L Ganesh: Based on the buoyancy of both the domestic market and our export programmes, our capital expenditure should be in the region of Rs 1,000 crore in the next three years. Our growth strategy basically is to maintain our domestic leadership wherever we are present in the domestic market and aggressively increase our export earnings. We continue to focus on the Indian aftermarket that is growing very well for us.
We have made some new initiatives in this area by consolidating the entire aftermarket under one management structure so that the efforts can be focused and the entire marketing initiative in terms of logistics et al, can be centralised.
We started this about a year ago, and that is giving us some good benefits. We expect the aftermarket space to grow at 12-15% in the next 2-3 years. In the past, our growth in aftermarket space has been about 7% to 8% a year.
In terms of the new technologies and the new standards that are coming in—whether it be BS6 or the airbags—each company in the group is gearing up to invest in R&D and engineering to upgrade the products and to introduce new products.
For example, in the steering company, we are now developing electric power steering for off-highway vehicles and some small commercial vehicles. The utilisation of power steering in tractors has been increasing. Currently, it has almost become 60% power steering in tractors. So, we are increasing our capacity for hydraulic power steering for tractors and also introducing new features to meet the new requirements of the industry in terms of engine valves.
There are a lot of new technologies that are coming up. Hollow valves are coming in with higher RPM engines to meet the fuel economy requirements. Valves are now coming with the new construction of what is called hollow stem valves. So, we have developed this.
We have set up a line in our Trichy plant. We have started supplies to some customers, and the valves are becoming more and more high precision, super finish, because of the new emission norms that are coming up. In terms of friction material, again with the new noise, vibration and harshness—what they call NVH—requirements, we are developing new formulations, which reduces the noise significantly. We are developing some of them with our Japanese partner.
In the last four or five years, we have also invested significantly in R&D and that is helping us develop new formulations. So, the development rate of new formulations has also increased in the last few years for us. So, these are some of the new technology areas that we are developing in terms of extending the existing products to the new generation vehicles. In terms of electric vehicles, fortunately for us, except engine valves, all our products are compatible with EVs. Some finetuning is required which we are already doing. We are already supplying rack and pinion steering, friction material, seat belts and airbags, to EV producers.
In all, the product lines—except engine valves—we are ready and already supplying to electric vehicles. In engine valves, there is probably enough time to adjust to this transition. In the short-term, our strategy is to focus on non-automotive applications where the changeover to EVs may not happen immediately. We are focusing on aftermarket, some export aftermarket, non-automotive applications et al, in the short-term.
For the medium-term, we are looking at adding some new products using the same facilities and kind of competence that we have in product manufacturing, forging, machining, heat treatment, etc. We are exploring what new products to add using these competencies and facilities. So, the EV transition by itself is not a big threat for us. There are new opportunities and new products, exclusively for the EV space. This is something that we have just started studying.
EV technology, as you know, is evolving … whether it be battery technology or transmission… Everything is kind of evolving. New technologies are coming up. Different car companies and different regions are trying to work on different things. Some are working on hydrogen for trucks and buses, and some others are going pure EV. Some Japanese companies such as Toyota are going for hybrid technology. So, we are also watching closely as to what could be new opportunities and which areas we could also work on for future growth. So, this is something that we are working on.
In India, we expect the transition to happen in two-wheelers first. Some buses, especially the ones that operate within the city, may see the transition next. Passenger cars will follow. In passenger cars, it is a question of value-for-money. And, it will take a little more time, especially for the small cars, which are more popular in India. The viability of EV transition is a little more difficult in small cars than in the case of large cars. With 70% of the cars in India being small cars, the transition is going to take slightly longer than for Europe or even China for that matter. So, I believe we have some time for this to happen. But it is happening. There is no denying that the EV transition is happening in phases. So, this is where I mean Rane is kind of going in terms of direction.
