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Revving up right-hand drive converted production

13 Mar 2022

 
  • In conversation with Autogroup International Executive Co-Chairman Rob Hill
  By Shenal Fernando In the 21st Century, an analysis of international trade is incomplete without considering the role played by re-exports. Within modern global value chains, the role played by re-exports continues to grow. In 2020, re-exports in Sri Lanka passed Rs. 100 billion for the first time, reaching Rs. 146.6 billion, up 289.4% YoY and accounting for 7.4% of total exports for said year, which is a significant improvement compared to 2019, when re-exports only accounted for 1.8%.  In this burgeoning re-export industry of Sri Lanka, Autogroup International is a veteran player whose unique ‘no foreign exchange’ business model makes it a very attractive entity in the current economic conditions of the country where foreign exchange has become the most valuable commodity.  Autogroup International is a 100% Australian-owned Board of Investment of Sri Lanka (BOI) company established in Sri Lanka in 2003, which functions as a reverse engineering facility specialising in left- to right-hand drive conversion on American automobile brands. Under its ‘no foreign exchange’ business model the products, i.e. the vehicles that are shipped to Sri Lanka, are paid for by the foreign customers – Autogroup International does not possess its own stocks. Therefore, any vehicle that arrives in Sri Lanka to be converted to a right-hand drive vehicle has already been paid for overseas. As a result, there is no outflow of foreign exchange. Furthermore, when Autogroup International carries out its value addition through its left- to right-hand drive conversion, it receives foreign exchange as payment from its customers before the converted vehicle is dispatched. Therefore, this unique business model is a positive contributor to the economy considering the current forex crunch. Due to its business model, Autogroup International has not been overly affected by the foreign exchange liquidity crisis observed in the country because the organisation is a BOI value addition business which re-exports its products and does not sell them to the local market. Historically, the organisation has sold to the local market, but at low volumes. Thus, the current ban on selling to the local market has had little to no effect on the organisation. Speaking to The Sunday Morning Business, Autogroup International Executive Co-Chairman Rob Hill stated: “We aren’t hugely impacted by the forex constraints other than the difficulty faced in importing parts and supplies such as fibreglass. Therefore, the impact from this forex crunch is limited to the absence of our traditional supplies which we would usually have on our shelves, because we are unable to bring them down.” As an Australian-owned business, its Head Office is located in Melbourne, where it has another facility. The business operates from both locations with a vast majority of the conversions being carried out in Sri Lanka. Describing the growth of the company, Hill stated: “It started off as a small enterprise with a handful people and relatively few vehicles going through, and has grown over the last 20 years. Particularly in the last two or three years its growth has accelerated under Chamath’s leadership, becoming a large and successful enterprise.” Adding to this, Autogroup International Sri Lanka Managing Director Chamath Tennekoon told The Sunday Morning Business that the organisation had started 19 years ago with only five employees and it had grown to employ over 150 employees at present. He further stated that its services were compliant with Australian Design Rules (ADR), which was no easy feat. According to him, Autogroup International is the only entity in Asia outside of Australia that is ADR compliant for left- to right-hand drive conversion of vehicles. He pointed out that over the past two years the organisation had experienced a significant surge in its volume, starting from the later part of 2020 and all through 2021. Because the overseas automotive market had been thriving over the past 18 months or so due to increased consumer demand, the order books of Autogroup International were filled up. Therefore, despite facing several waves of the Covid pandemic, the organisation had been ramping up its production. During 2021 the facility in Sri Lanka had produced over 250 right-hand drive converted vehicles and it is expected to produce 300 by end 2022. This, Tennekoon pointed out, translated to re-exports every week, generating US Dollar revenue for the country on a consistent basis. Considering the current foreign exchange liquidity crisis in the country, the steady forex inflows ensured by the organisation is an admirable development. Commenting on expansion plans, Hill stated: “We are a growing organisation with an expanding order book and we are currently recruiting about 60 people across all disciplines including electricians and mechanics to our engineering teams, etc. Our key focus over the last six weeks and the next couple of months is to hire the 60-odd people. This is just the first step. The next phase we are looking at is evaluating building a second facility which will be much larger. We are currently looking at our options.”  Autogroup International is looking to follow the trend of moving into electric vehicles and it has already commenced conversions on certain electrical models. Accordingly, it will be looking to expand to some of the popular electrical vehicles that will be released in the near-term such as the new electric Hummer. “There are mainly two things when we think of the future. One is certainly the volume of vehicles. Instead of doing 30 vehicles a month, how do we get to 50 or 100 vehicles a month? The other is the ongoing challenge we are facing, which is that manufacturers are bringing new models. For example, we are currently converting the new Ford Bronco and to my understanding we are the first in the world to do a right-hand variant. When you get a new vehicle like the Ford there is no manual, YouTube video, or instruction set to follow. Our ability to convert the vehicle from left-hand drive to right-hand drive comes down to our intellectual property and the skill and capability of our team here,” stated Hill. Commenting on the viability of the business, Hill pointed out that most American automobile brands like Chevrolet and Cadillac did not manufacture right-handed vehicles anymore. They believe that the available market in right-hand drive countries is insufficient and therefore the business has the potential to grow further. He explained: “There are only a handful of entities globally that are doing what we are doing, which is left- to right-hand drive conversions, and the quality varies. Some of them are quite rough and some of them, like ours, come out better than they do originally from the manufacturers. There are two elements at play – one is certainly quality. The vehicles we convert are quite expensive, whether they are SUVs or muscle cars. Therefore, the people who are buying our vehicles across Australia, New Zealand, Indonesia, Malaysia, the UK, and parts of Africa expect an incredibly high-quality vehicle. The other key element for the business is the team we have here.”  Commenting on the company’s contribution to social development, Hill pointed out that its unique engineering knowledge and expertise were diffused to local employees and consequently Autogroup International was producing Sri Lankans who possess an incredibly unique knowledge base and experiences on a global level, which was both positive and negative for the organisation. “It’s a good thing because we are able to provide incredibly unique training and skills and we also have some extremely talented people on our team. The downside is that our people, after spending several years with us, are employable anywhere on the planet because of their skills and capabilities,” stated Hill. Explaining further, Tennekoon pointed out that in addition to providing employment opportunities to local and foreign engineering graduates, the organisation had also provided employment to graduates from local technical institutes. He also stated that Autogroup International had collaborated with technical institutes in developing courses in such institutes based on the experiences and knowledge of the business. Autogroup International specialises in the conversion of a range of models such as GMC Yukon, Ford Bronco, Dodge RAM and Challenger, Denali and Sierra, Hummer H2 and H3, and Japanese North American models such as the Toyota Tundra.  


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