Tamil Nadu remains high on auto investment chart

by Sricharan R 07 Aug 2020


As India is slowing adjusting to the new normal amidst the Covid-19 pandemic, businesses are also gradually adapting to the new challenges. But the question is how well are we using this adversity into an opportunity?

Tamil Nadu’s nodal investment promotion agency, Guidance TN in partnership with SIAM conducted a webinar on the theme of ‘Post Covid: Automotive industry turning crisis into an opportunity’ on August 6, where key representatives of major OEMs participated.

The panellists included

  • Dr Neeraj Mittal, MD and CEO, Guidance TN
  • Tarun Garg, Director - Sales & Marketing, Hyundai Motor India
  • Satyakam Arya, MD & CEO, Daimler India Commercial Vehicles
  • Kaleeshwaran Arunachalam, CFO, Royal Enfield
  • Aneesh Sekhar IAS, Executive Director, Guidance TN
  • Yukihiko Tada, Director, India Yamaha Motor
  • K N Radhakrishnan, Director & CEO, TVS Motor Co
  • Rajesh Menon, Director General, SIAM. 

Autocar Professional was the media partner for the event.

Brisk investment pipeline
Despite the pandemic and lockdown, Tamil Nadu has received Rs 30,664 crore of investment of which Rs 3,500 crore – or 11.14 percent – is from the automotive segment. Leading global OEMs and suppliers including Daimler India Commercial Vehicles, BYD and Visteon have signed MoUs for their expansion plans in India. This makes for a great outlook for the State, according to Dr Neeraj Mittal, MD and CEO, Guidance TN.

“Due to the pandemic, globally we see a lot of changes in customer preference which is being driven by climate change and supply chain. These changes bring us new opportunities and challenges. The state government has established an expert committee to come out of the pandemic in a phased manner. Also, we are responding to the emerging supply chain reorientation and announce packages that are relocating to the state,” said Mittal. 

Mittal is optimistic about the medium-term: “We also believe that there will be an increase in two- and four-wheelers in the short and medium-term. This is because of the new lifestyle that has been brought on us by Covid. Also, there is a lot of awareness for people about the environment and we see interest in EVs and manufacturing them in Tamil Nadu.”

Tamil Nadu aims to become paperless and have a contactless system to have an ease of doing business. The state already have a single-window portal system where people can avail up to 36 services. Tamil Nadu is  planning to increase the service portfolio to 200 by May 2021. Apart from this, it is also working on to design and launch the LAN information portal which will bring buyers and sellers together. 

“We are trying to improve transparency, accountability and efficiency. In the next few months, we will see the state jump places up in national ranking. As far as EVs are concerned, the state recently announced the EV policy and intends to bring around Rs 50,000 crore of investment and 1.5 million jobs. The policy covers both demand and supply side incentives. We are focusing on incentives like 100 percent GST reimbursement for vehicles and up to 15 percent capital subsidy for components like EV cells, motors, battery management system and powertrains,” revealed Mittal. 

He sounded upbeat about the future, “We are coming up with a 300-acre park especially for EVs and many companies have evinced interest to invest in the state. Overall, Tamil Nadu is going to show the way for investment in EVs.”

Digital, the way forward
Speaking about how digitisation plays a major role, Tarun Garg, director (Sales & Marketing), Hyundai Motor India, said: “At Hyundai, we could witness the trend in the digital space much before Covid. We also had the ‘Click to Buy’ online platform and now our online enquiries are contributing to 25% of the total enquiries. We can surely say that digital is the way forward. But customers still want the touch and feel of a vehicle because it is a bit of an emotional aspect here in India.” 

Hyundai is among the many Indian OEMs which are benefitting from the digital space. Even as the Covid outbreak happened in India, the Korean carmaker went ahead with its new product launches and got 110 million people to view the events online. The widespread reach of digital clearly is enabling a much larger audience than before, and also in parts of the country where the carmaker had not ventured. What’s more, demand for Tier 2 and Tier 3 markets is growing, indicative of the considerable potential in these regions. 

“It provides us with a lot of opportunities to rethink. We have to be agile and much more customer-centric now. Even after the pandemic, we will continue with some of our digital drives. We are optimistic about the recovery here in India. Also, the rural market is contributing to a lot of growth in digitalisation. As an OEM, we need to look at how to approach the market here as consumer aspirations are changing and people want to be in sync with new trends,” he said.

Daimler India CV to expand operations
On  May 28, 2020, Daimler India Commercial Vehicles (DICV) signed an MoU with the government of Tamil Nadu, covering Rs 2,277 crore of new investment designed to expand production of CVs at its plant in Oragadam in Chennai. This investment also represents an addition of 400 jobs. The plant currently has a manufacturing capacity of 72,000 trucks and 4,000 buses per annum.

According to Satyakam Arya, MD and CEO, DICV, “We see a lot of comparison between India and China. But when we look at the output of manufacturing, China has an output of 4 trillion dollars which is 30 percent of the world share. India is at 400 billion dollars. We are talking about a difference of 10:1. In the automotive segment too, we witness the same difference. India has to learn from China and Japan to emerge as an alternative.” 

He added, “How can we be more competitive? We have to work on cost and the quality has to match the global needs. Third, we have to invest in the latest technology and workforce and reach a level of improvement. We are quite competitive but when it comes to productivity, we have large headroom. There is also an infrastructure requirement. Also, there is a need for us to build an entire supply chain where we can supply to the globe at competitive rates. We have to invest in tomorrow's technology to compete.” 

Sharing his thoughts on Tamil Nadu’s industrial policy, Arya said that the state needs to look at the ease of doing business and the ease of starting a business. Also, he pointed out a few suggestions like bringing in incentives for exports for the industrial policies of Tamil Nadu and asked the state government to look at including services in its policy. “There is a large pool of engineering talent and infrastructure here. This will provide great service to the world. It will also develop upskilling, innovation and R&D,” said Arya.

Advantage two-wheelers
Kaleeshwaran Arunachalam, CFO, Royal Enfield, highlighted that India has an excellent opportunity to grow and digitisation is facilitating it. “We see how digitisation is helping us and we are also witnessing huge growth in online enquiries. It is up to us on how we convert the digital enquiries to sales. Going forward, industries will invest a large part of on data transformation. Also, the investment will happen on three Cs – capacity, capability, continuity.”

Sharing his thoughts on the Indian market condition, Yukihiko Tada, Director, India Yamaha, said, “The two-wheeler market has been continuously growing. The last few quarters were hard times but we believe it will grow again after Covid. This is mainly because of the need for personal mobility. Electric two-wheelers will have scope but as of now IC-engined two-wheelers have a lot of benefits. A few consumers will switch to EV maybe in 10 years, but a major part will remain in ICE.”

K N Radhakrishnan, director and CEO, TVS Motor Co, stated that Covid is helping the company understand and get used to the new normal. While this is a challenge, it is also an opportunity. “With people getting more evolved, there are quite a lot of changes underway in consumer behaviour. People will prefer two-wheelers because of the worry of social distancing. The concept of shared mobility will take a back seat for now.”

Low vehicle penetration in India an OEM opportunity
The current and prolonged industry slowdown since the past five quarters are a result of higher acquisition cost, liquidity crisis with NBFCs, the axle load norms in CVs and other reasons. But Rajesh Menon, director general, SIAM sees it as an opportunity despite the tough times. Around 81 percent of our volume is in two-wheelers, 14 percent is PVs and 3 percent each in CVs and three-wheelers. Despite the large growth, we see low penetration compared to other parts of the world. In PVs, it is about 25 vehicles per 1,000 people and two-wheelers it is 143 per 1,000 people. This brings a lot of potential to grow,” said Menon.

He added, “SIAM’s prediction for FY2021 is an overall sales decline of 26% to 45% across various segments. We are going back many years in terms of volumes across the segments. However, now with the industry slowly recovering, things may look better.”