Tamil Nadu charts out aggressive growth plan

Faced with increasing competition from Gujarat, Tamil Nadu is all set to come up with a sector-specific policy for vehicle and component makers.

In a major boost to the investment scenario in Tamil Nadu, as many as 12 Memorandums of Understanding (MoUs) were signed between the state government and companies from various industries including automotive on November 5. The automotive industry was represented by three companies. Hyundai Motors India Ltd (HMIL) has announced a $300 million (Rs 1,615 crore) investment for a flexi-engine plant and a press shop to be set up in its existing facility site at Irrungattukotai. The TVS Group's MoU involves an investment of Rs 700 crore and HVAC systems manufacturer Danfoss Industries has inked another for a project with an investment of around Rs 500 crore. In all, 12 companies, including major glass manufacturer Saint Gobain and Finnish mobile phone manufacturer Nokia signed MoUs worth Rs 20,925 crore with the Tamil Nadu government.

Reacting to this development, R Dinesh, chairman, CII Tamil Nadu State Council, says, “Obviously it’s a great positive step as far as we (CII) are concerned. We see this in two ways. First, the ‘Vision 2023’ is getting into action and second, since Tamil Nadu has been seen as an automotive and automobile hub, going forward this is a big momentum. To have a mega event like this when the market is not so great, we are very happy with this.”

Vision 2023 is a policy by the Tamil Nadu government that “warrants a provision of world-class infrastructure.”



HMIL flexi-engine plant will also export

Speaking to Autocar Professional, R Sethuraman, senior VP (finance and corporate affairs), Hyundai Motor India (HMIL), said: “The flexible-engine plant will have a capacity of about 300,000 engines. We are optimistic that we will set it up within two to three years.” At present, HMIL imports all its diesel engines for the Indian market from its plants in Korea. Seeing that the shift towards diesel hasn’t subsided, a flexible-engine plant was always on the cards, Sethuraman said. “This is the right time for us. We will be able to reduce costs and the waiting period once this facility goes on stream,” he added.

Asked if new vendors from Korea will set up facilities in Chennai to cater to this plant, Sethuraman said that existing vendors and suppliers will be enough to cater to the engine plant . “We are also looking to export engines from this facility to other Hyundai plants across the world. It is too early to say exactly where they will go,” he said.

Commenting on the TVS Group’s MoU for a Rs 700 crore investment, chairman Venu Srinivasan said the funds will be put to use in existing facilities in Padi, Chennai and Hosur and, depending on market trends, will be used towards either manufacturing of three-wheelers or two-wheelers.

Danfoss Industries, which makes HVAC units, has also inked a Rs 400-500 crore investment. A company official said that initial plans are to use the funds towards expanding R&D operations, assembly and manufacturing. He also revealed that it plans to introduce more products for the automobile industry. Using the opportunity to allay fears about the incumbent power crisis in the state, chief minister J Jayalalithaa said that the past 18 months have seen various companies invest close to Rs 1.74 lakh crore in infrastructure development projects such as power generation and distribution and port development. Although the state has been a preferred investment location for many multinationals in the past decade, the last year or so has seen many investments slip out of Tamil Nadu’s hands due to basic infrastructure issues. However, going by recent trends, it seems like the government has either done enough or promised enough to put itself back on the map, a prime example being Japanese two-wheeler major Yamaha’s investment of Rs 1,500 crore for its third plant in India to come up in Chennai by January 2014.



Banking on solar power

Recently, the Tamil Nadu government announced a policy to encourage the use of solar power with an aim of generating close to 3,000 mega watts by 2015. The policy makes it mandatory for heavy consumers of electricity, like industrial units, to draw 3 percent of their power requirement from solar energy by December 2013 and 6 percent from January 2014.

Proper implementation of this policy might see the power crisis in the state ease up a little, thereby encouraging new investments. In a recent interaction, Florian Laudan, head of communications at Daimler India Commercial Vehicles, mentioned that DICV is already making moves to install a solar power plant within its facility in Oragadam, near Chennai, and in building “a logistics park that will run on solar power.”

As of September 2012, investments in the pipeline in Tamil Nadu stand at Rs 9.25 lakh crore, as against Rs 7.50 lakh crore in March 2011.

The chief minister also announced that the state government is set to introduce new policy reforms that include a new industrial policy and a new automobile and auto parts policy. A policy note prepared by state minister for industries, P Thangamani, mentions that the government plans to expand the existing industrial areas of Oragadam and Sriperumbudur – which already house Renault-Nissan, DICV, Apollo Tyres, and HMIL to name a few – by close to 2,300 acres, thus freeing up more land for industries. One of the more recent industrial parks set up in Pillaipakkam and Thervoy-Kondigai regions, both within 50km of Chennai, have seen Ashok Leyland-Nissan and Michelin respectively set up new manufacturing facilities.

Tamil Nadu, which has traditionally been a stronghold of automotive component companies and vehicle manufacturers, has in the recent past faced strong competition from the emerging hub of Gujarat which first saw General Motors India set up a plant at Halol in June 1996. This was followed by the now-famous shift of Tata Motors from Singur to Sanand, and more recently Ford India’s announcement of a second plant in Sanand. Meanwhile, Maruti Suzuki has also confirmed plans to set up a manufacturing facility in Gujarat. The corollary to OEMs setting up base is that component makers follow them and most leading suppliers to these OEMs, some of them from Tamil Nadu, are already exploring plans to set up shop in Gujarat.

KARTHIK H.