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On the fast lane to growth

Edcol Global is riding on the robust automotive industry to power its own global expansion.
Tuesday, March 29, 2016 - 05:50

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In India, Edcol Global's biggest market, growth in sales of passenger vehicles was the fastest among the eight largest auto markets in the world in the first 11 months of 2015.

ESTABLISHED in 2001, Edcol Global is an international procurement and trading company that sources for parts, components and raw materials to support its customers in the automotive industry.

In particular, the homegrown company services manufacturing facilities located in India, the United Arab Emirates (UAE), Europe, South Africa, Thailand and most recently, Mexico and the US. These plants are involved in the fabrication of various wire harness, polymer processing and sub-assemblies for the automotive industry.

"Our sourcing activities is worldwide with the goods either going direct to the manufacturing plants or coming into Singapore for consolidation before being redistributed to various manufacturing locations," said Edcol Global director Eddy Kok.

"These manufacturing facilities are essentially Tier One suppliers to major automotive manufacturers such as Toyota, Honda, Tata, Mercedes, Ford, GM, Nissan and others."

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The firm's key market is India, which accounted for US$8.1 million, or 75 per cent, of its total revenue in 2015. This was a 74 per cent increase over the previous year. The UAE was a distant second, contributing just under 10 per cent to revenue. The addition of Mexico and the US to Edcol's customer markets has also helped spur the company's growth in recent years.

"I would say that for the last financial year, India is still the main driver with Mexico and USA coming on board being the booster. The India automotive industry will continue to drive our growth," said Mr Kok. Edcol's solid performance in overseas markets earned it in DHL-SME1000 Global Growth Excellence honour at the S1000 awards.

Despite the current volatility in the global economy, Mr Kok believes that the automotive industry is a more stable one compared to others such as consumer electronics, which have relatively short product life cycles.

"People will continue to want to own cars as it signifies their economic status. In difficult times, perhaps they will buy a smaller car but people will still want to own cars. As long as there is population growth - and India has got a huge population - the automotive industry in India and generally in the world will continue to grow," he explained.

Low oil prices are also likely to help drive demand for cars, Mr Kok noted. "While most would lament that there is a slowdown in the economy, I am still positive about growth for this year. It may not be in the region of 20 to 30 per cent but growth is still there."

Indeed, sales of cars and light trucks in the US set a record for 2015 at around 17.5 million vehicles, according to industry forecasts. According to research firm IHS, the US auto market has been fuelled by a combination of low interest rates and low petrol prices. IHS analysts expect the market to continue to grow in 2016 and 2017 despite expected interest rate hikes.

In India, Edcol Global's biggest market, growth in sales of passenger vehicles was the fastest among the eight largest auto markets in the world in the first 11 months of 2015. Sales grew at 7.64 per cent over the previous year, making India the world's fifth largest passenger vehicle market by volume, surpassing Brazil. China continues to be the world's biggest auto market by volume.

MIDDLEMAN RISKS

Yet, as Edcol Global is essentially a middleman, its business is exposed to any major shifts in the purchasing policy of the OEM manufacturers, their customers or even their suppliers. The automotive industry also has many compliance requirements such as emission standards, safety requirements and other environmental compliance.

"It is a heavily regulated industry so any changes in regulatory policies especially global ones will have an impact on the business," said Mr Kok.

He added: "The supply chain is also very interconnected. A good example would be when an OEM is caught violating a regulatory compliance. Companies that are supplying to the OEM would be implicated whether directly or indirectly. The challenge is really to stay relevant and ensure we are adding value to the supply chain."

While the company has no control over policy changes or compliance issues, what it can do is to stay nimble in order to adapt to changing conditions. This means keeping its workforce lean and maintaining a simple corporate structure. Leveraging technology is another means of staying competitive, noted Mr Kok.

"We will have the flexibility, efficiency and quick decision making as an SME should to respond to any such changes more rapidly," he said.

Going forward, Edcol Global will continue to expand to markets where its customers go to. In particular, it plans to deepen its presence and increase its sales in newer territories such as the US, Mexico and Thailand.

However, as resources are not infinite Mr Kok is wary of stretching the company's resources too thin by entering into new business segments; at least not right now.

He said: "We would always see ourselves as a 'Not Yet' company so, who knows when that opportunity comes."

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