards BS7, in case the government legislates that.

Okay, sir. There is no more questions. And so, any closing comments you want to make, sir?

Okay. Okay. So, thank you, everyone, for your attention today, and we've had an extremely good year in my view, last fiscal year and also last quarter. Things have been very positive and good production and sales. We hope to continue this momentum, barring some headwinds coming our way through economic downturns or higher inflation or other parameters. But besides that, I think we are on a good track, and we hope to keep it that way. Thank you very much.

Thank you.

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