Gujarat awaits the big push to turn into an auto hub

The momentum generated by the Tata Motors project in Sanand seems to have lost its steam, so all eyes are on Ford India which kicks off operations later in the year. Brian de Souza reports.

By Brian de Souza calendar 05 Jun 2014 Views icon11387 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Gujarat awaits the big push to turn into an auto hub

The momentum generated by the Tata Motors project in Sanand seems to have lost its steam, so all eyes are on Ford India which kicks off operations later in the year. Brian de Souza reports.

When we kicked off our first Gujarat Special in June last year, we could not have imagined the sea change that the country’s political landscape has seen in the last fortnight. A man widely described as the CEO of Gujarat – Narendra Modi – is now the prime minister.

Many of the people we met for this issue, our second on the Gujarat auto cluster, expressed hope and confidence that under the new leadership, things will change for the better. That is why you will see that our stories usually end with asking the interviewee what his wish-list is from the new government. In fact, earlier in this issue (‘Industry Voices’), nearly 20 captains of industry have detailed what they seek for growth in the industry. No surprise that most mentioned the need for good-quality infrastructure, a hallmark of Gujarat.

The companies that we have covered this time around far exceed those we did in our first Gujarat Special. The variety covers companies that are involved in the production of three-wheelers to trucks to those making gears, plastic moulding machines and ball bearings, to mention but a few. As an upcoming auto cluster, Gujarat shot into prominence when Tata Motors decided to shift its plant from Singur, West Bengal to Sanand in Gujarat in 2008. This shift became folklore of sorts given that it is believed that an SMS sent by the then chief minister to the head of Tata Motors did the trick. Along with Tata came its group of suppliers and that too has meant some investment and job creation.

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However, the fact that Tata Motors’ Nano has not really taken off has come as a disappointment to those who went along to Gujarat. The 250,000 plant only rolls out the Nano and since the Nano project moved there in 2009, the yearly sales have fallen. Sales in the last fiscal just crossed 21,000 units.

However, since then, a whole lot of OEs have come marching in. Ford Motor Company announced plans to set up base here and is all set to inaugurate its new plant, its second India facility, by end-2014/early 2015. Among the cars to roll out will be the new Figo. Many a component manufacturer is looking to Ford India taking off as that can create some momentum in the auto sector. In fact, we have revealed Faurecia’s plans to set up a plant in Sanand for assembly and manufacture of seating frames for supply to Ford India’s new facility, The Sanand project cost is estimated to be around $ 1 billion.

Following Tata Motors and Ford India, several other OEMs announced plans. PSA Peugeot Citroën came in and even announced that a CKD operation would be the first part of the Indian plan but thanks to problems at the French HQ, that plan seems to be on hold for now.

OEMs line up new projects

Other companies that are entering Gujarat include Suzuki Motor Company which has decided to establish a wholly-owned subsidiary in the state in the Mehsana district, Honda Motorcycle & Scooter India (HMSI) and Hero MotoCorp.

In February this year, HMSI announced its new – and fourth – plant in the Ahmedabad district of Gujarat. The new facility, to be set up at an investment of Rs 1,100 crore and slated to become operational in 2015, will have an initial annual production capacity of 1.2 million units. This capacity expansion will increase HMSI’s total annual production capacity to 5.8 million units. With its three existing plants covering North and South India, HMSI says the new plant will help it cater better and faster to the western region which contributes over 25 percent to HMSI’s overall business.

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Together with existing players, Gujarat should have a good mix of two-wheelers, cars and four-wheelers in the next couple of years.

Thus far, the main players in Gujarat were General Motors India, the very first, which set up shop at Halol way back in 1998 and then Asia Motors (AMW) in Bhuj in 2005. AMW rolls out a range of trucks in the medium and heavy CV segment. In the electric vehicle segment, the state is home to one of the first manufacturers of electric-powered bikes marketed under the Yo brand, and manufactured by Electrotherm India.

As the new players set up shop, Gujarat’s involvement with India’s dynamic auto sector can only get deeper. The state has all the necessary ingredients to ensure that the auto sector can flourish. Good roads, for one. This correspondent travelled to a destination that is over 100km from Ahmedabad on wide and well-paved roads. There was no feeling of fatigue that is normally associated with such long-distance travel on bad roads.

Moreover, Gujarat has 24/7 power, something that is the envy of its industry counterparts in the Chennai-Oragadam belt. Then, there are the world-class ports that can help in any export effort. The Mundra port that caters to Maruti Suzuki’s export business, among other OEMs, has reportedly added a few more clients.

 

Given the entrepreneurial nature of the Gujarati, many smaller companies are family run enterprises and in this issue, we speak to a couple of them. The companies were started in the pre-liberalisation era and operated in a closed economy catering to the older names in the auto sector. However, it is impressive to see that the gen-next leaders of these companies are taking their firms further afield, while being firmly anchored in their home turf.

Whether it is tapping the opportunities in their own backyards, thanks to the emergence of an auto cluster, these companies are establishing links to markets outside of the state and the country. This is a tribute to the entrepreneurial genius of the state as it seeks greater leverage beyond the traditional business space.

In a few years from now, a slew of the big names will be operating from Gujarat. The opportunities for localisation are immense as the big names go about developing local sources and back-ups. But there will also be greater competition in the labour market. We spoke to companies who said that the issue is not a problem so far as they tend to get the staff they require in the vicinity of other operations.

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However, they admit that going forward, in four to five years’ time, getting the required talent at the right price may well be an issue for companies operating in the auto space. They will then have to bring in personnel from other parts of India. On the shopfloor, reaching tie-ups with local ITIs can help create a steady supply of staff.

One project that will give Gujarat the big push is the Delhi-Mumbai industrial corridor that goes through the eastern part of the state. The $90-billion project, being set up by the Delhi Mumbai Industrial Corridor Corporation, is aimed at creating industrial infrastructure along the Delhi-Mumbai Rail Freight Corridor. The project has been described as the world’s most innovative and inspiring infrastructure projects by consultancy firm KPMG.

It will be interesting to see how Gujarat develops as an auto cluster in a decade from now. With its top-class infrastructure and entrepreneurial genius, it should carve its own place in the sun. 

This news report appeared in Autocar Professional’s June 1, 2014 ‘Gujarat Industry Special’ http://bit.ly/1xaqiA8

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