‘Kabali’, the blockbuster
Tamil movie starring south Indian superstar Rajnikanth got off to a roaring
start in July 2016 across cinema halls in India. While Rajnikanth is, without
doubt, a showstopper and a star to reckon with in the celluloid world, there’s
lot more that south India offers in terms of investment and a healthy business
environment for several industries. The automobile industry is one that has
thrived here and continues to do so. Latest data on investments reveal that
Southern states continue to attract major investments.
By 2020 when Indian vehicle
production will touch 46 million units and auto component revenues will
increase several fold from its current annual turnover of US $ 39 billion,
south India will contribute at least a third of this output with Tamil Nadu
scoring over its immediate neighbours that include Andhra Pradesh, Karnataka,
Telangana and Kerala.
Several major car companies
like Hyundai, Renault-Nissan, Ford India, Mitsubishi, BMW India, TVS Motor,
India Yamaha, among others operate out of Tamil Nadu alone. Supporting the OEMs
are several automotive component manufactures that form the formidable supply
base for the vehicle manufacturers. The Chennai-Bangalore industrial corridor
is a major region for automotive players in the country. On the other hand,
states like Karnataka, Andhra Pradesh and Telangana too are wooing investment
in the automotive space.
“The Southern states of Tamil Nadu,
Telangana, Andhra Pradesh and Karnataka have collectively emerged as hubs for
IT, aerospace, automotive and defence manufacturing over a period of time.
Clearly defined policies, in some cases special subsidies, supported by good
roads and railway infrastructure and specifically ports in the case of Tamil
Nadu and Andhra Pradesh have played a role in this.
“Many of India’s top ranking engineering
colleges are located in the Southern states. These institutions are a source of
high quality talent for the automotive industry. Bangalore, Hyderabad and
Chennai are India’s IT / software hubs. With the highly skilled engineering
talent available in these cities, they are emerging as important centers for
automotive R&D,” says Claude d’Gama Rose, Managing Director, Continental Automotive
While Continental has a well established
presence across the automotive hubs of the country, it has an electronics plant
as well as an R&D centre in Bangalore, Karnataka. Recently Continental
opened an office in Chennai to support its customers better.
Many automotive majors operate
out of different locations in South India. These include both OEMs as well as
automotive component manufacturers. Among them are India Yamaha, Allison
Transmission,Turbo Energy, Titan Automation, Simpson, Roots, Hyundai Motor India, Ford India, TVS Group,
Royal Enfield, Hero MotoCorp (Will be setting up plant in Andhra Pradesh), BMW
India, Daimler India Commercial Vehicles Pvt. Ltd. (DICV), a 100% wholly owned
subsidiary of Daimler AG, Mitsubishi, Renault-Nissan plant, Ashok Leyland, TAFE, Caterpillar India, Wabco India, Wheels
India, Federal Mogul, Rane Ltd, Visteon, Takata, BorgWarner Thermal Systems,
Ennore Foundries, etc. Tamil Nadu also has the presence of major tyre
manufacturers like Michelin, Apollo Tyres and MRF.
A note (updated July 2016) put
together by the Investment and Technology Promotion Division of the Ministry of
External Affairs, Government of India, says “In order to keep up with the
growing demand, several auto makers have started investing heavily in various
segments of the industry during the last few months. The industry has attracted
Foreign Direct Investment (FDI) worth US$ 14.32 billion during the period April
2000 to December 2015, according to data released by Department of Industrial
Policy and Promotion (DIPP)”.
Of these investments, several
were directed towards southern states. Isuzu Motors, the Japan-based utility
vehicle manufacturer, inaugurated its greenfield manufacturing unit in SriCity,
Andhra Pradesh, at a cost of Rs 3,000 crore (US$ 450.94 million) a few months
back. Global auto major Ford plans to manufacture in India two families of
engines by 2017, a 2.2 litre diesel engine codenamed Panther, and a 1.2 litre
petrol engine codenamed Dragon, which are expected to power 270,000 Ford
vehicles globally. Ford has plants both in Chennai as well as in Gujarat.
Germany-based luxury car maker BMW’s local unit based in Chennai has announced
to procure components from seven India-based auto parts makers. MRF Ltd plans
to invest Rs 4,500 crore (US$ 660.231 million) in its two factories in Tamil
Nadu as part of its expansion plan.
Hero MotoCorp is investing Rs
5,000 crore (US$ 733.59 million) in five manufacturing facilities across India,
Colombia and Bangladesh, to increase its annual production capacity to 12
million units by 2020. Part of that investment will be in a new plant in Andhra
In September 2015, India
Yamaha Motor announced that it would invest Rs. 1,500 crore in phases till 2018
in its new plant at Vallam Vadagal in Kanchipuram district of Tamil Nadu. The
plant has an initial production capacity of 450,000 units which will be
increased to 1.8 million units by 2018
This was Yamaha’s third
manufacturing facility in the country. The plant was inaugurated during the
opening ceremony of the Global Investors Meet 2015 by Chief Minister Ms. J.
Jayalalithaa. The new factory is the first in the Yamaha Motor group to have a
vendor park in its vicinity. Spread across 177 acres, the new facility covers
an area of 109 acres for IYM and 68 acres for vendor partners.
The vendor park has 9 vendors
who plan to invest Rs. 1,000 crore and will employ around 3,000 people by 2018.
Mahindra has a state of the
art R & D facility, Mahindra Research Valley at Chennai which regularly
churns out a range of vehicles from utility vehicles to tractors. In April
2016, Mahindra & Mahindra’s Farm Equipment Sector (FES) raised the bar in
farm technology with the launch of the Mahindra Yuvo, a new age, superior
technology, range of tractors in the 30-45 HP category which added to the
company’s existing range of highly successful 15 – 57 HP tractors.
M&M invested over Rs 300
crore towards the development of this new platform of tractors. These were manufactured
at Mahindra’s newest plant located at Zaherabad in Telangana state.
In the auto components space
too there are a lot of investments coming through in South India. German auto
components maker Bosch Ltd opened its new factory at Bidadi, near Bengaluru,
which is its fifth manufacturing plant in Karnataka. The company has also
signed a memorandum of understanding (MoU) with Indian Institute of Science
(IISc), Bengaluru with a view to strengthen Bosch’s research and development in
areas including mobility and healthcare thereby driving innovation for
“In India, we talk about South
as separate states, but I think it’s a different country all together. We
should treat it like that because of the awareness level and the way the
behaviour and preferences of customers are different. The South is four to five
years ahead compared to the North. .....No manufacturer can think of moving
away from the South, whether it be Tamil Nadu, Karnataka or Andhra Pradesh, you
have to be present there, because from OEM and logistics point of view, it
makes more sense if you want to cater to those customers....Eventually everyone
has to come to the South, the way the automobile industry is growing,” says Roy
Kurian, Vice President, Sales & Marketing, Yamaha Motor India Sales Pvt
Giving his views on Tamil
Nadu, Kurian noted, “Tamil Nadu is a good place. Not only Yamaha, but the
entire industry is growing there. The market is booming and it is at an all
time best. Market share is increasing year by year, in fact, month by month. As
a brand, we’re very happy with Tamil Nadu and would like to go more aggressive
as far as Tamil Nadu is concerned”.
several factors that work together towards making South India an attractive
destination for automobile players. Some of them are 1. Industry-friendly
government policies, 2.Proximity to ports, 3.Availability of land, 4.Strong
auto component base and 5.Excellent pool of skilled talent and productive
labour ,” said a spokesperson of Daimler India Commercial Vehicle.
Will South India bag the future Tesla project?
In July 2016, Union Road
Transport and Highways Minister Nitin Gadkari visited the Tesla factory in
California and urged the electric car major to make India its Asia
manufacturing hub. The Minister offered it land near major Indian ports to
facilitate exports to South and South East Asian countries.
Technically speaking, though
several states like Gujarat, Maharashtra, Karnataka, Kerala, Tamil Nadu. Andhra
Pradesh and Odisha have a huge coast line, the ones with big ports and with a
proximity to South East Asian countries are Tamil Nadu and Andhra Pradesh.
Gadkari offered to promote joint ventures between Tesla
and Indian automobile companies with a view to introducing pollution-free road
transport in India, especially commercial and public motor vehicles.
Tesla senior executive
admitted that their manufacturing hub has to be outside the US for markets in
rest of the world and appreciated the Indian offer of cooperation which they
said will certainly be considered at the appropriate time in future. They said
India will definitely be a market for their next generation low cost
Replying to specific queries
from the Transport and Highways Minister regarding manufacturing of electric
trucks, buses and two wheelers, Tesla team said they have future plans for
trucks and pick up vans but not buses and two wheelers. They evinced keen
interest in knowing whether there was any subsidy on electric vehicles in
India. Gadkari asked Tesla executives to outline their proposals for entry into
The Chennai hub is one of the
largest auto hubs of the country. Because of the massive exports undertaken by
companies like Ford India, Hyundai Motor India and Renault-Nissan Alliance from
their plants in the state, the state accounts for 21pc of India’s automobile
exports. The state aims to reach 5.8 million units production by 2020. There
are more than 80 leading automobile components manufacturers in Tamil Nadu.
Currently, the state has an installed capacity of more than 3.5 Million units.
Companies like India Yamaha and Nissan –Renault have planned capacity expansion
the near future. Tamil Nadu,
with the presence of tyre majors like Michelin, MRF, JK Tyre and Apollo Tyres, contributes
40pc of India’s total tyre manufacturing output.
Component majors in the State
include the likes of Rane, Lucas-TVS, Bosch, Valeo, Visteon, Delphi, Brakes
India, Amalgamation Group, Samvardhana Motherson Group, etc.
The distinct clusters of
automobile industry in Tamil Nadu are identifiable in and around Chennai at
Sriperumbudur, Oragadam Industrial Corridor, and Maraimalai Nagar. Moreover,
the state also has the Global Automotive Research Centre in Chennai. GARC is
one the seven test centres of NATRiP which in turn is one the largest R&D
infrastructure in the country for the automotive sector.
Testing of full range of
automobile, agriculture tractors and construction equipment vehicles is done at
Early 2016, the National
Council of Applied Economic Research (NCAER) published a survey report titled
NCAER State Investment Potential Index (NSIPI). According to its report, Gujarat,
Delhi and Tamil Nadu are the top three states for making new investments.
In September 2015, ZF Hero
Chassis Systems Pvt. Ltd. the 50:50 JV of ZF India Pvt. Ltd. and Hero Motors
Ltd. formally inaugurated a new plant in Oragadam, Kanchipuram district on the
Chennai city. The plant
assembles front and rear chassis systems for passenger cars. A few months earlier
Force Motors’ state of the art Engine Assembly plant was inaugurated in
Chennai. This plant located in Chengalpattu Taluk is the first independent
plant outside of the BMW Group that assembles and tests engines for the German luxury
car maker. This project was started in June 2014 and was completed in a record
time of seven months. The plant can
produce up to 20,000 premium engines per year.
Like its immediate neighbour
Tamil Nadu, this southern state too has very ambitious plans to woo investors
from the automotive space. According to a note on “Invest Karnataka 2016”
published by the state government, “Karnataka is at the cusp of high growth”.
With large number of engineering colleges, R&D institutes and ITIs,
Karnataka has the potential to become the automotive manufacturing and research
hub of the country. Automobile manufacturing has been identified as a focus
sector in the new Industrial Policy 2014-19, as per the note. Karnataka is the
4th largest automobile producing state in the country contributing 8.5% to
national output. It has three auto clusters, one industrial valve cluster and
one auto component cluster. The state is planning to set up an Automobile
Research & Innovation Centre which would also be an incubation centre. The
government has also prioritised improvement of the Mangalore port so as to
enhance the connectivity to major industrial clusters in the state. Several tax
incentives too have been proposed by the government for manufacturers of Hybrid
and Electrical Vehicles.
Several auto majors are
already present in the state. They include Toyota Kirloskar Motor, TVS Motors,
Honda Motorcycle and Scooter India, Mahindra Reva, Scania Commercial Vehicles,
TAFE, Tata Motors and Volvo Buses India.
Honda Motorcycle & Scooter
set up a plant in Narasapura which began operation in 2013. The company
increased its capacity to 1.8million units here in 2015-16. Toyota Kirloskar is
another key player here. It’s a joint venture between Kirloskar group and
Toyota Motor Corporation. The company has manufacturing facilities at Bidadi.
In April 2016, SriCity in
Andhra Pradesh saw Isuzu Motors inaugurating its new plant to manufacture D-Max
pick up vehicles, both for the commercial as well as passenger vehicle segments.
The company rolled out the 1st India made Isuzu D-Max V-Cross. The plant with
an investment of Rs. 3000 crore, was inaugurated by Chandrababu Naidu, Chief
Minister of Andhra Pradesh. The plant has a capacity of 50,000 units that can
be scaled up to 120,000 units in future.
Andhra Pradesh has to its credit more than a
100 automotive component manufacturers (including tier I suppliers and OEMs).
Over half the cylinder liners and clutch plates in India are being produced in
Hero MotoCorp signed an MoU
with the Andhra Pradesh state government in September 2014 for setting up a two
wheeler manufacturing facility at Madannapalem in Chittoor district.
The plant is expected to have
a capacity of 5 lakh units per annum in the first phase, which is expected by
December 2018, with an investment of Rs. 800 crore. In the second phase,
by December 2020, Hero MotoCorp will add another 5 lakh units to its production
capacity. In the third phase, by December 2023, an additional 8 lakh units will
be added with further investment of Rs. 800 crore.
The Chittoor plant will
provide employment to 1,500 people in the first phase and another 3,500 in the
subsequent phases. The plant will also serve as an export hub for two wheelers
to Hero's overseas markets.
AP Chief Minister Chandrababu
Naidu is serious about his plans to attract investment in the automotive space.
The state government has drawn up an Automobile & Auto Components Policy
2015-20 that aims to generate new employment opportunities for at least 2 lakh
people and attract new investments of at least Rs 20,000 crore in the
automotive sector by 2020. The
government has initiated setting up dedicated suppliers’ manufacturing centres
and auto clusters to leverage economies of scale and produce world-class
product quality. The automobile sector in Andhra Pradesh has a potential for US
$ 2 billion investment and US $ 3.50 billion output, according to a recent analysis
by Automotive Components Manufacturers’ Association of India (ACMA). The state
has to its credit, more than a 100 automotive component manufacturers
(including tier I suppliers and OEMs) which specialize in various auto
components such as gears, pistons and axles.
Over half the cylinder liners and clutch plates in India are being
produced in AP. Andhra Pradesh has one major port (Visakhapatnam) and over 14
notified minor, deep water ports.
The government is in the
process of setting up multiple world-class Automotive Suppliers’ Manufacturing
Centres (ASMC). These centres shall be industrial parks dedicated to auto
component manufacturers and suppliers which shall help them meet the expectations
of Auto OEMs in terms of product quality. Also being set up are two major auto
clusters (apart from the ASMCs) which will cater to Automobile companies, in
the PPP mode in districts of Nellore and Chittoor.
Telangana which was carved out
of Andhra Pradesh a few years back is the baby among the south Indian states. In
April 2015, Mahindra & Mahindra extended its production facility at
Zaheerabad in Telangana. The new facility increased production capacity by
92,000 vehicles per annum taking the total production capacity to 140000 units
per annum. Mahindra invested Rs 250 crore into the new facility. A few months
later in July, the state received yet another boost with an addition of a bus
manufacturing plant. The Rs 250 crore facility was set up by Deccan Auto
Limited and has a capacity to produce more than 3,000 buses annually. The
facility was inaugurated by Chief Minister K. Chandrasekhar Rao. Deccan Auto
has a technical association with a state-owned Chinese auto company, Jhongtong,
for the Hyderabad operations while its promoter, MSRV Prasad, also holds a
majority stake in Pune-based Corona Bus Manufacturing bringing the two
together. Deccan will focus on the luxury segment targeting the private sector
while Corona would continue to focus on government transport and city bus.
This southern State of Kerala
is least industry friendly among all the states in the country. Yet its economy
which strives on remittances from the Gulf region is dotted with some of the
biggest automobile dealerships in the country. Apollo Tyres Ltd., the leading
tyre manufacturer in India, acquired the Premier Tyres plant in Kalamassery and
converted it into a unit of the Apollo Tyres in North Kalamassery in 1995.
Since then this facility has been managed by the Kanwars rather tactfully,
keeping in mind the militant trade unions in the state. Apollo Tyres also has a
plant in Perambra, Thirussur. Auto components major Delphi too is present in
Kerala through Delphi Connection Systems India which is based in Kochi. Kerala
Automobiles Limited (KAL), incorporated in 1978 as a Government of Kerala
undertaking near the capital city of Thiruvananthapuram manufactures Three
Wheelers (Diesel, Petrol & CNG) suitable for passengers and goods traffic
in the brand name of “Kerala” and are considered as Eco-friendly vehicles.
Automotive is not a priority industry for the state government.