Five regions vie to be India's automaking hub

17 October 2011

India's automotive manufacturing regions are contending to be the country's number one hub for vehicle production.

Five regions are currently contending to become the heart of automotive manufacturing in India.

According to expert opinion, Gujarat's position as the top automaking destination in the subcontinent could be faltering, as more global brands invest heavily in the country.

India's Business Today reports that Gujarat's success as a centre for vehicle production began three years ago in 2008, when government chiefs recognised the need to expand from chemical manufacturing into other capital-intensive sectors.

According to the state's industries minister Saurabh Dalal, decision-makers needed to shift from traditional products to ones that would generate more of a profit but with a low per capita value - and automaking was identified as the most lucrative industry to grow, as the ratio of direct to indirect employment is considered high.

The Gujarat region is home to facilities that build cars for Tata, General Motors, Peugeot and Ford - with these plants based in the cities of Sanand and Halol.

Following the emergence of Gujarat, Chennai also grew into a centre for vehicle manufacture in the country, with 35 per cent of Indian components and just under a third of cars coming from there, including models by Hyundai, Renault-Nissan, Daimler, Ford, BMW and Mitsubishi.

Other regions contending to become the subcontinent's premier car production hub are Pune, Pantnagar and the National Capital Region (NCR).

Pune is the home of factories belonging to Audi, Skoda, Volkswagen, Tata Motors, General Motors and Mercedes-Benz, Pantnagar boasts a Tata Motors facility amongst others, while the NCR is the origin of models from Maruti Suzuki and Honda.

Some states are offering financial incentives to attract investment and increase their motor production family.

For example, Partnagar became known as an auto hub thanks to central and state government benefits offering a 100 per cent income tax exemption for the first five years and 30 per cent for the next five, followed by 100 per cent excise duty exemption for ten years.

But while these centres compete, they also complement one another as they offer companies greater scope for distributed manufacturing - as the size of the subcontinent alone means buyers are scattered across the country's four corners with the NCR accounting for 20 per cent of cars sold and the west of the country also making up for a similar chunk of consumer population.

V Sumantran, executive vice chairman at Hunduja Automotive, claims India is replicating an identical power struggle seen in the US not so very long ago.

"In the early part of the 20th century, Detroit became the auto hub in the United States, with a strong manufacturing base and cheap migrant labour," he stated, adding that over time, pricey and inefficient labour and work practices and incentives from rival states prompted manufacturers to take their facilities elsewhere.

Mr Sumantran explained that Mercedes went to Alabama, BMW chose North Carolina, while Honda opted for Ohio.

"India is at a similar stage," he observed.

The nation is also a favourable location for businesses to set up their research and development operations, with GKN Driveline already having a presence in the country, as the nation has advantageous tax regimes and other state incentives.

Another reason behind this growth is the fact that the subcontinent has a large talent pool for engineers and scientists.

GKN Driveline has an application engineering centre in Faridabad, a city in the south-east of Haryana state in northern India and manufacturing facilities since the 1980s, with production units at Fairdabad and Dharuhera, in Haryana State in north India and Oragadam near Chennai in the south.

Later this year, GKN Driveline will open a new precision forge at Oragadam in the south and next year a new production at Pune in west India.

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