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October 14, 2013

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Home » Business » Autotalk Special

MANN+HUMMEL takes aim at poor air, fuel quality

By Xiao Lu | October 14, 2013, Monday | Print Edition

MANN+HUMMEL, one of the world’s biggest makers of vehicle filters, had a double celebration in China last month.

MANN+HUMMEL FAWAY, its joint venture with a subsidy of FAW Group, marked its 10th anniversary, and opened its expanded new plant in the Chinese automotive hub of Changchun in Jilin Province.

The 100 million yuan (US$16.3 million) expansion project was a bold move, launched in 2012 when fast growth in China’s auto market was cooling.

“The market slowdown is indeed true,” Manfred Wolf, president and general manager of automotive and industrial business at Germany-based MANN+HUMMEL said.

Only weeks earlier, he said the company’s first-half global profits were lower than expected as price pressures built in the industry.

“Our answer to that is to become better in operations and production, and to try to find new products area where our customers are prepared to pay a little more,” said Wolf. “MANN+HUMMEL spends 4 percent of its revenue every year on research and development.”

China’s tightened vehicle-emission standards now require more sophisticated filtration systems, providing somewhat perfect timing for the company’s plant expansion. Besides filter systems, oil filters, fuel filters, centrifuges and air dryer boxes, the plant now also produces engine covers, intake manifolds, air filter elements for passenger vehicles, cabin filters, turbo charge ducts and acoustic resonators.

The company has even developed special filtration solutions for China’s allegedly substandard fuel quality, and cabin filters to deal with hazardous air-borne fine particles PM 2.5 — the main culprit behind the massive smog shrouding parts of the country earlier this year.

The new product launches helped MANN+HUMMEL outperform the Chinese market last year, with a around 20 percent growth in revenue to nearly 2 billion yuan. Wolf said he expects to see a double-digit revenue growth again in China this year. The opening of a sixth plant is not far off.

The company is trying to diversify its Chinese customer base — a strategy aimed at making it more resilient and able to withstand volatile market conditions in the commercial vehicle and construction vehicle segments it traditionally serves here, Wolf said.

The new plant in Changchun, which is expected to generate up to 350 million yuan of annual sales in its initial stage, is a case in point. Heavy investment in the development of components for passenger vehicles last year won MANN+HUMMEL FAWAY quite a few contracts to supply locally made passenger cars, including the Mazda 6 Economy, the Besturn B50, the new Volkswagen Sagitar and Bora though most contracts come from the FAW Group that owns the Chinese joint-venture partner.

MANN+HUMMEL knows the value of spreading risk. Through a 100 percent takeover of China’s local filter manufacturer Bengbu Haoye last year, it has gained new business opportunities with domestic carmakers and greater access to the after-market.

“In the after-market, we are leading the high-end segments with our MANN-FILTER brand, but in the large, medium-priced segment, we haven’t been that successful,” said Wolf. And Bengbu Haoye is a stepping-stone for the company to break into this that market in China.    

MANN+HUMMEL is no stranger to acquisitions. It has been active in that field around the globe for the past two decades. The automotive filter industry is just too big and fragmented, Wolf said. The company — which manufactures 17 filters every second — accounts for 4.1 percent of the global market. The company said it sees huge growth potential in China, where filter companies smaller than Bengbu Haoye are in abundance and a big industry consolidation is just waiting to happen.

“After five years, we may see only half of them still in business,” Josef Parzhuber, group vice president and Asia-Pacific CEO of MANN+HUMMEL, has once predicted.

Still, sales of passenger cars and commercial vehicles in China are not likely to go back to double-digit growth anytime soon, and the growth curve of the after-market could be leveling off until 2018 or beyond as filter replacement intervals gradually come down in China.

Due to dust and fuel quality problems, the frequency of filter changes in China is currently significantly higher than in more developed countries, Parzhuber said.

Looking on the bright side, China, with reportedly 120 million vehicles already on the road, remains the top market focus for the company in Asia, he added.

Though counterfeit auto-parts makers are a big headache in China, Wolf said it is not unique here. The same can also happen in Russia, Turkey and other places, he said.

“We take them to court, we close them down,” he said. “We probably will be not able to sort things out all altogether. But whenever we have a case, we take it seriously. We need to protect our name, which is also in the auto industry’s interest.”

 

Autotalk Special


 

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