ZF Commercial Vehicle Control Systems India Limited (NSE: ZFCVINDIA) Q2 2025 Earnings Call dated Nov. 12, 2024
Corporate Participants:
P. Kaniappan — Managing Director
Sweta Agarwal — Chief Financial Officer
Analysts:
Annamalai Jayaraj — Analyst
Mukesh Saraf — Analyst
Lakshmi Narayan — Analyst
Nirali Gopani — Analyst
Rahil Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the ZF Commercial Vehicle Control Systems India Limited Q2 FY’25 Earnings Conference Call hosted by B&K Securities India Private Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Annamalai Jairaj from B&K Securities. Thank you, and over to you, sir.
Annamalai Jayaraj — Analyst
Thanks, team. Good morning. Thank you for joining us today and welcome to ZF Commercial Vehicle Control Systems India Limited’s call to brief you on the — on the quarterly earnings.
Today, the second quarter earnings for FY 2024-’25 will be presented by the management team of ZF Commercial Vehicle Control Systems India Limited. Your host today from ZF Commercial Vehicle Control Systems India Limited are Mr. P. Kaniappan, Managing Director; and Ms. Sweta Agarwal, CFO; and Ms. M. Muthulakshmi, Company Secretary.
I’ll now hand over the call to Mr. Kaniappan who will provide further insights into the results. Over to you, sir.
P. Kaniappan — Managing Director
Thank you, Mr. Jayaraj. Good morning to all of you. I warmly welcome you all to ZF Commercial Vehicle Control Systems India Limited’s second quarter results for FY 2024-’25. Certain forward-looking statements that we’ll make today are based on management’s good faith expectations and beliefs concerning future developments. As you know, actual results may differ materially from these expectations as a result of many factors. ZF Commercial Vehicle Control Systems India Limited’s Results for the Quarter ending September 30, 2024, were published on November 8, 2024. They are available on the website www.zf.com, under the ZF CV India Investor Relations section. We hope that you have had an opportunity to go through them. A transcript and the recorded audio of this call will also be made available on the website www.zf.com under the ZF CV India Investor Relations section.
I am happy to talk to you today as we give you an update about the business of the company. Economic Update: I would like to start with a quick update on our operating environment, which is influenced by economic factors and the development of the commercial vehicle industry. The global economy remained resilient and is expected to maintain stable momentum over the rest of the year, amidst downside risks from intensifying geopolitical conflicts. In India, real gross domestic product, GDP, registered a growth of 6.7% in Q1 2024-25, driven by private consumption and investment.
The Reserve Bank surveys indicate an improvement in consumer and business sentiments. Government expenditure has improved in Q2 2024-25 and this trend is likely to continue during the rest of the year in line with the budget estimates. Private corporate investment is gaining steam with seasonally adjusted capacity utilization improving in Q1 2024-25, and healthy balance sheets of banks and corporates. The two major drivers of GDP are consumption and investment which is expected to sustain the momentum observed in Q1. Consequently, the real GDP is projected to grow at 7.2% in 2024-25 with Q2 at 7%, Q3 at 7.4% and Q4 at 7.4%. Source: RBI’s MPC October 7 and 9, 2024.
Indian Commercial Vehicle Industry: The commercial vehicle industry’s shift towards Intermediate Commercial Vehicles continued into Q2 FY 24-25. This trend, coupled with other factors including decreased Government capex on infrastructure projects, cautious buying behavior, muted demand during the initial phase of the festive season, decline in the mining sector due to excess rainfall, adverse and increased Medium & Heavy Commercial Vehicle inventory levels, led to lower sales thus impacting the overall performance. Consequent to this, Commercial Vehicle Production above 6 Ton has seen a down growth of 17.5% from 102,514 vehicles produced in Q2 ’24 versus 84,542 in Q2 ’25.
OE Sales: The company’s OE sales were at INR366.5 crores this quarter, compared to INR449.4 crores in the same period last year, a decline of 18.5%. This decrease was mainly due to reduced vehicle production, and lower content per vehicle driven by a shift in the vehicle mix toward buses and ICVs. Due to these challenging conditions and our strategic exit from low-margin products, we initially anticipated a Value Per Vehicle of INR40,000. However, we raised our VpV to INR43,000 through targeted product launches. These products include Electronically Controlled Air Suspension for coaches and electric buses, an increase in penetration of OptiDrive AMT by extending it to additional vehicle platforms, upgraded Air Processing systems for a leading OEM, and a new Pressure Control Valve for transmission systems.
An uptick in vehicle registrations in October 2024 signals a positive trend, and we are optimistic about sales growth in the coming quarters based on the following assumptions: The anticipated resumption of infrastructure projects and favorable policy decisions, including the acceleration of EV bus tenders under the Prime Minister e-Drive scheme successor to FAME-II. Two, focus on new products like Lift Axle control system, Pressure Control Valve for manual transmission, and penetration increase of AMT OptiDrive kit position us well for stronger sales performance. Three, with increased demand for buses, we are focusing on bus-specific aggregates, such as door control systems, and increasing the penetration of Electronic Stability Control. Fourth, the company’s strategic decision to focus on supplying Trailer ABS kits to trailer manufacturers, enhancing trailer safety. Five, expanding our footprint in EV aggregates, including electric compressors and electronic braking system, aligning with evolving market trends and customer demand. Six, proactive collaboration with original equipment manufacturers in anticipation of potential government mandates on Advanced Driver Assistance Systems, ADAS, including features like Advanced Emergency Braking and Lane Departure Warning.
Aftermarket: Turning to the aftermarket segment, our performance in Q2 FY 2024-25 shows a positive trend, with aftermarket revenue reaching INR126.6 crores, over INR118 crores over the corresponding period in the previous financial year, representing a 4% growth. The slowdown in growth can be attributed to STU sales dropped by about 10% in Q1 and 14% drop in Q2 due to financial constraints among some state transport undertakings. Export sales were down by 33%, impacted by supply chain disruptions arising from geopolitical situation in Bangladesh and Sri Lanka. In the western region, demand for general spares declined due to excessive rainfall. Decline in the trailer segment affecting overall performance. Additionally, Diesel Exhaust Fluid supplies were disrupted due to technical-grade urea price stabilization in Q1 and the implication of BIS certification requirements to be enforced in Q2.
However, we are taking proactive measures to achieve our growth objectives, and implementing several strategic actions. One, we are intensifying efforts to secure more orders for Door Control Systems, by working with ARAI-approved bus bodybuilders and targeting additional revenues to offset the decline in traditional products. Securing advanced schedules from export markets, to improve supply chain management and transition from a minus 33% decline to a positive growth rate. Working closely with EV bus manufacturers to provide diagnostic software and brake components and we aim to grow our presence in this expanding sector. Additionally we are expanding our offerings for harvester combine machines, which will help increase the average value per vehicle.
Exports — Exports of goods: In Q2 of FY 2024-25, the company achieved export sales of INR299.4 crores, a 3% decline compared to the same quarter last year. This decrease was primarily due to a drop in our export to one of the OEMs, driven by decreased EV production in Europe. Despite these challenges, Inter-Company sales of other products grew by about 9.3% year-on-year, supported by the start of production for heavy-duty clutch compressors and actuators for major global OEMs. We anticipate growth in heavy-duty compressors and actuators in the coming months, which will contribute to modest overall export growth.
Export of services: In Q2, the export of services grew by 25%, with a service income of INR116 crores compared to the same period in the previous fiscal year. This growth was driven by an increase in engineering and related support activities provided to our global teams.
Digital business: In Q2 FY 2024-25, our digital business achieved a business income of INR9.2 crores, a growth of 47% compared to the corresponding quarter in the previous financial year. This performance was driven by additional business acquisitions in connected ADAS, Advanced Driver Assistance Systems and Driver Behavior Monitoring Systems from a major fleet operator, along with a steady increase in customer subscriptions for our existing connected services. Subscription revenue increased 53%, with active connections rising by 36% in H1 FY 2024-25. The growth was further supported by strengthened field support and targeted customer awareness initiatives.
R&D and Engineering: ZF CVS India recently developed a state-of-the-art Electronic Stability Control test track, with a steering pad, at our existing proving ground. This facility, certified by TUV Rheinland and ARAI, positions ZF as a comprehensive, end-to-end systems solution provider for advanced braking and active safety systems. The new track is specifically designed to facilitate the end-to-end implementation of ESC solutions, Electronic Stability Control solutoins, accelerating their adoption in the commercial vehicle market. This addition complements our existing ABS test track and provides a controlled environment for testing the stability, agility, and handling performance of vehicles. Our facility will support testing across a wide spectrum of vehicle types, including two-wheelers, passenger cars, light commercial vehicles, heavy commercial vehicles, and tractor-trailers. This development aligns with ZF CVS India’s strategic objectives to enhance safety and sustainability in the long term.
As part of the global footprint expansion, our Ambattur facility has been designated as a Center of Excellence for ICE engine compressor testing. This facility will serve as the global competency center for validating ICE engine compressors ranging from 160 CC to 704 CC. The expansion will enhance our ability to cater effectively to both domestic and international projects.
IT and Digitalization: I’d also like to share that we are accelerating the transition to data-driven solutions through several projects leveraging data science, machine learning, and deep learning to address critical business challenges. Additionally, we’re building a strong team of data scientists, platform engineers, and data engineers to advance our capabilities and ensure future readiness.
Light Commercial Vehicles: I’m also pleased to inform you that ZF CVS India will be entering the light commercial vehicle LCV segment, with our product portfolio and expertise from the heavy commercial vehicle sectors. Our offerings will include products such as Hydraulic AS, vacuum brake boosters, vacuum pumps, Advanced Driver Assistance Systems, and lightweight calipers. This move is anticipated to contribute around EUR90 million in annual revenues by 2030, with double-digit profit margins, over the long term.
ESG: On the sustainability front, our facilities in Ambattur, Mahindra City, and Oragadam are now fully powered by 100% renewable energy. This significant achievement has been made possible through a combination of onsite rooftop solar installations and group captive power supply through renewable energy sources, underscoring our firm commitment to minimizing our environmental footprint. Our new manufacturing plant in Oragadam has received LEED Gold certification for design and construction, making it the first ZF plant worldwide to receive this recognition. Additionally, our Ambattur site has received the First Prize in the CII National Energy Efficiency Competition, which further reinforces our dedication to advancing sustainability and energy efficiency in our operations.
ZF CVS India in IAA 2024: ZF CVS India successfully hosted the ZF India Day at the Jeversen Test track Hannover during IAA Transportation 2024. More than 30 customer representatives from Indian OEMs, including CXOs and teams from engineering, purchasing, and marketing, participated in this event. During the day, customers could witness demonstrations and also experience ZF’s latest products and advancements in e-mobility, advanced safety, and vehicle motion control technologies. The feedback from our customers was highly positive, and this event has significantly strengthened our ongoing technology discussions with the customers. Additionally, ZF welcomed several Indian OEMs at our booth at IAA Hannover during 2024. We presented a range of advanced technologies and facilitated over 15 one-on-one meetings between the senior management of OEMs and ZF CVS leadership. The feedback from these meetings is very encouraging and will reflect strongly in our future discussions.
Awards and Recognition: ZF CVS India has been honored with multiple prestigious customer awards this quarter, underscoring our leadership and commitment to innovation, safety, and customer excellence. The TATA Motors Technology and Innovation Award recognizes our pivotal role in developing advanced active safety technologies, including implementing India’s first Advanced Driver Assistance Systems, ADAS, with Active Braking in commercial vehicles, a milestone that sets new industry standards. Ashok Leyland presented us with the “Impactful Innovation-Gold Award” for our role as a Technology Partner in introducing Electronic Stability Control for their bus range, which our team applicated and homologated in record time to meet regulatory deadlines. Additionally, VE Commercial Vehicles honored us with the Outstanding Contribution in Field Support award, acknowledging our dedication to customer commitment, reliability, and service excellence. Olectra, a leader in e-mobility, recognized us with the Quick Development Partner and Strategic Supplier award, reflecting our partnership in providing advanced systems including ESC, EBS, and ECAS, so EBS electronic braking systems and ECAS, electronically controlled air suspension, for their e-bus platforms.
In the second quarter of FY 2024-25, ZF CVS India received notable recognition in total employee involvement engagements. The teams from our Ambattur facility won the Platinum Award in CII’s Digitech Award under the categories of Productivity, Maintenance, and Energy Management. Additionally, the Ambattur site earned a Platinum Award in the CII National Six Sigma Competition. Our Pune plant also achieved distinction, by winning the Gold Award in the QCFI Case Study Competition. Our employees actively participated in external Total Employee Involvement and related competitions, winning five National awards, four Regional awards, and eight State-level awards across various categories. These accolades were earned through our commitment to excellence and participation in competitions organized by CII, ACMA and Quality Circle Forum of India among others. We remain dedicated to our pursuit of excellence.
CSR, Corporate Social Responsibility: In Q2 of FY 2024-25, the company continued to make a meaningful impact in surrounding communities through dedicated corporate social responsibility initiatives. We installed off-grid solar power systems at seven Primary Health Centers in Chengalpattu, ensuring reliable, uninterrupted power for essential healthcare services. In Barabanki, Uttar Pradesh, we contributed to a more conducive learning environment by enhancing infrastructure at a Government Inter College. Additionally, we provided advanced servicing and testing equipment to two State Transport Undertaking workshops, supporting improved maintenance of braking systems and contributing to safer transportation.
Financial Updates: For your reference, the results were made public at 15:30 hours on November 8, 2024. I hope you have had a chance to go through them. Our overall product sales in Q2 was INR788.5 crores versus INR890.9 crores in Q2 FY 2023-24, a degrowth of 11.5%. Though the market is facing headwinds in the near term, our fundamentals remain strong which is reflected in Profit Before Tax of INR146.5 crores & Profit After Tax of INR109.1 crores in this quarter with growth of 3.7% and 3.3% respectively. Our PBT in Q2 FY 2024-25 is 18.6% of product sales and our EBITDA for this quarter is 22.7% which was 19% in the same quarter of the previous financial year.
We continue to carefully review the environment and our performance to consider further opportunities. Thank you. We now welcome your questions and feedback.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. The first question is from the line of Mukesh Saraf from Avendus Spark. Please go ahead.
Mukesh Saraf
Yes, sir. Good morning and thank you for the opportunity. Sir, before the question, the export number that you mentioned, Mr. Kaniappan is it INR299 crores, sir.
P. Kaniappan
That’s correct. INR299.4 crores.
Mukesh Saraf
Okay. INR299.5 crores. Yeah. Okay. So just coming back to the question, sir, I think in the previous quarters, you mentioned about certain new products in the export segment, especially the new compressor project, the new actuator, as well as I think, yeah, so two new actuators.
So could you give some sense, if we have started seeing revenue contribution from these new export orders that we had spoken about.
P. Kaniappan
Yes, please. So in the case of compressors, as I have earlier said, originally, we started only with the Volvo — Volvo supply of compressors to Volvo globally, for their heavy-duty platforms. Then almost last one year, now we have been steadily increasing our supply to the DAF group, compressors. We actually started with one version 440cc. Now we have moved to 560cc.
We are expecting it to further raise to a higher and capacity compressors maybe with the — with also clutch version of compressors. So steadily raising our position in terms of the size and the size of — size of the compressors and also the volume also increasing. This is quite tough.
Most recently, about a month ago — about two months ago, we have started producing compressors for truck globally from our Mahindra site. This is also a very high end compressor. It’s a compressor with a clutch. So in terms of value, it is much higher. So this is actually in-line with the evolution that we have been working and actually sharing with you all.
In terms of Actuators, again, the position is further strengthening, volumes are increasing. We are — we have added one actuator line in our side because the current Mahindra City is full and there is no space. So now we are expanding. Yeah, it will continue to expand in my view because few customers globally, decided to increase our market share to very close to 100% and at least of them.
So we are — so these two are the growing segments. So one area where we are de-growing is our air supply unit, which is which used to supply to the taskar primarily BMW type of customers. Because of their global maybe volume reduction in the EV sector side.
Mukesh Saraf
Sure.
P. Kaniappan
But we expect that to — in our view that to happen as we move forward. So right now, despite a major drop in the — in the BMW air supply unit business almost about 50%, we are able to recover very close to our earlier numbers in the — through the increase in the other areas, other product lines, which we think going forward, both the BMW business also will recover and we see more volumes as we go-forward.
Mukesh Saraf
Sure, sir. So if I understand, sir, excluding the BMW air supply unit decline, the compressor and the actuator business from here on should only ramp-up further because of these new orders. Is that the correct.
P. Kaniappan
That’s correct.
Mukesh Saraf
Okay. Got that.
P. Kaniappan
So right now we are in the ramp-up phase right in both areas. And we are also building our supply chain and issues, the supply chain to speed-up the.
Mukesh Saraf
Right. Yeah. Got it, sir. Got it. And second question on the domestic business. I think in the past you have mentioned that while ESC is mandatory in buses, still on the implementation side, there is still a lot of gap in terms of the OEMs doing it or the bus bodybuilders doing it or generally, there has been some gap in the implementation.
Is that now being fixed because you were working with the ministry on trying to set things right there. So how is that situation now, sir.
P. Kaniappan
Actually the some improvement, but formally government has taken a stand to cover more buses from September 2025 so, but till then, this application is slightly increasing but not to the full applicable volumes. We are in the range of currently selling about 1,000 ESG systems, but you know the applicability would be at least 3, 4 times of that year.
Mukesh Saraf
Right. And sir, in continuation to this, any visibility on when the ESC regulations will be applicable for trucks as well. I mean, generally, there is a gap of one to two years.
P. Kaniappan
Yeah not yet, got any, any communication or so I am not in a position to give you any update on that part. But on the bus side, there is — there is clarity that from September 2025, more buses also will get covered.
Mukesh Saraf
All right, sir. Got it. Got it. Thank you, sir. I’ll get back-in the queue.
P. Kaniappan
Thank you. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Lakshmi Narayan from Tunga Investments. Please go ahead.
Lakshmi Narayan
Yeah, good morning, sir. Hope you’re able to hear me. Sir, one question in general, sir, we hear a lot about challenges in Europe with respect to some of the auto — auto OEs as well as Tier-1 companies such as Bosch and ZF in terms of how things are going on. Now I also see that ZF is planning to split into two or three companies like ZF Life tech or something.
Now just want to understand what is the implication this has not in particular to the ZF transaction, but in general, what is your read for the Indian auto ancillary companies, particularly to German companies such as yours. Is it an opportunity or is it actually curtails their growth and how or whether it actually helps them to improve export markets, just your thoughts on how to think about this, sir.
P. Kaniappan
Yeah. So the points what you said about even globally, particularly in Europe, more so in German companies is correct. For us my view all maybe short-term topics because it’s driven by the many geopolitical problems, particularly on companies. For us, it it’s more to do with the debt and servicing the debt at a higher interest-rate, etc.
Which I think the — our leadership is pressing it. But the opportunity was though it is not specifically, related to this short term development, but otherwise the opportunities remains open in multiple ways because India, India, which is the cost advantage and produce and also meeting the global standards in terms of car, in terms of quality, if you know, that’s an opportunity, manufacturing side at least in many of the product lines where we have already established here and some other areas also we are looking at whether we can make India’s a manufacturing for not only for — not only for India or even global markets.
So that continues that direction. And our success is largely driven by, how we — we actually show that compelling value proposition to our parent. These are the manufacturing side. So we see, for example, now we make electric compressor, e-compressor and we — so in that segment, for the segment, we are launching the light.
So we are trying to launch it as a global product. Some markets where it is applicable, we are seeing opportunity. Like that certain other products and we are — I think also now evolving. So if you see India also the vehicle configuration, the market, everything is moving towards global. So in terms of engine power, in terms of dark, the transmissions and all those things, that scenario makes many of makes in the product very much relevant to Indian market, which was not the case earlier because the Indian commercial vehicles were at a very much lower and in terms of configuration, in terms of engine cover,.
Typically recently now we have with the transmission whatever happens is outside of the estate company but it gives us an opportunity we are now launching a product called Transmission Control vault which I’ve already launched to one of the customers. So the transmission needs certain control power assist to control, etc. Wherein — so it gives an opportunity.
Similarly, AMT now the market is moving and more and more nine speed and in some cases toll speed. So this will seek and support like products like AMT. So this evolution, this evolution will also help listed part of the business.
The the other area where we see an opportunity to is in the engineering as you, as you see, we keep on adding our resources in India to support the global current because India is a best-cost location with the hike in terms of competency also at a high-level in many areas. So it becomes — it’s easier for a — for them to really set-up expand those things here.
So it will be an opportunity, but the opportunity is not only driven by the recent development. Recent development in my view is a is a short-time or not two years but otherwise from a longer-term perspective, we still we are looking at India as a center of excellence for engineering, manufacturing, etc. So that will continue.
Lakshmi Narayan
Got it, sir. I think from exports point-of-view you know-how, how India will become relevant given this particular transition.
P. Kaniappan
Can you say it again. I couldn’t get the full.
Lakshmi Narayan
Yeah, my question is that how this actually helps exports from India there is a slowdown in the Europe and how can we take position. I can talk about that, it will be helpful.
P. Kaniappan
Yeah. So basically, we are trying to capture the market globally in the area of compressor, let’s say two product compressors and actuators actuators were developed in India, compresses, of course, a global product developed in India, compresses the global product, but manufactured in India now. So these areas, if we want to increase our market share globally. You need to — you need to supply those products at a continuously improving — reducing cost structure.
So that is where we are becoming solutions to our parent organization to position like that. One example is, compressor what we started as one customer now we have moved to three customers and now that further gives us an opportunity to — the scale gives us an opportunity to further improve our pricing, etc.
So that’s how we see it because this cost structure because on the quality as long as we meet the quality standards of global OEMs and the cost is compelling, then you become an automatic manufacturing site. So that will continue to drive the growth for us. And in few product lines, that is already happening. We are looking at more areas because many more product lines than or more opportunities we are looking at that also earlier we had we were doing some DAP compressors also.
Lakshmi Narayan
Now we also started doing compressor for BMW, our car application. Now how this thing has actually expanded in the last two years? And had we succeeded in developing it. And what is the kind of volume we are expecting on a steady-state basis.
P. Kaniappan
Yeah. So we started our — in the compressor — started business with Volvo. We are — it was about 180,000 compressors for per year to Volvo heavy-duty compressors but then today it has come to almost 100,000 because the evolution the vehicle configuration changes and induction of other supplies at a global level etc.
At the same time, we have — we have started supplying it to DAF, DAF, we are in the range of 5,000 compressors. Now we have come to it will go to about 100,000. Soon, we expect it to be another 100,000 compressors, but this is a higher-end configuration. Twin cylinder, after some time we are going to go for a twin cylinder clutch. So the size and the complexity of the product also keep increasing.
Now we are also — as I said, we are also — in the last two months we have started producing compressors for DAV — sorry, Daimler truck AG, DAC, so DTAG.
Lakshmi Narayan
So this is this Volvo you talked about is for cars or for trucks.
P. Kaniappan
Trucks only, all our cars heavy-duty air airbrake compressor and so now we are supplying it to Daimler truck. In a small way, we start about INR3,000. I think it’s a INR3,000 number per month type of volume we are will be soon moving to. Which will keep increasing, both customers will keep increasing.
So if you see in terms of sales, sale volume, what used to be about INR20 crores we see it will become about INR30 crores INR35 crores per month type of volume, the compressor segment itself. Though, there is a reduction in the Volvo, but other customers, other businesses increasing as such overall is a growing segment.
On the BMW, what we are supplying is it’s an air supply unit. It’s a small compressor electric motor. It’s apply unit for the cash, electronic control for air are such high-end car. There because of the, the slowdown of the EV vehicles globally, my assumption, but I’m not having the direct understanding of exactly, why there’s a reduction, but there’s a reduction in the BMW solution that we used to offer, which in my view will come back because this product is not so much only for EV, but it is a — it is for all the — all the applications. But this is — again, I understand it will start recurring.
Yeah. So some products it is continuously improving more. Some products there is a reduction, but overall we see a growth trend.
Lakshmi Narayan
Got it. Sir, on the ESG opportunity, I think about 60% of the buses are actually fabricable too and that is the mix of hydraulic and pneumatic, right. So what has been the traction there in terms of the ESC.
P. Kaniappan
The ESG, there are two-parts for the. One is for the airbrake, there is the ESG, pneumatic ESG we call it from hydraulic ESG. So pneumatic ESG used to be — it’s our portfolio from the beginning and because all the air brakes are the portfolio and now it is the rough the electronic control system for that is applicable for certain applications of the buses and, the actual equipment it also had a lot of challenges because they tried to exclude it for the city you say school buses etc. They were trying to avoid because of different interpretation.
Also, you know whether you are building the bodybuilding was done inside or outside, so whose accountable, were there. With all that today we are selling about 1,000 ESCs for the buses and roughly about 4,000 buses may be producer, we are in the range of 1,000, so about 25% applicability there now is on the on the pneumatic buses. But then the government has understood this and then from September ’25, they are also making more vehicles applicable, which will increase the penetration. I’m not in a position to exactly how much, but then the directionally it is going to increase. This is on the pneumatic.
On the hydraulic it is applicable for the you know the category of vehicles is above the below six ton and maybe above three ton type of vehicles. So we are now supplying it to few customers like Force Motor. Again, the applicability is good in some customers. And most recently, we have — it has been released for Mahindra.
So we see already we are supplying about 400 per month, which will go to about 700, 800 per month. So all put together, we are talking about 1,700ESCs and which it will only continue to increase because ESC as a technology will reduce significantly the rollover action.More and more the market will realize the value that the technology provides and adaptability will keep increasing.
Lakshmi Narayan
Yeah. Got it. Sure. And last on the part.
Operator
I’m sorry to interrupt, sir, can you please.
Lakshmi Narayan
Okay. Thank you so much.
Operator
Okay. The next question is from the line of Nirali Gopani from Unique PMS. Please go-ahead.
Nirali Gopani
Yeah, hi. Thank you for the opportunity. Sir, if I look at our numbers, normally historically, every quarter, we outperformed the OE sales. I know one quarter is nothing to indicate, but can you highlight like why couldn’t we perform — outperform the OE sales in this quarter and do you see this trend continuing.
P. Kaniappan
Yeah. Thank you for the question. So basically, not only the volume came down, normally when the volume comes down, two things happen. One is the mix automatically comes down because the more of light-duty vehicles are produced that in our case, I intermediate commercial vehicle, intermediate commercial vehicle.
So the medium and JV comes down, you can see roughly from 62% to it has come down to 54% during this period. So mix is unfavorable to us. Similarly, the bus volume and the light-duty volume increases where the content is much lower than the MSC. This is point number-one.
Point number two, also the trailer production also comes down and tractor-trailer combination production also comes down. When the tractor-trailer production comes down, we miss the opportunity of, the compos — the increased value because we — when we add value to the trailer, we also add value to the tractor. If you have a trailer ADS, you’ve got a tractor ADS.
So plus you may have all the braking system for the trailer, you have the braking system for the tractor. So the percentage of actual trailers came down about 15% versus last year. So the third dimension is the electric production stop because the government has not in that quarter at least they have not announced the policy and the fame and other things which the no tenders were — the new government did not start the tender.
So the electric buses in which our content is quite high also volume came down. As I said, the deeper, mining also actively stopped again through multiple things, one of that is flooding in certain part of India. All that led to — the numbers were there, but the mix was completely unfavorable to us. Which with the result, our value per vehicle came down to 43,000. In fact we have planned about 47 and all that but 43,000 also would have gone to 40,000, if we have not done anything, but we did quite a few projects we launched during this time.
Of course, not some of these projects are the and some customers who have moved from a normal air processing to advanced air processing our processing. So those things supported us. So we are in the range of in this quarter about 43,000 value per vehicle. So that is the — there is a reason plus few commodity-type products and we are also exiting from the — because those things are in our now.
So we want to be — each part, each — so both customer profitability and product profitability, we are now reviewing and more-and-more we would like to move to a technology — more technology products. Of course, wherever we are able to reduce the cost and still maintain the margin, we would like to supply even commodity products, but then where we are not able to do, we — and customers are not willing to compensate a few products like app tank, etc., which also we have decided to exit. So all these things led to the same. But see, our focus, as I said, was largely on the margin. We would like to really grow the margins and we were — I think the highest was about 17%. Now we have gone to, of course, some ForEx supported us. So even without ForEx, we were very close to 16.9% margin, probably one of the highest in any quarter as a percentage level.
So of course, ForEx also that almost 18.6% we delivered. So the focus more-and-more we are to margin and try to see how we’ll keep improving that part.
Nirali Gopani
Right. So sir, when you say that the content per vehicle has come down to 43,000. So what could have that been three quarter back like from what number have we come down to 43.
P. Kaniappan
Typically, if you see, we are — we were in the range of 45% and we also have a — our plan is to outperform at least 10% year-on-year. So we have to keep improving. So from 45% and one year later late, one year later at lease should be in the range of 50,000. It’s because of the recent last two, three quarters the — when the volume comes down, as I said all-in — it’s not number alone, the mix is also very much, much it becomes unfavorable in participants.
Nirali Gopani
Right. And sir, in your experience, how does the next few quarters, when do we see this trend changing the favorable mix for us.
P. Kaniappan
Okay that it’s also not very predictable, but actually we are seeing some signals already started improvement. The volume — if volume improves automatically the it indicates that the economic activity is more on the fleet profitability is improving. So we will start buying, so we see the few things we already started seeing segments.
One is electric tend — bus tenders have started and one of the customers at least for us, they start buying our products already this month and we see that extending into other customers soon.
In the trailer segment, we are also initiating action to really increase the adoption of ABS because ABS has to be — it’s mandated. Now trailers, it should have an salary ABS, but some of the market the — because largely this is not so much of an army sector and not people are not following it up, following it. But then when we had discussion with the major manufacturers, they were suggesting because we are giving an alternate option of fitting without ABS, the customers they chose that part but because it’s mandated one and we as a company have a commitment to drive safety in this country. We have decided to now supply only with ABS. Largely, it will take some more time.
Maybe in my view, another few months, it will take for us to increase adoption from about 25% to progressively ideally we should be 100% because the regulation. And we are working on that. So trailer side, also we are trying to sell trainer, which gives much more value. Today’s adoption is only about 3% in the trailer. So there is no mandate, but can customers themselves see a good value there. Also, the trailer numbers are also increasing.
Some few signals. I’m not saying that that’s a big uptick in the market, et-cetera. But when these are all a few signals, vehicle production itself has increased from over 27,000, 28,000 to close to 32,000 we are seeing in this quarter. So these are some of the positive signals. Our view is that it will only go up because last year it was the downward movement started in October and continued till August 2024. So whereas this year the improvement starts now, though it is a very small increase. But then last month sales number is also quite decent. This is at least 3,000, 4,000 better than the production wealth number.
We see the things to things to improve because certain things are also based on the government’s decision to, discuss fund for the construction of the project. This is also starting, which has already started I think. So all these things indicate that things are in the positive direction.
Nirali Gopani
Right. And sir, just one last question. If I look at the service income, that has grown very well over the next past few years. So how do we see this trend going ahead.
P. Kaniappan
Yeah, I would request our CFO to answer this.
Sweta Agarwal
Yes. Hi, Nirali. See, the service income is a direct linkage to the number of people that we’re employing in the IT or in infrastructure we are using for the R&D purposes. And sees India as a location where the R&D services or the quality of R&D is quite competitive, equivalent to anything that they would get from a colleague anywhere in the world and hence we see that growing steadily over the next quarters as well.
So we currently have about 1,200 R&D colleagues on-board in large company and we expect to see this increasing as more-and-more of the R&D services are rendered from India.
Nirali Gopani
Perfect. That’s it. Thank you so much.
P. Kaniappan
Thank you.
Operator
Thank you. The next question is from the line of Rahil Shah from Crown Capital. Please go-ahead.
Rahil Shah
Hello. Can you hear me.
P. Kaniappan
Yes, please.
Rahil Shah
Yes, hi, sir. Good afternoon. Sir, so based on the current environment, the situation where you say the market is kind of facing headwinds in certain business segments, but then you also just said that you see uptick and some positive indications so what are your growth expectations then for the next second-half.
So like for full-year FY ’25, what are your expectations over FY ’24. And then you also mentioned you are focusing more on the margin. So what kind of margins do you think you can end the year with. Thank you.
P. Kaniappan
Thank you. So first question on the — we look at the calendar year for our numbers. So next year than December, we are — we are planning about 7% growth in the vehicle production. And because our target is to outperform by about 10%, and from a longer-term perspective, I won’t be able to commit for a quarter here, but so the — these are the numbers we are planning.
And in terms of margin, we — no, there are multiple areas we are working, but only is of course we are trying to see how much we can keep addressing some of our bleeders and part level, if we are not making money, we are trying to see if we can reduce the cost of the supply chain or manufacturing and like that.
Also, there are challenges, we show to the customer and see if improvement. So this process is one. And per se, we are a continuous improvement culture driven company. We are a company and all that. We were the first-in India to get the remain price etc. So that fundamentally put the DNA in our system that we look for improvement everything that we do.
So factory productivity is something that we continuously, see how do we improve our efficiency the system. Supply is also same. But at the same time, this is on the — so at the same time, there is also pressure from the — from the market, from the customers to pause on some reduction every year to them.
With all that, at least what we are trying to do is me and with our CFO. So if you see last few quarters, we are in the range of 16%, very close to 17% at least we will protect this level, first level. Yeah. Yeah. Thank you.
Rahil Shah
And about the growth you said, I believe trying to beat the vehicle production. Am I — did I hear you correctly. 10%.
P. Kaniappan
Sorry, can you say it again.
Rahil Shah
Hello.
P. Kaniappan
Can you — can you ask the question again, sorry.
Rahil Shah
Yeah, yeah. So in the first question which you answered, is that hear you correctly when you said you are trying to beat the vehicle production growth rate you’re expecting in the market, which is 10%.
P. Kaniappan
No. So what I said was next year, we expect in our planning that next year vehicle numbers will be about 7% better than this year. Yeah, this year if you look at it steep drop versus what we originally planned. These are in the range of I think we thought it will be 414 vehicles, 1,000 vehicles, but it come down to almost 390 around that now, where there’s a big drop, 17 — we see 17% drop in this quarter itself.
It won’t fully recover, but at least we leave next year as a full year, there will be a growth of 7% in our planning that’s what we have taken. But then our focus always is and because market growth is not in our control. We have many new technologies, many products which in the very advanced-stage of releasing by customers. Example, advanced systems, they are one of the top customers in India.
So AMP and so many products, we want to outperform. Our standard — our standard objective is to continuously outperform the market by about 10% year-on-year. So that is what I said. So next year also, we would like to outperform. If the market grows on 7%, we outperform about 10% that will drive our growth in the OE segment of India.
Rahil Shah
Okay. Well, for this year, you’re not able to guide a certain revenue growth.
P. Kaniappan
Sorry.
Rahil Shah
For this year, FY ’25, we are not able to guide for a particular revenue growth.
P. Kaniappan
Yes. This year, as I told you, we are actually not even grow. We are growing with only market. In fact, about 1% less than the market growth if you see our numbers, but that was because of some very significant drop-in the mix, unfavorable mix, the actual mix was very unfavorable, plus drop in the trailer production, drop in the electric vehicle production. So many things has affected us and but in the second half it will start definitely we are seeing some signals of improvement.
I’m not in a position to tell you whether that we will be able to do 10% because the exact nature of the growth, everything we have to still watch for at least one or two months-to come to a conclusion. But our intent is to put all our advanced technologies and ensure that we grow 10% over the market every quarter.
We have actually last two, three quarter, we could not achieve that because of the very unfavorable mix and other things, plus the new government and certain projects were not taking up, etc, which in our view is a very short-term type of issue, but then we will be back to our growth margin.
Rahil Shah
Okay. So you’ll try to beat the market in any quarter, but it’s not key at the moment. But however, you’ll try to protect the margins at these levels.
P. Kaniappan
Yeah, that’s our there.
Rahil Shah
Got it. Got it. Okay, sir. Thank you and all the best.
P. Kaniappan
Thank you.
Operator
Thank you. Thank you. The next question is from the line of Lakshmi Narayan from Tunga Investments. Please go-ahead.
Lakshmi Narayan
Thank you, sir. This ESC for trucks, right, when do you think it will become mandatory.
P. Kaniappan
For the — which one.
Lakshmi Narayan
ESC, sir, electronic. Yes, sir.
P. Kaniappan
Yes, ESC is mandated only for the bus trucks, we have not got any signal or any indication the government not in a position to really give any indication, but we are working with the government, but we have to wait and watch on this. First priority, I think is busess, the next increase we expect by September 2025 where more and more buses are getting covered, some up there where we have got some clarity was lagging, but I think that is being addressed from September 2025.
Lakshmi Narayan
So truck segment. So for trucks, which is a next regulation that is going to come, which should be beneficial to us in the next 12 months or so.
P. Kaniappan
Yeah. Next 12 months, we don’t see any big regulation, but what we expect is the is next regulation is advanced system, that is a part of that is AE advanced emergency braking system and lane departure warning system, which is already the standards are actually finalized and steady with the government. And in our view, this will come by 2026, ’27. Again, just estimate our own estimate. But then when the ABS has to come, it — the braking — basic braking system should be further improved, which includes an ESC also and ESC is in other markets it has been a prerequisite to put AEDS. So but then no clear visibility or commitment or a date has been announced yet. But these are all we are ready.
We are working with in all these areas and the discussions are completed and the standards are ready. So it an.
Lakshmi Narayan
And sir, one last question. You mentioned that, you are getting into LCD segment. Now this is — this is the segment which we had global product portfolio or is something which we actually developed in India ground-up. And you mentioned that it’s almost EUR90 million per year is the potential. When do you intend to achieve that.
P. Kaniappan
Yeah. So, if you see, in in itself, we had certain portfolio of products for that segment and we were supplying vacuum boosters, you know vacuum boosters for Tata Sumo and Mahindra type of application both in aftermarket and OE and some of the customers like Swaraj Mazda, motors, they are supplying it.
And then those customers shifted to suppliers, who can supply the full system, including the tandem master ABS etc. In days, we were not having those technologies because we were having only a vacuum booster.
But now, we have the full access to all the technologies from many things, only Vaking booster and Tanda Master are college this is one part, but then we have many other things, very advanced systems integrated ID we call IBC, integrated braking control, which is — which we incorporate all these things as a single solution, like that many, many things.
So the entire range there, particularly on the braking side, entire range is available to the listed company now because that taken at a global level. The decision to give this business to CVS in India, which in CVS we would like to do it from the listed company. It’s a new decision very recently and this is a opportunity is huge because in this segment, the vehicle number is almost same as the MFCG number. So almost another 400,000 or 500,000 vehicles. So we have to see the applicability, etc. But what immediately we have few areas we have already started.
One such thing is the hydraulic ESC, which we are supplying it to now force motor extending it to Mahindra. I talked about which was not just not a the portfolio or CVCS portfolio, which was a pass car business, which we actually brought to India, because there was a mandate and by the time recently exited from the — from the, so our parent asked us to really take responsibility and then go and support the customer.
So that product is being produced in and now we are supplying it to, which is — as I said, extending it to Mahindra. That gives us an opportunity to take up more products. There are many other products available. So all put together. We have already started there, which will — it can give us about EUR90 million by 2030 with about at least double-digit margin can at low-end of double-digit. So that’s what we are saying. So it’s a new area which is moving into the listed part.
Lakshmi Narayan
Thank you, sir. Thank you.
P. Kaniappan
Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question for today’s conference call. I now hand the conference over to the management for their closing comments.
P. Kaniappan
Yeah. I would like to thank all of you for having someone participated in this very useful discussion. So I’m sure we are able to clarify many of your questions. And thank you. Thank you. Thank you. Thank you for your participation.
Operator
[Operator Closing Remarks]