Schaeffler India Q1 FY26 earnings call

What moved the numbers, as management explained it

• Export uptick in current year reflects low base from 2022 peak (~₹1,100 cr); recovery tied to post-Ukraine/Russia demand normalisation, not structural shift.
• Localization shift from 74% to 79% over 2-3 years has lifted EBITDA margins via backward integration (roller localization, land, buildings).
• E-axle development costs sit with German parent; India e-axle sale to Tata reported breaking even in first year, insulating India P&L. (accounting)
• GST rate cuts effective Sept 22 create near-term supply chain confusion ahead of festive season; demand traction expected to take time to stabilize. (one-off)

The numbers management led with

• Localization ratio: ~79% (vs ~74% two-three years ago)
• 5-year capex commitment: ~INR 4,500 crore up to 2030
• Vitesco R&D engineers in Bangalore: ~910 engineers

Guidance on this call

What changed since the Fri 25 Jul 2025 call

By business

Balance sheet, capex and funding

• Capex FY26 plan; ~₹400 cr for current year, similar next year
• Capex 5-year commitment (2026-2030); ~₹4,500 cr committed by Group CEO
• Funding; Fully internal accruals; CFO cited 34-year history of self-funded capex
• E-axle full-line capex (when triggered); ~₹200 cr for one complete e-axle line, contingent on EV volumes
• Working capital / specific cash or debt level; Not discussed on this call

The industry, as management sees it

Management views India as a 'heady cocktail' of IC, hybrid, EV and range-extender technologies through 2030. Hybrid share expected to match EV share in 5–6 years; realistic PV EV penetration 15–20% by 2030–32, well below China/Europe. Wind turbine technology is decisively shifting from 2–4 MW to 4 MW+ onshore, with offshore still distant. Railways in transformation around safety, reliability and 100% electrification, with DFCs moving slower than expected.

Risks management named

• Indian steel suppliers lack batch-to-batch consistency for critical bearing components
• EV adoption still single-digit in PVs; full EV transition economically distant
• GST rate-cut timing during festival season creating short-term demand unpredictability
• Two-wheeler OEMs making EV tech in-house limits addressable market for external e-drive suppliers
• Dedicated Freight Corridors moving slower than expected, deferring freight upgrade opportunity

Asked for a number, answered without one

• Capex split between ICE and EV within the ~₹4,500 cr envelope: Cited standalone ~₹200 cr for one full e-axle line contingent on volumes; did not split the broader ~₹4,500 cr envelope between ICE and EV
• Hybrid segment content per vehicle: Said content moves from two-digit to three-digit Euro categories as offering shifts to subsystem; declined to isolate hybrids from total population
• Exports as % of revenue target: Said strategy is no longer export-led due to geopolitical and tariff dynamics; will only serve from excess localization capacity
• Aftermarket earnings potential and monitoring approach: Called aftermarket a 'necessary opportunity' with good margin business; did not quantify earnings or monitoring metrics

Every question, with its answer

1. 1. Localization and capex roadmap

   Questioner, Unknown

   Question. Could you talk about medium-term localization plans? We understand there is large expansion going on with capex of ~INR 500 crore per year over the next 4-5 years. What is the plan in terms of manufacturing and localization over the next 4-5 years?

   Answer, Hardevi Vazirani, Director – Finance and CFO. Over the last three years invested ~INR 1,700 crore. Localization ratio has moved to ~79% (from ~74% two-three years ago). Mix is 60% bearings / 40% non-bearings; non-bearings localization is ~90%, bearings still has headroom. Caution that bearings further localization depends on volume scale.

   Follow-up. How much capex needed over the next 2-3 years on an annualized basis?

   Answer. Current year capex ~INR 400 crore, similar next year. Group CEO has committed ~INR 4,500 crore of total investment in next five years up to 2030.

2. 2. E-axle localization, bearings export hub, aftermarket

   Questioner, Unknown

   Question. Three questions: (1) E-drive/e-axle localization, growth visibility, and vehicle range from 2W/3W/4W; can India be an export base for e-axles? (2) Can industrial bearings be the export hub? (3) Is aftermarket a distraction and how do you monitor channel/debtstock?

   Answer, Harsha Kadam, Managing Director and CEO. Tata Harrier e-axle is primary powertrain; phase-1 (parts integration at Pune) is live; phase-2 (assembly in India) targeted by mid next year with Indian supply partners being developed. For industrial bearings, India is already the global hub for cylindrical roller bearings (manufacturing + engineering). On aftermarket, termed it a 'necessary opportunity' — driven by BS-VI vintage coming back to garages after 4–5 year lag.

   Follow-up. INA product brand — are you doing that here?

   Answer. INA is a product brand; focus is on the product. CRB was erstwhile FAG.

3. 3. E-axle segment coverage (2W/3W/4W)

   Questioner, Unknown

   Question. What range of vehicles does the e-axle cover — 2W/3W/4W?

   Answer, Harsha Kadam, Managing Director and CEO. Tata win gives competency to design/develop/produce e-axles in India. 2W/3W definitely addressable; working on strategy for 2W. Key difference vs PV: 2W OEMs (Ola, TVS, Bajaj) want EV tech in-house, unlike PV OEMs. Expect 'metamorphosis' over time.

   Partly answered.

4. 4. Capex-to-revenue conversion ratio

   Questioner, Unknown

   Question. Group CEO signalled INR 4,500 crore capex over five years (~INR 1,000 crore per year). Is a 2x asset turn a fair estimate?

   Answer, Hardevi Vazirani, Director – Finance and CFO. Capacity-only capex follows 1:2 ratio, but localization capex and backward integration (e.g., roller localization, Shoolagiri) does NOT translate to top line. Last 3 years: INR 1,700 crore capex delivered INR 2,800 crore incremental sales; localization ratio improved to 79%.

   Follow-up. Market shares are decent, segment growth is 7–8%. Triangulating whether market share gains or exports are the driver — what's the contour?

   Answer. Same triangulation done internally; 1:2 holds purely for capacity investment.

5. 5. New products driving capex step-up

   Questioner, Unknown

   Question. Couple of quarters back you signalled capex slowdown to optimize existing capex. What is driving the sudden step-up — new products or exports?

   Answer, Hardevi Vazirani, Director – Finance and CFO. New products include Dual Mass Flywheel, planetary gear, e-axle, plus backward integration and process localization. Full e-axle line alone would be ~INR 200 crore — gated by EV volumes expected to reach 15–20% by 2030.

6. 6. Vitesco integration update

   Questioner, Unknown

   Question. On Vitesco — how should we look at it now? What's the integration status?

   Answer, Harsha Kadam, Managing Director and CEO. Already integrated functionally and on business side — operate as one India sub-region under common leadership. Recent e-mobility wins (battery management systems, electronics + software) came from Vitesco side. Customer now sees one Schaeffler face.

   Follow-up. Does the tiering improve — Tier 3 to Tier 2/Tier 1 — implying pricing power?

   Answer. EV market still single-digit adoption in India; cannot be rigid on system-only play. Will play component game too if it adds value — tier not the primary lens.

7. 7. Capex funding and EV exposure allocation

   Questioner, Unknown

   Question. (1) Funding plans for INR 4,000+ crore capex — internal or external? (2) Today ICE is 35–40% of exposure; in a hypothetical 100% EV market, what's Schaeffler India's EV exposure and how much of capex is for EV?

   Answer, Hardevi Vazirani, Director – Finance and CFO. Internal accruals only — in 34 years at Schaeffler, never taken external funding for capex. EV-only capex allocation not yet meaningful given realistic 15% EV adoption by 2030-32. Vitesco acquisition was the foundational EV move; phased localization + Pune electronics plant + Bangalore Vitesco R&D centre (~910 engineers) form the EV execution stack.

8. 8. Parent-level questions: Vitesco losses, Continental, India valuation leveraging

   Questioner, Unknown

   Question. Three parent-linked questions: (1) Is global EUR 1bn e-mobility EBIT loss mostly Vitesco and is the same in India? (2) Continental automotive-tyre demerger — any overlap or synergy? (3) Global mkt cap ~$5.5bn vs debt ~$8bn; India mkt cap ~$7bn with 74% parent ownership — will parent leverage India's valuation?

   Answer, Harsha Kadam, Managing Director and CEO. Continental: only equity ownership by the family; no overlap or impact for Schaeffler. On e-mobility losses: views it as 'glass half full' — group took the burden, India enjoys benefits via Vitesco acquisition. CFO added India e-mobility is breaking even in year one (Tata e-axle sale); development cost sits in Germany. On parent leveraging India valuation — Mr. Schaeffler said at Shoolagiri inauguration: 'not in that desperate situation'; any leveraging would be for India's inorganic growth.

9. 9. Content per vehicle and regulatory tailwinds

   Questioner, Unknown

   Question. Content per vehicle (CPV) for 2W ICE and PV ICE/hybrid — what regulatory tailwinds could help CPV?

   Answer, Harsha Kadam, Managing Director and CEO. CPV is an outcome metric, not a strategy. In IC engines, value addition was 2–3 digit (Euros); in EVs at system level, 4–5 digit. Strategic shift from component → subsystem → system is what adds 'zeros'. Mathematically CPV will move up. For 2W: base of 20–24 million units, ~20% EV adoption already; re-engineered for BS-IV to BS-VI transition earlier, ready for next regulatory shift.

   Follow-up. Would Schaeffler be a beneficiary of ABS regulation in 2W?

   Answer. Not in ABS today; core 2W IC engine portfolio is bearings (needle, ball, cylindrical, taper). Strategy on 2W EV still being shaped — every 2W OEM wants in-house EV tech, unlike PV.

10. 10. GST rate cut impact on aftermarket

    Questioner, Unknown

    Question. With further GST rate cuts, do we see aftermarket traction improving given unorganized-to-organized shift after initial GST introduction?

    Answer, Hardevi Vazirani, Director – Finance and CFO. Short-term confusion on MRP changes required by 22 Sept; supply chain already disrupted. Diwali demand pickup unlikely. Will take longer for demand normalization where GST has reduced. Net credit/debit effect on Schaeffler as manufacturer: NIL.

    Partly answered.

11. 11. EPS, E-clutch and adjacent modules

    Questioner, Unknown

    Question. Can you get into EPS and other modules given the motor technology?

    Answer, Harsha Kadam, Managing Director and CEO. Already in portfolio: E-clutch (well received by commercial vehicle OEMs), EPS, rear-wheel steering. Technology exists; waiting for Indian customer pull. E-clutch works via electric-by-wire signal replacing mechanical/hydraulic clutch.

12. 12. Hybrid plans and railway market potential

    Questioner, Unknown

    Question. (1) Medium-term 3–5 year plans on hybrid side given Kia, Mahindra announcements; any CPV estimate for hybrid? (2) Railway market potential over 3–5 years.

    Answer, Harsha Kadam, Managing Director and CEO. India is a 'heady cocktail' of IC, hybrid, EV, range extenders. Hybrids: success stories with Japanese OEMs; locally producing planetary gearboxes. Hybrid share expected to match EV share in 5–6 years per market research. CPV for hybrids not isolatable, but as subsystem offering CPV moves from 2-digit to 3-digit (Euros). Railways: positioned on reliability and 100% electrification theme — strong in current-insulated bearings for electric locos; Class K bearings approved for higher-speed Vande Bharat-type passenger locos; freight wagons still legacy tech but expect upgrade cycle.

13. 13. 2-wheeler revenue exposure

    Questioner, Unknown

    Question. What's the current 2-wheeler exposure in the overall portfolio?

    Answer, Harsha Kadam, Managing Director and CEO. 2W exposure ~5–6%. Industrial business is ~40% of total. Within industrial, 2W + off-road put together is ~20–25% (on CY basis).

14. 14. Wind segment and technology transition

    Questioner, Unknown

    Question. On wind — high-level read on demand and capex implications.

    Answer, Harsha Kadam, Managing Director and CEO. Wind is unique: 80–85% of turbines made in India are exported. Technology shifting from flagship 2–4 MW to 4+ MW; 6 MW already arriving; 9+ MW expected. Currently manufacture products up to 4 MW in India; will move to larger-diameter bearings. Offshore still distant — samples off Gujarat coast; 10–15 MW capacity there.

    Follow-up. Market share gains in wind and which other segments?

    Answer. Wind: very strong share in gearboxes, main bearings and (sometimes) generators. Products made in India shipped worldwide.

15. 15. Class K bearings for railways

    Questioner, Unknown

    Question. Class K bearings — is this for DFC?

    Answer, Harsha Kadam, Managing Director and CEO. Class K is for axle boxes in bogies. Approved. As railways implement Class K, Schaeffler will be an important player.

16. 16. Raw material sourcing and localization of critical steel

    Questioner, Unknown

    Question. Raw material: high-grade chrome steel (52100) — large price gap between Chinese (INR 80–85/kg) and Indian (INR 135–140/kg) supply; Chinese imports also banned. Are we building in supply chain resilience for core bearing capex?

    Answer, Harsha Kadam, Managing Director and CEO. Schaeffler does not buy from China. Sourced from India, Japan and Korea. Some critical-application steel still imported from Japan/Korea because Indian suppliers lack batch-to-batch consistency — Ministry of Heavy Industries pushing for local sourcing but quality not yet at mark. Rings already localized; rollers/balls not yet for critical applications. Brand image and high repair costs in wind (60m hub height) preclude failure risk.

17. 17. Exports scale-up and geographic mix

    Questioner, Unknown

    Question. Exports have done well — what's the scale-up plan? Which 10 markets and end-segments?

    Answer, Hardevi Vazirani, Director – Finance and CFO. Exports primarily industrial bearings (automotive supply chains are localized in country/city). Current year uptick is base-effect driven — 2022 peak was ~INR 1,100 crore; demand recovering post Ukraine-Russia. Mix: ~50% Europe, 10% USA, 40% China + Asia + Southeast Asia. Europe growth ~3–4%; expect more from Southeast Asia and Korea via distributor outreach.

    Follow-up. On a 5-year basis, can exports be 25% of revenue?

    Answer. No specific target — strategy is localization-first; whatever excess capacity remains serves group companies. No targets given tariff/geopolitical volatility.

Topic by topic, in the order it was spoken

In their words