BTTV Exclusive | KPIT Tech co-founder, CFO on why clients' issues are structural, not cyclical

Global automotive industry has been grappling with multiple challenges, including intense competition from China, geopolitical uncertainties and tariffs, top KPIT Technologies Ltd management, as represented by Joint Managing Director and co-founder Sachin Tikekar and CFO Priya Hardikar told Business Today TV (BBTV) on Thursday. These factors, they said, have affected KPIT Tech's clients through supply chain disruptions, higher costs and elevated input prices, ultimately hurting KPIT's business.

CFO Priya Hardikar told BTTV that several of KPIT's clients have undertaken drastic measures to navigate the challenging environment, with some announcing job cuts while others taking significant write-offs to their profit and loss accounts, as part of restructuring efforts.

"Most of the OEMs in our client base have gone through this. Our top two clients reduced their budgets, and about a month ago, we disclosed the potential impact this could have on our P&L. Accordingly, if you look at our Q1 results, we reported a one per cent YoY decline in reported dollar revenue," Hardikar said adding that revenue fell 3.6 per cent sequentially on constant currency (CC) terms," Hardikar said,

She said the revenue decline and one-time forex loss translated into a reduction in profits.

Joint Managing Director Sachin Tikekar said the key issue his firm faced recently was related to two of the top clients. One was a Japanense car manufacturer, which trimmed its electric vehicle programs that KPIT Tech was working on. Ut happened somewhere in the March quarter and had significant impact on KPIT Tech's business because it was the IT firm's top client.

Later, Tikekar said, KPIT's second-biggest client too gave a profit warning towards the end of June quarter.

"That had significant impact on our revenue and we didn't have enough time to adjust our costs. So obviously, that disproportionately hit on our bottom line. There are significant challenges, especially for European OEMs and some of the Japanese OEMs. If you look at them, their number one market was China, number two was the US. In China, they have been consistently losing market share for the last three years now. China market itself dropped by 20-25 per cent year-on-year, uh, in the first half of this year. That made things worse for the European OEMs," Tikekar said.

On top of that, clients are facing tariffs in the US, their second-largest market, Tikekar said,

"They're actually getting squeezed, in between and, it's the same case with Japanese OEMs. All of these happen to be some of our top clients. This is a structural change. This is not a cyclical change. Because of the competitive landscape that has been disrupted by the Chinese car players," Tikekar said.

"There is 30-40 per cent, if not 50 per cent, cost difference and, some of the features are even better. The Chinese have the ability to deliver features and new products much faster than the European and the Japanese ones. So there is a lot of catching up to do," Tikekar said.

The KPIT Tech co-founder said all of KPIT tech's European and Japanese clients are working on increasing their time to market and reduce cost.

"As one of their key partners, it is also our responsibility to help them in this journey to not only reduce the cost of their product by 30-40 per cent, but also help them reduce the cost of production to the same degree," Tikekar said.