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‘Making India A Major Hub’

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In fiscal 2010, global revenues totalled €69 billion heading siemens for the past four years, Peter Loscher plans to come to India soon. The reason for the trip is that the Germany-based company, which already had manufacturing operations in India, plans to make the country one of its major manufacturing hubs. This is driven not only by the fact that there is rapid urbanisation in India, which is a big opportunity for Siemens, but also that the company will increase the export of its made-in-India products. In an exclusive email interview with BW's P.B. Jayakumar before the visit, Loscher talks of the importance of India and other emerging nations as markets for Siemens and its expansion plans here. Excerpts:

The global economy is undergoing a sea change. What strategic changes are you planning in order to maintain growth?
Siemens has already set the course for growth, especially in emerging markets, by focusing on global megatrends. Today there is progressive urbanisation. In Asia, the population in cities has been increasing by about 100,000 people a day over the past five years. Mumbai and Delhi are examples. This has an enormous impact on infrastructure. Asian cities must build plants for drinking water, resource-saving power plants, energy-efficient buildings and public transportation systems. This means huge growth opportunities for Siemens, because we have the technologies at almost no cost for our customers — many of our solutions pay off by themselves! For instance, our energy-efficient lighting, heating and air conditioning systems for buildings reduce energy costs by an average of 40 per cent. We have already improved energy efficiency in about 6,500 public buildings worldwide, including India. Over the duration of the contract, they achieved savings of over €2 billion. And the customer's initial investment was zero. 


Established: Siemens Global is about 160 years old 
Headquarter: Berlin and Munich in Germany
Sectors: The world's largest provider of environmental technologies. More than one-third of total revenues come from green products and solutions
India: Generates average revenues of Rs 11,800 crore per year in India. The group in India comprises about 20 companies, 19 manufacturing plants and 20,000 employees
Turnover: In fiscal 2010, global revenues totalled €69 billion

How important will be the emerging economies for future global business? 
Emerging economies will be the global growth engines. By 2030, the present emerging countries will have grown more than twice as fast economically as developed countries. The BRIC nations (Brazil, Russia, India and China) will grow thrice as fast. In 2010, about one third of our total revenue came from emerging markets — with a local workforce of over 110,000 people. But most of this was generated from high-end-products.

Now, take India: 70 per cent of our addressable market here is in the low- and mid-market segment. Globally, we see a potential for Siemens of more than €200 billion in this segment. There is a huge market that we have not yet addressed. So, we have nominated India to be one of our major hubs for design, development and manufacturing of high-quality products adjusted to basic requirements. Our products made here are not only sold in the domestic market but already exported throughout the world. 

Early last year, you announced plans to invest over €250 million in renewable energy and base-level products in india. What is the progress so far?
A big part of the investment was for increasing our manufacturing footprint in India. Here, we are well underway. We have also made good progress in making India a major hub for products for low- and mid-market segments. We have started developing 60 products for these segments; eight have already been launched with considerable success, our X-ray machines from Goa, for example. We sell these not only in India but in 36 other countries including the US.

Recently Siemens announced a new sector — infrastructure and cities.
Due to the progressive urbanisation, we foresee global infrastructure spendings of around €2 trillion per year. Out of this, the relevant city market for us is a €300-billion business opportunity. We are bundling our offerings for cities — from building technologies to mobility — in our new sector. And we have managed a jump start as we have just recently signed with Deutsche Bahn (German Rail) the biggest contract in our history, which will be a major contribution to the new sector's future growth. The order includes the construction and delivery of up to 300 ICx-trainsets with an order volume of some €6 billion. We are also very active here in India when it comes to efficient mobility. For example, our metro solutions in Delhi.

Your target is to generate revenue of about €1 billion from base-level products produced from India until 2020. Which are the broad business areas and product groups that you are targeting?
Also for the low- and mid-market segment, we have solutions in our core business areas of energy, industry, healthcare and infrastructure and cities. We have a strong local workforce in India, around 20,000. I am convinced that we understand the demands in India and we can customise our products and solutions for many emerging markets. One solution developed specifically for India is our 220-KV gas-insulated steam captive power generation unit that can make industrial units and residential buildings self-reliant.

In addition to our base-level products, we are expanding our plants in Vadodara, Hyderabad, Aurangabad and Kalwa, while setting up new plants in Goa mainly for green technologies. 

Why did Siemens AG increase its stake in the listed Indian company Siemens from 55.3 per cent to 75 per cent?
We have invested around €1 billion to increase our stake in Siemens. This gives us the necessary flexibility to further develop our business.

(This story was published in Businessworld Issue Dated 06-06-2011)