It causes no major surprise now when any automotive OEM announces its plan to set up a production facility in Gujarat, which is well on its way to becoming the largest automotive hub in India.
Call it the Narenda Modi effect or attribute it to the big decision taken by Tata Motors to relocate its plant to make Nano from Singur in West Bengal to Sanand in Gujarat but there is no shying away from the fact that Gujarat is well on its way to becoming the biggest automotive hub in India. Contributing to the state's fortunes on wheels is the recent decision taken by Japan's Honda Motor Company, which is planning to invest Rs 4,000 crore to build an automobile manufacturing plant at Vithalapur in Gujarat. The new factory will have the capacity to manufacture about 1,00,000-1,25,000 cars a year. "This will be the fourth car company that has come to Gujarat after Tata Motors," J Pradhan, Gujarat's Additional Chief Secretary, Industries, is reported to have told the media.
Meanwhile, Suzuki Motor Corporation and American car giant Ford Motors Company are already in the process of setting up their manufacturing units in Gujarat. A few months back, representatives of over a dozen companies from China, engaged in electric vehicle manufacturing, visited Sanand to set up a manufacturing park for producing electric vehicles at an investment of USD 100 million. Companies in the delegation included Green Field Motor, VOCH Group, YueHua Control Group, Zhuji Yongcheng Auto, Wenzhou Jinpi Machinery Manufacturing and JBON Control Industry.
In terms of wholly owned Indian companies, one notable development is that of Rajkot-based three-wheeler manufacturer Atul Auto Limited which is setting up a new production unit near Ahmedabad. The company, which already has a manufacturing facility in Rajkot, recently acquired about 34 acres land for its facility in Ahmedabad. "The production capacity of the new plant will be about 60,000 units per annum," informs Jitendra Adhia, Vice President-Finance, Atul Auto Limited. The project's total investment would be about Rs 150 crore and the fund will be managed through internal sources. "Our aim is to complete this project by the end of March 2017. The new unit will produce petrol models also, a new segment for us. Presently, we are involved in production of diesel models only and enjoy about 13 per cent market share in it," Adhia adds.
However, much before all this could happen, it was Apollo Tyres that first sparked off the automotive revolution in Gujarat in 1991 with an investment of Rs 1,400 crore. Today, its plant at Limda is one of the largest units of its kind in Southeast Asia and can lay claims to the latest technological innovations. Among the vehicle OEMs, General Motors started its plant at Halol in 1996 with an investment of Rs 2,000 crore. In 2002, heavy commercial vehicle manufacturer, Asia Motor Works (AMW), set up its Rs 1,400-crore facility in Bhuj. AMW has ramped up this plant's capacity from 10,000 units to 50,000 and now also manufactures components for the automotive and general engineering industries.
Ceat Tyres followed and set up a manufacturing plant with investments of Rs 700 crore. The company manufactures over 10 million tyres per year and has a major market share in the light truck and truck tyre market. Gujarat has also become a preferred location for tractor makers. In the wake of Mahindra & Mahindra (M&M), several players have been zooming in on Rajkot for setting up manufacturing units of mini tractors. While M&M has been producing mini tractors in collaboration with city-based Field Marshal Group since 2009, Amul Industries has forged alliance with Escorts Group and formed a special purpose vehicle named Adico Escorts. Yet another important player has been Captain Tractors which launched its first mini tractor with a 9.5 HP engine in 1998. In Rajkot and Saurashtra, about 15-20 companies manufacture mini tractors which have capacity of below 25 HP.
All this has, but naturally, given a fillip to the setting up of automotive component industries too. "Driven by the growth in vehicle production, the Indian automotive component industry is expected to scale USD 115 billion by the year 2020. Of this, the domestic turnover is estimated to be USD 85 billion while exports could cross USD 30 billion. The automotive component industry can be an engine of India's economic and manufacturing growth, contributing 3.6 per cent GDP by 2020, up from the current level of 2.2 per cent. To achieve this potential the industry would require additional skilled manpower of over 1 million people and cumulative investment of over USD 35 billion," says Vinnie Mehta, Director General, Automotive Component Manufacturers Association of India (ACMA).
This rapid growth is especially true of cities like Rajkot and Mehsana. In fact, despite a slowdown in the automotive industry during which component makers in Rajkot suffered around 30 per cent erosion in business, the potential that new entrants like Ford India and Maruti Suzuki offers has encouraged component manufacturers across Gujarat to wipe off the earlier losses and look at a profitability curve. Rajkot has over 500 component making units, employing over 10,000 people. Of these, around 50 big-sized units supply directly to the OEMs.
Of these, Amul Industries is a force to reckon with. Established in 1988, it is a leading manufacturer of connecting rods, crank shafts, cylinder blocks, cylinder heads and camshafts. The company supplies parts to Tata Motors, Maruti Suzuki, Mahindra & Mahindra, Ashok Leyland, John Deere, and several others. Yet another company that is planning to ramp up capacity and make fresh investments is Royal Engineers, which makes pins, steering and suspension parts for cars. The company exports over 70 per cent of its production to the European countries. Meanwhile, Kadvani Forge Limited that supplies gearbox parts to Mahindra & Mahindra, General Motors, Tata Motors and Ford India, is also planning partial automation at its plant to increase production from 1,500 tonnes to 2,800 tonnes per month.
Another interesting development in Gujarat has been the government's strong pitch to attract investments from Japanese companies near the Maruti Suzuki plant. The state government has earmarked 500 hectares for Japan-based companies to set up shop in the Mandal-Becharaji region and a crucial role is being played by the Japan External Trade Organisation (JETRO) in promoting this cluster. Japan, in fact, was one of the partner countries in the Vibrant Gujarat Summit of 2013. A huge delegation led by JETRO, comprising over 150 companies, visited the state during the summit. And now, even European companies are setting sights on the state. One such is Promens (India) P Limited which uses roto moulding technology for manufacturing automotive components like fuel tanks, SCR tanks, mudguards, air cleaners, canopies, etc. "We are a European company with expertise in plastic moulding technology and our decision to be in Gujarat is based out of the fact that some of the biggest automotive OEMs are here or will be here very soon," says Santosh Kumar, the company's CEO.
"Gujarat offers a very conducive environment for the automotive industry with its quick clearances and facilities," comments Nirav Shah, Director, Rotex Automation Limited. The company manufactures solenoid valves, valve automation systems, pneumatic cylinders and bus door systems for various automotive applications at its factory in Vadodara. In the long run, Gujarat is also likely to attract companies that make vehicles from CKD units. Like Pune-based DSK Motowheels P Limited which makes the Hyosung brand of superbikes. "We are seriously thinking of setting up a plant in Gujarat because of the many attractive incentives it has to offer," admits Shirish Kulkarni, the company's director.
In fact, the trend has been sparked off with a state support agreement (SSA) that Gujarat government has signed with Honda Motorcycle & Scooter India P Ltd. (HMSI) for the latter's Rs 1,100 crore two-wheeler plant. To be commissioned by December 2015, the said plant will see a two-wheeler manufacturing capacity of 1.2 million per annum, taking
HMSI's total capacity to close to 6 million per annum.
Meanwhile, the Gujarat government is going the extra mile to achieve its 'automotive' dream. Soon all the automotive hubs in the state will have direct railway connectivity from the backyard of the manufacturing plants to ports like Mundra and Pipavav. There is also a plan to develop last-mile connectivity for Maruti Suzuki in Mandal-Becharaji. A railway line that passes through Chharodi near Sanand will be extended right to the doorstep of the Tata Motors and Ford India factories in the area. And as some of the players in the automotive sector put it, the good times have just begun.