American irrigation equipment maker DRTS Enterprises Ltd. closed its injection molding operation in California last month and moved the work to India.
The company said the sharp slide in India's currency made its U.S. production uncompetitive.
India's agricultural industry was the major market for the company's U.S. molding operation, which had six all-electric presses. The plant molded irrigation drippers, which were used in machinery that San Diego-based DRTS also manufactures.
But the rupees' drop from 45 to the dollar in mid-2011 to more than 60 in mid-December put the U.S. operation in a difficult position economically, even though it was highly automated, said DRTS CEO Doron Mamo, in an interview at the Plastivision trade show in Mumbai.
The company may in the future manufacture some machinery in India, although the currency swing has a much smaller impact on the end of its business, he said.
The company manufactures equipment to make drip irrigation systems, a specialized technology that uses a system of plastic tubing and drippers to deliver small amounts of water directly to crops, rather than flooding a field.
It's designed to save significant amounts of water over flood irrigation, and the technology is getting a lot of attention in India, which according to Indian government data, has 17 percent of the world's population but only four percent of its water resources.
“This [India] is our biggest market,” DRTS sales director Edan Shayak said at Plastivision, which was held Dec. 12-16 in Mumbai. “We have sold over 150 production lines in India over the last three or four years.”
Shayak said the U.S. molding operation did well against local Indian manufacturers of drippers, even with shipping costs, until the currency swing: “For three or four years we were fully capable of competing with local manufacturers in India because we were more efficient in the U.S.”
DRTS also has a molding operation for drippers in Turkey, where it has eight injection presses manufacturing for the Middle East, Africa and other markets, Mamo said. The company has invested $3 million in that joint venture facility, where it also has sizable sales and support operations, he said.
In India, the company is not setting up its own factory directly, but rather moving its molds to an Indian injection molding company in Pune. Given the complexity of the drip molds, the key technology is in the mold design, he said.
Mamo declined to identify the local partner but said it's a “very distinguished Indian company with a background in the automotive industry.”
He said DRTS does not see a need to open its own molding factory in India. The company does not expect the rupee to quickly gain back value, and sees some advantages in serving smaller customers with an Indian operation.
The company has about 25 employees in its U.S. offices and contracts out much of the manufacturing for its irrigation machinery, Mamo said.
While the slowdown in the Indian economy in the last year or two has hurt the company's business, particularly as customers have a harder time getting financing, he said he believes the country's government long-term is committed to drip technology.
“I think the commitment of the government to the drip market is clear, substantial and consistent,” Mamo said. “They understand clearly the importance of saving water in a country with over 1 billion consumers.”
Shayak said India has a lot of untapped potential for drip technology, but more education is needed to convince more farmers of its value.
“India is getting there,” he said. “The potential is not reached. They are under 15 to 20 percent of what is possible.”