Saturday, April 13, 2013

US has one Detroit. India has four.

They are attracting loads of investments and oodles of commitment from automakers. But apparently, some are being preferred more than the rest. Only the best ecosystem will win the day.

Rome was not built in a day. And it has taken years of nurturing and progressive development for Chennai and its neighbourhood in Tamil Nadu to earn the ‘Detroit of India’ sobriquet. Today, seven of the 20 top global automakers have moved into Chennai’s vicinity, where within a radius of 50 to 60 km, an automobile hub has quietly emerged over the years. The world’s leading car makers are located here – Ford, Hyundai, BMW, Renault and Mitsubishi – and so is the world’s largest truck maker Daimler and Japanese commercial vehicle maker Nissan. According to industry estimates, by the end of FY2010-11, the automobile hub in Chennai had an installed capacity to produce 1.28 million cars and 350,000 commercial vehicles per year. That’s huge for an zone already accounting for 42% of India’s passenger car production and 35% of India’s $18 billion worth auto-components production, according to statistics provided by the Tamil Nadu state government. The state’s auto sector has attracted investments worth more than $4.5 billion, which is more than what Gurgaon – another leading auto hub in Haryana in north India – receives. In terms of units produced however, Gurgaon with an installed capacity of around 4.8 million vehicles (1.2 million for Maruti and 3.6 million for Hero Honda) is #1. Hero Honda, which is the world’s largest producer of motorcycles, has two plants in Haryana – at Gurgaon & Rewari, with each rolling out 6,000 units a day.

Chennai has taken many years to become a ‘Detroit’, but staying there seems equally challenging. Recently, another state Gujarat, stole some of Tamil Nadu’s motown thunder from right under its nose. Many players, who for years had believed in the waters of Chennai are today showing increased interest in Gujarat. That they have even expressed it is a natural outcome. It is known well that Chennai was chosen as Ford’s preferred port of call, when it first stepped on Indian soil 16 years back. On July 28, 2011, Ford India announced its decision to invest Rs.4 billion at a plant – not in Chennai but in Sanand (Gujarat). It will be the company’s second plant in the country. The decision must have surely vexed government and industry mandarins in Tamil Nadu, who have in recent years gone to great lengths to sell the state as a preferred auto hub to local and global car manufacturers. And this was not the first instance when Chennai had been overlooked by automakers. In 2009, Volkswagen – Europe’s largest car maker, chose Pune over Chennai when it decided to build its plant in India.

That Gujarat is fast emerging as the poster boy for car manufacturers looking to set up shop in the country does not come as a surprise to those aware of the developments in the world of automotives. Recently, French auto major Peugeot’s Gregoire Olivier (CEO – Asia) and Fredric Faber (MD – India), met Gujarat’s CM Narendra Modi to explore land options for the company’s upcoming plant site in India. The state, given its reputation as being a well-governed and investment-friendly destination, stands a good chance of swinging the Peugeot deal in its favour, even if other contenders like Tamil Nadu and Andhra Pradesh count themselves very much in the reckoning. For a region that till not too long ago was chiefly known for only its trading (and not manufacturing) prowess, Gujarat has indeed come a long way since Hindustan Motors (the maker of Ambassador cars), began operations in a small assembly plant at Port Okha in Jamnagar district in the state in 1942. But it was the arrival of the Tata Nano plant at Sanand in 2008, which opened the floodgates for the state.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
 
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