Alstom promoting 'Make in India' initiative globally: CEO Henri Poupart-Lafarge

In an interview with Mint, Alstom chief executive Henri Poupart-Lafarge detailed the company's plans to scale up domestic operations and promote the 'Make in India' initiative globally. This will soon include exporting electric locomotives made at its joint venture facility in Madhepura, Bihar. The goal is to boost both domestic and export revenues in India to over 1 billion euros. 

Edited excerpts from the interview:

Q. FY24 was difficult for Alstom with cash-flow issues. How is the situation now?

It was an intense but positive year. We continued the integration of Bombardier, benefited from a strong global market and good commercial momentum, and improved our cost stability. While we faced cash-flow issues in the first half of FY24 (April 2023-September 2023), these were corrected in the second half (October 2023 - March 2024) with a new financing package. Overall, it has been a year of progress and evolution, and we are now back on our feet.

Q. So this year looks much better than the last?

A. Yes, there was volatility in our cash and a smaller commercial momentum in the first half of last year due to delivery issues, which were resolved in the second half. Globally, we are seeing continued improvement, though there were some necessary balance sheet repairs recently implemented.

Q. Did the problems also lead to asset divestments?

Yes, we divested a specific signalling technology asset in the US, focusing on the country's mining sector.

Q. How has your performance been in India during this period?

Our performance in India has been strong. We've stabilized projects at our Savli and Maneja manufacturing facilities and improved management across different sites. We localized operations, creating a unified footprint for sales in India and globally. We continue to expand our capacity and programmes, making 2024 a very successful year.

Q. Alstom received many orders in India in 2022. What is the current situation?

We continue to receive orders and have a large order book for urban markets, including metro projects in Bhopal and Chennai. We also have orders for the commuter segments with the National Capital Region Transport Corp (NCRTC) and the Regional Rapid Transport System (RRTS) corridor. These orders are being manufactured at Savli, Gujarat, and our portfolio remains strong.

Q. Last year, you mentioned plans to increase engineering capacity in India. How is that progressing?

A. Currently, about 25% of our Group engineering is done in India, with plans to increase this to over 30% in the coming years. We have moved from project and application engineering to product engineering, development, and R&D, significantly enhancing our value chain in India. We are also announcing new programmes in signalling and software.

Q. Has the Bombardier integration been completed in India?

A. Yes, it has been fully completed. We are now focusing on incorporating best practices and working on traction projects across all our facilities from Coimbatore to Maneja in Gujarat.

Q. What will we see next from Alstom in India?

Beyond our 320 million euro capex investment, we are emphasizing investment in human capital to foster more innovation from India for both domestic and global markets. We plan to introduce advanced signalling technology for NCRTC, including automatic train operation (ATO) and the European Train Control System (ETCS), which optimize energy use and reduce journey times.

Q. How is India positioned in terms of exports?

We can discuss exports from India in three key areas:

About a third of Alstom's global engineering is done in India, making every Alstom project partially made in India. This includes significant contributions in signalling and software technology development.

We've significantly expanded our component making capacities at the Coimbatore factory to produce better motors and electrical cabinets. Additionally, we've localized the production of circuit breakers at our Maneja plant. Coimbatore has become a major export hub, manufacturing essential components such as traction converters, auxiliary converters, looms, cubicles, and a new portfolio of traction motors.

Our production facility in Savli is a vital contributor to Alstom's exports. We manufacture bogie frames and flat-tops for trams, fulfilling orders for international markets. Through these efforts, we are actively promoting the 'Make in India' initiative globally, reinforcing our commitment to this cause.

Q. How much of your India manufacturing is exported?

Nearly a third of all components produced at our Coimbatore facility are exported. With experience in engineering and manufacturing electric locomotives in Madhepura, we now have the capability to export locomotives from India. Projects in REM, Montreal, and Sydney Metro have been engineered and manufactured here.

Q. Do you foresee an expansion of the market in India?

India is a large market, and we are working to translate the need for railway systems into projects and development. Many big cities are developing new lines, and Mumbai, in particular, is working on several urban and other railway projects.

Q. What about the competition to Alstom in the Indian transportation sector?

While we face competition, Alstom enjoys a strong presence in India due to the 'Make in India' initiative and our high level of localization, which has reached 70% for Metro and 90% for Locos.

Q. Alstom has invested heavily in India over the last decade. Do you anticipate continued growth in the next decade?

Absolutely. Despite our current setup, we are still far from meeting market needs. Given India's size, several new lines should open each year. We are collaborating with the Indian government to accelerate project implementation.

Q. Are you working with Indian Railways to improve train operation safety?

Yes, we are working with Indian Railways in enhancing railway network safety in the country, which is crucial for everyone. The ETCS system, suitable for dense networks, is one solution we are implementing.

Q. The railway minister mentioned that Alstom is an approved vendor for the Kavach system. Is that true?

Yes, we are involved in parts of the Kavach system, which is set for a nationwide rollout.

Q. What about the aluminium train tender?

Aluminium technology will definitely come to India. It is different from stainless steel and increasingly used in Europe. We expect similar adoption in India soon.

Q. Are you involved with the Vande Bharat trains?

Yes, we manufacture major electrical components for the Vande Bharat trains, including propulsion systems, HVAC, and batteries.

Q. What are your views on the production-linked incentives (PLI) scheme for railway components?

Greater localization in India is beneficial. It helps bring global suppliers to India and upgrades local manufacturers' capabilities to produce our components.

Q. Many of your markets are undergoing elections. What is your perspective on this?

Rail infrastructure enjoys broad political support. In the US, the Jobs and Infrastructure Act, which aims to improve infrastructure, received bipartisan backing. Similarly, in the UK, both major parties support rail network expansion. Globally, there is a push for more urban rail networks to alleviate congestion, address climate change concerns, and enhance living standards. Therefore, elections do not pose a concern for us.

Q. What is your take on the ease of doing business in India?

I believe India is moving in the right direction. Speed is crucial because infrastructure projects are inherently complex worldwide. It is essential to find the right government setup that balances the need for strong, cost-effective products with the agility and flexibility of local operations to enable quick decision-making. Achieving this balance allows cities to effectively promote their own urban systems, and India is heading in that direction.

Q. How is your loco joint venture in Madhepura performing?

A. The locomotives are performing well, and we are now focusing on their maintenance.

Q. What about new maintenance contracts?

We have a maintenance arrangement with the NCRTC, setting a positive precedent for the industry. Maintenance contracts offer significant benefits to operators. Our trains are designed for maintainability, ensuring a smooth transition from manufacturing to warranty and maintenance. Inside the trains, many components and software systems require continuous upgrades and new cybersecurity measures. The market trend is not just to deliver a product or solution but to ensure ongoing support throughout its lifecycle.

Q. With this trend, do you need to scale up operations here?

We already operate numerous maintenance sites and plan to establish more to meet growing needs. Globally, we have 270 maintenance sites, with at least 25 located in India. Each site is staffed by a team of 10-20 people dedicated to assisting operators. Additionally, there is an increasing demand for more digital technology in the sector.

Q. What is Alstom doing about sustainability and greener technology?

We are focusing on energy-saving products. For electrified locomotives, we are working on eco-design to increase the recyclability of our different products. India is also working on massive electrification of its rail network, which will reduce carbon dioxide emissions, and we are helping do that.

Q. You also have hydrogen trains.

We have hydrogen trains in our network. But we are bringing battery technology in India. We are also exploring the potential for hydrogen trains in India, drawing insights from trends in other countries. However, the technology needs to mature before we can implement it widely. Developing fuel cell technology is essential for the daily use of hydrogen trains, and we are actively working in this area.

Q. Can you elaborate on the battery technology?

We are currently implementing batteries for traction components and working on adapting these batteries for rail use. While there has been significant investment in batteries for cars and trucks, we are focusing on developing batteries suitable for trains. Efforts are underway to adapt large batteries for rail applications, and we plan to introduce this technology in India, starting with our Maneja plant next year. These batteries will supply auxiliary power in railways, optimizing train capacity in terms of weight and volume and increasing auxiliary power autonomy by 50%. Initially, the cells will be imported from France, but we will eventually move to indigenous cells from India. This technology will be developed for both the Indian market and other markets.

Q. Is this battery technology available in other markets?

Battery technology is still evolving, with various technologies in the market. Although we have battery trains in some markets, their adoption is still limited due to the newness of the technology.

Q. What other innovations do you plan to introduce in India?

We will introduce a significant amount of new digital technology in India. Alstom will be the first in the world to bring Automatic Train Operation (ATO) and the European Train Control System (ETCS) to India. We will also implement new passenger information systems and detection systems to streamline operations. Additionally, we are exploring technology to improve maintenance and enhance train efficiency.

Q. India has become the second-largest market for Alstom outside France. Is that correct?

Yes, in terms of our footprint. In terms of value, India ranks fourth or fifth.

Q. How was India's performance as part of the Asia-Pacific (APAC) region?

India contributes about a third of our APAC revenues. Of the total revenues in India, 25-30% typically come from exports. Over the past two years, we have secured orders worth over 3 billion euros from the Asia-Pacific region, representing 17% of our total orders, with India's share being about 1 billion euros. The APAC region accounts for 14% of Alstom's total sales, amounting to 2.4 billion euros in FY24. Alstom's backlog of orders in India is 3.6 billion euros, which is just under 4% of the company's total backlog.

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