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In top gear
Right from Independence, Tamil Nadu has been focusing on the automobile sector. Ashok Leyland and India Pistons had their beginnings in the late 1940s followed by Standard Motors and Enfield India.

The state accounts for a fourth of India’s automobile production and a third of India’s auto components production. Chennai alone has over 300 Tier I, II and III suppliers.

tAMIL NADU sustained the wave of industrialisation better than most other states in the subsequent decades too. It also seized the opportunity in post-liberalisation era to build a vibrant auto industry.

From 1949 when the home-grown Amalgamations Ltd. pioneered the auto component sector to now, the state’s automobile and ancillary sectors have emerged among the most competitive in the world.

 The state presently houses factories of passenger car makers Hyundai, Renault-Nissan, Ford and BMW, truck makers Ashok Leyland and Daimler. These companies together have a total production capacity of 1.6 million units a year. The state also houses two wheeler companies: TVS Motors, Royal Enfield and Yamaha and tractor firms TAFE and Same-Deutz. Tamil Nadu’s total automobile production capacity is 3.5 million and the state aims to touch 5 million units by 2020.

During 2014-15, Tamil Nadu accounted for a third of passenger vehicle (PV) production in the country. The state also accounted for 65 per cent of the country’s total PV exports, indicating the state’s global manufacturing standards and cost-competitiveness.

 

Large exports of PVs...

Hyundai, Ford and Nissan have made Chennai their export hub. Daimler has turned its Oragadam truck manufacturing operations into an export hub to serve  emerging markets. Hyundai and Nissan are the largest PV exporters from India; together accounting for half of total passenger vehicle exports from India. Ford exports 25 per cent of its car production from Chennai.

Hyundai has so far pumped $3 billion in its manufacturing facilities in Tamil Nadu; its vendors have made investments to the tune of $1.2 billion. Hyundai’s annual revenues are $5 billion. Over these years, its car project alone has generated one lakh jobs, both directly and indirectly.

Another key chapter in the state’s automobile revolution is the establishment of a truck plant by German major Daimler; a true Make in India example. The Rs 4400 crore Daimler project saw the global major designing a mass-market truck series BharatBenz with the help of local talent,  producing the same quality product for both domestic and global markets. It involved hundreds of Indian suppliers, most of them new to Daimler. The Oragadam-built BharatBenz trucks have been well-received.  Daimler has started making buses for the Indian market.

Tamil Nadu offers several competitive advantages to be a preferred destination for automobile production. The  most urbanised state in the country has a  robust auto parts industry, strong port connectivity and copious availability of skilled manpower.

 

Auto parts industry thinks global

India’s auto component industry is truly global with a significant portion of its revenues coming from businesses outside the country. Tamil Nadu’s contribution to the growth of the Indian auto parts industry has been immense. The state also houses the highest number of Deming Award winners, a global recognition for quality.

Traditional groups like TVS, Amalgamations and Rane, among others, have  the highest recognition for their manufacturing quality. They supply to some of the leading automotive companies in the world.

The state is accounting for a third of India’s auto components production. Chennai alone has over 300 Tier I to III suppliers besides a few thousand SMEs under Tier IV segment.

Almost all types of parts are manufactured in Tamil Nadu:  braking systems, engine parts, castings, forged components, electrical equipment, etc. are produced in large volumes.

 

A tyre production hub too!

The presence of global auto OEMs has lured domestic and global tyre makers to set up factories here. While MRF and TVS Tyres are home-grown players, the state has seen other domestic brands like Apollo and J K Tyres, and French tyre maker Michelin putting up large factories near Chennai. For Michelin, the Chennai factory is one of its largest in the world. Thus the state is also a tyre production hub.

 

M&M: Asia’s largest research facility

Availability of a huge talent pool has attracted MNCs to set up their global R & D centres in Chennai. Mahindra & Mahindra has set up

its Research Valley at Maraimalai Nagar to focus on design, prototype development and testing of new vehicle models. This centre is Asia’s largest facility with a built-up area of 800,000 sq ft.

The Global Automotive Research Centre (GARC) – Chennai is being established at Oragadam manufacturing corridor. This facility will take up testing of all categories of vehicles: cars, commercial vehicles, tractors and construction equipment.

Further, the central government has been working on promoting industrial corridors in the southern region. Once the economy improves, more and more companies are expected to make a beeline to invest in the southern corridor.

 

New challenges

Tamil Nadu offers a well-established industrial environment for an auto maker to set up base. But the emergence of other automotive clusters in the country, Delhi-Gurgaon-Faridabad in the north and Mumbai-Pune-Sanand- Nashik-Aurangabad in the west will pose a strong challenge to Tamil Nadu in attracting automobile investments. Sanand region in Gujarat has already attracted huge investments.

With rising compulsion to generate jobs, every other state is trying its best to lure industrial investments. Besides traditional automotive clusters, the new state of Seemandhra is expected to pose a significant challenge to others.  

Last year, the Tamil Nadu government announced the New Automobile & Auto Component Policy with a view to boosting the automotive industry and attracting fresh

investments in the state. This was a move in right direction. The policy outlines a road map for further growth and envisages  an exclusive auto city to cater to the needs of auto manufacturers in component designing, prototyping and manufacturing.

With issues relating to power getting addressed, the state gears up to market itself to attract mega bucks in the auto sector. It should work on  a hassle-free approval system and faster facilitation services for the investor.

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