Andhra Pradesh’s Sri City emerges as new auto hub in India

The emergence of the integrated Sri City business zone in the state of Andhra Pradesh as a new automotive cluster in South India has been posing a threat to new auto investments in the neighbouring states of Karnataka and Tamil Nadu.

After the recent bifurcation of Andhra Pradesh into two states – comprising Seemandhra region and Telangana – Sri City remained in Andhra Pradesh, where the Chandra Babu Naidu-led Telugu Desam won the assembly elections and formed the first government in the carved-out part of the state.

Naidu, who is known as an industry-friendly chief minister, is pitching Sri City as his government’s trump card to woo investments, primarily from the automotive sector, from other states.

Although Sri City has been established during the previous Congress government by private company Sri City (P) Ltd, the current Telugu Desam government is projecting it as a major upcoming industrial destination, primarily for the automotive industry in the southern part of the country.

The industrial zone came to into the limelight when the Andhra Pradesh government attracted Hero MotoCorp’s investment of Rs 2,200 crore from Karnataka in September 2014.

Earlier the Karnataka government had cleared a land parcel of 500 acres for Hero MotoCorp to set up its manufacturing facility. But Naidu voluntarily visited Hero MotoCorp’s top-rung officials in New Delhi and managed to attract the investment to his state by offering several other sops.

Now according to sources, the Andhra Pradesh government is in talks with at least a dozen of auto component makers from Japan to woo investments.

“Japanese investors are showing interest here as Isuzu is already building its plant and now Hero MotoCorp also preparing to establish its facility here,” an Andhra Pradesh government official said, requesting anonymity.

Isuzu Motors India had acquired 107 acres of land in 2013 in Sri City after signing an MoU with the Andhra Pradesh government in order to start an automobile manufacturing operation in India.

The new facility is likely to commence commercial operations by early 2016, with the initial production capacity at 50,000 units a year which will be scaled up to 120,000 units a year with an accumulated investment of Rs 3,000 crore and expected to generate 2,000 to 3,000 jobs. A state-of-the-art paint booth and oven, water tester, combination tester and spot welding machines would be used to ensure that the India manufacturing facility is at par with Isuzu’s global operating standards.

With this, a few Japanese auto component makers have approached the Andhra Pradesh government when Naidu visited Japan in November to meet prime minister Shinzo Abe in November and hold trade talks.

In October 2014, a Japanese delegation visited Sri City to explore opportunities for Japanese companies. The delegation comprised representatives from various companies including Sumitomo Corporation India, Kyokuto Trading India, Tokyo Consulting Firm, Sojitz India, Standard Chartered Bank and the Japan Chamber of Commerce and Industry. It may be noted that the both Sumitomo and Kyokuto are major automotive component players in Japan. 

Japanese crane manufacturer Kobleco has already set up a facility in Sri City while another Japanese auto coil spring maker NHK Springs is investing Rs 300 crore to build its plant on 18 acres here. This is the second plant for NHK in India after Manesar in Haryana, which was set up in 1996. NHK is a manufacturer of automotive suspension components for passenger cars and utility vehicles. Its client base includes Toyota, Nissan, and Ford.

A fortnight ago, NS Instruments India, a wholly owned subsidiary of Nippon Seiki of Japan that produces a range of electronic-based instrument clusters for automobiles and motorbikes, has inaugurated its production unit in Sri City.

Some more Japanese auto component makers like Kikuwa and Kusakabe are also pumping in their investments in the industrial cluster.  Kikuwa produces aluminum and Zinc die casting products for automotive parts while Kusakabe manufacture tube and pipe.

At present, Sri City’s gain is seen as a major loss to Tamil Nadu as it is located very close to the Tamil Nadu border and wooing potential auto investments.

Spread over 7,000 acres, Sri City is located 55 km north of Chennai on the NH-5, border of Tamil Nadu-AP. It is already home to over 100 companies including 45 MNCs from 25 countries with proximity to shipping yards like Ennore Port, Mattupalli Port and Chennai Port and airports of Tirupati and Chennai located within 75 kms.