Looking to increase sourcing in India to 50pc in mid term, to set up supplier park: Hafele

New Delhi, Dec 22 (PTI) German interior solutions provider Hafele is looking to increase sourcing from India to 50 per cent in the mid term with a gradual development of supplier base, according to company South Asia Managing Director Frank Schloeder.

The company is also planning to set up a manufacturing unit to produce some of the items that it produces itself in Europe with investment running into “hundreds of crore of rupees”, while also developing a supplier park with an eye on exporting from India in the future.

Hafele India, which has a turnover of ₹1,200 crore expects to triple its business here in the next six to seven years but it is facing challenges due to lack of a proper policy framework for the furniture industry and steps such as the quality control order for hinges slated to come on January 1, 2025, Schloeder told PTI in an interview.

“Till now, the sourcing from India was less than 10 per cent…From 10 per cent now in December, next year, our internal target is that we will hit almost 30 per cent ‘Make in India’,” he said.

Schloeder further said,”Then from 30 per cent, the mid-term target is to cross 50 per cent and then we will see how things evolve.”

He was responding to a query on how Hafele is looking to increase local sourcing.

So far, 90 per cent was imported from different geographies, and China was the biggest market but not the only one, he said, adding, “I think we are less exposed to China than maybe other companies are”.

Explaining why the company sources a majority of components, he said,”Hafele is not a typical manufacturing company. Worldwide we manufacture less than 10 per cent of what we consume on our own.”

The company’s portfolio is a diversified one ranging from home appliances to partitions to furniture, fittings and faucets, among others he said, adding “we are like a platform to a certain degree, and we work with suppliers. So we have a huge supplier base across the world, in all geographies.”

Asked if the company is planning to set up its own manufacturing unit in India, Schloeder said,”Like we do, about 10 per cent of our production worldwide on our own, we will also now create our own set-up in India and manufacture certain products that we do in Europe, in India.”

The route will be first ‘India for India’, but with a mindset from day one that it will be ‘India for the world in a second step’, he said.

“Therefore we will build up a sourcing base in India, for India initially, but with the ambition of Hafele worldwide, in a second step,” he added.

The company will also “create a setup like a supplier park, where we will offer space to our international suppliers from Europe, and we will attract them to come to manufacture with Hafele, for Hafele in India, in our facilities”, Schloeder noted.

“In the second step, we can utilise the cost benefits that we can localise manufacturing to bring these products also to other regions (of the world)”.

When asked about investments, he said,”I don’t want to give a detailed number, but it will be several 100 crores (of rupees) and if the investment of the suppliers are put together in five to six years, it can even reach four digit numbers.”

Commenting on the company’s growth in India, he said,”It is a ₹1,200-crore business that we do here, but with a huge growth potential…We have exponentially grown. It took probably 10 years until the real business really picked up exponentially.”

“We are quite bullish about how India is going to develop,” he said adding, the country is the third biggest market for Hafele in the world after home country Germany and the US.

The US is currently 60-70 per cent bigger than India and Germany, about double of India at present, he added.

On where the company sees its business in India in future, Schloeder said,”It is very difficult to predict, because India is also a volatile market, and while I think the trend is up, the volatility is like a stock curve. You have to take into account fluctuation. We think it’s probably going to triple, if not quadruple, in the next six-seven years, and maybe more, maybe less.”

Yet, he said there are challenges in the Indian market due to policy issues related to the furniture industry.

“We have been now impacted quite heavily with the policy control order for cabinet hinges…and they only give the six months to comply,” Schloeder said.

Stressing that while the company fully supports the idea of quality control orders as it encourages production of quality products in India that can compete anywhere in the world, he said,” (but) using quality controls to stop importing from certain geography is creating a lot of problems, especially for areas where you don’t have healthy manufacturing base.”