India's Automobile Hubs

4 Months agoWe bring you 5 auto clusters in the country that are revolutionising India's automobile landscape. Read our article for more.

The automobile industry occupies a prominent place in the Indian economy. In Financial Year (FY) 2015-16, the industry contributed 7.1% to India’s Gross Domestic Product (GDP) and 49% of the nation’s manufacturing GDP. It has deep forward and backward linkages with several key segments of the economy. It is undebatable that an efficient transportation system is central to rapid industrial and economic development of a country. Given how closely linked the automobile sector is to the transportation system, its relevance to economic development becomes magnified.

Manufacturing clusters in India have existed for decades. ‘Clustering’ describes the propensity of manufactures within a specific industry to locate operations in the same geographic area.1 A cluster is identified by the product and place where it is located. Be it the knitwear of Ludhiana, textiles of Tirupur, diamond cutting and polishing of Surat or pharmaceuticals of Baddi; industry clusters across India continue to add substance to the manufacturing sector in the country.

These clusters usually form on the basis of availability of raw material, skilled labour and other support infrastructure. It is interesting to note that in all cases where a cluster develops, a symbiotic relationship can be noticed between manufacturers, part suppliers, related services and support industries.2 This holds true for all automobile hubs in India which are presently at the forefront of the automotive and automotive component sector’s growth in the country. Contrary to the initial stages of industrial development in India, when the development of automobile industry was sporadic, a high level of organization is visible today.

Following automobile clusters are paving a path for the booming automobile industry in India, all set to reach a market size of USD 300 Billion by 2026:

 

Chakan, Maharashtra

 

An auto hub located near Pune city in Maharashtra, Chakan houses industrial parks developed by Maharashtra Industrial Development Corporation (MIDC). The well-known auto industry names in the Chakan Industrial belt include Germany based Volkswagen and Daimler along with Indian auto majors such as Mahindra & Mahindra and Bajaj Auto.3 Automobile clustering started in this region due to its proximity to the coast, availability of power supply, skilled labour pool and exceptional infrastructure. Chakan’s strategic location helped in the rapid expansion of industries in the region. Its proximity to Mumbai’s Jawaharlal Nehru Port Trust (JNPT) and National Highways connecting important cities in Maharashtra made it attractive to automobile companies. Chakan is also well connected to Maharashtra State Corporation Transport buses from all important cities of Western Maharastra.

The proposed new international airport at Pune will further improve its connectivity to major global cities. The Chankan-Talegaon belt hosts around 750 large and small industries predominantly focused on making automobile and automobile components.4 Volkswagen’s Chakan plant, which was built at the investment promise of USD 634 Million, has an installed production capacity of 200,000 vehicles per year while Mahindra & Mahindra plant can produce 300,000 vehicles per year.5 6 The Pune-Talegaon- Chakan automobile cluster has an installed capacity of 1.1 million vehicles and 3 million two/three wheelers.7

 

Oragadam, Tamil Nadu

 

It was in 1995 when the US automobile giant Ford Motors set up its plant in Chennai that marked the arrival of the city as an auto hub.8 Since then, the region hosts plants of BMW, Royal Enfield and Renault, Hyundai, Mitsubishi and Daimler.9 Tamil Nadu is one of the top 10 automobile hubs in the world with Chennai having an installed capacity to produce 1.4 million cars per year. Nissan, a Japanese car maker is all set to inaugurate its ‘India Design Centre’ in Chennai10 , signalling its intent to expand its footprint in the region in the coming years.

Innovative business models, ease of doing business and strong policy support have all contributed to the rise of Chennai as the automobile hub in the region.11 The region has always welcomed major auto-players with its superior infrastructure facilities. Three modern ports in Chennai and one in Tuticorin provide an easy gateway for exports and imports. Chennai’s strong labour force is noted to be a significant contributor to its success as an auto cluster.

 

National Capital Region Cluster (NCR)

 

This automobile cluster houses Maruti Suzuki, one of the oldest passenger car makers of India which established its plant at Gurgaon in 1982.12 The cluster is spread across three states – Uttar Pradesh, Haryana and Delhi – hosting production facilities for Honda, Hero Moto Corp, Yamaha and other established players in the automobile industry.13 Apart from manufacturing, the region also houses R&D and testing facilities at Rohtak and Manesar. Access to large domestic market, government’s support and availability of land were major factors which have resulted in the growth of the automobile sector in the NCR region.14 Delhi and Haryana have an excellent road network which facilitates faster transportation of goods from the point of production to the point of consumption. The industries in Uttar Pradesh have also benefited out of the 165 km long newly constructed Yamuna Expressway Industrial Development Authority (YEIDA) which ensures planned development of areas along the route.15

 

Sanand, Gujarat

 

The automobile revolution in Sanand, a town near Ahmedabad, Gujarat, began with Tata Motors’ ambitious plant to manufacture Nano car models in 2010.16 Since then, the 5,000 acre Sanand Industrial Estate has attracted world renowned automobile majors such as AMW Motors, Maruti Suzuki, Ford, Honda and Hero Motocorp.17 18

Sanand boasts of an excellent support infrastructure and is extremely well connected to the rest of country. It is situated 35 km from the Ahmedabad International Airport and linked to the state highway - 17 which connects a part of it to the Golden Quadrilateral, thus to major industrial, economic and cultural regions. Further, it is connected to major ports – Jawaharlal Nehru Port Trust (JNPT) Mumbai, Kandla, Mundra and Pipavav. Sanand also has a Broad Gauge network and the Ahmedabad railway station is located at a distance of 35 km. Critical infrastructure including power, water/gas supply and solid waste disposal facilities are easily available with simplified application procedures. All of this, coupled with the state’s enabling policies have made the region a magnet for the auto industry giants.19 What adds value to the location is its ability to swiftly meet the demands of the growing car markets of North and North-West India at a low cost. Sanand is a part of the Delhi-Mumbai Industrial Corridor – a multi-billion dollar infrastructure project20 and its connectivity to the major port of Kandla makes it an ideal export-hub.21

The Sanand - Hansalpur - Vithalpur belt has an installed capacity of 1.5 million vehicles and three million two wheelers22. The Tata Motors’ Sanand plant alone is estimated to produce 10,000 to 12,000 vehicles per month soon.23 Ford India’s USD 1 Billion assembly and engine plant has an installed capacity of 440,000 vehicles and 610,000 engines.24

 

Pithampur, Madhya Pradesh

 

Located at a distance of 30 km from the city of Indore, Pithampur is spread across an area of nearly 2,000 hectares and boasts of an annual automotive production of USD 500 Million. The cluster houses 122 medium and large-scale industrial units, more than 455 small-scale industries and auto giants such as Larsen & Toubro, Eicher, Volvo, Mahindra and Hindustan Motors. Pithampur has attracted cumulative investment of over USD 1 billion and today provides employment to approximately 25,000 people. 1 Madhya Pradesh, being the centre of India, enjoys strategic locational advantages like close proximity to major Indian automotive markets, including the automotive hub of NCR.  A state-of- the-art automotive testing track has been set up in the region with digital testing superstructure capable of sensing fine nuances of an automobile even while it moves at 375 kilometers per hour.

The Automotive Mission Plan (AMP) 2006-2016 recognised the importance of the automotive clusters noting that the emerging industrial clusters will carry forward the momentum of India’s success in the automobile sector, and thus help contribute to achieving the objectives set out in the new ‘AMP 2016-26’: increasing production, exports and creating more jobs which aims to create 65 million jobs in the automotive industry.25

Source:
1 http://shodhganga.inflibnet.ac.in/bitstream/10603/16716/9/09_chapter%203.pdf
2 http://shodhganga.inflibnet.ac.in/bitstream/10603/16716/9/09_chapter%203.pdf
3 http://www.bharatestates.com/blog/development-in-chakan-pune/
4 http://www.dqweek.com/chakan-the-most-preferred-investment-destination/
5 http://www.volkswagen.co.in/en/volkswagen_world/volkswagen_india/chakan_plant.html
6 http://www.indiainfoline.com/article/news-top-story/mahindra-bets-big-on-new-chakan-plant-113100901383_1.html
7 http://www.business-standard.com/article/companies/sanand-the-new-global-auto-hub-115032200818_1.html
8 http://www.livemint.com/Industry/nzgFbwcO2BgdW4x6dVBCCN/How-Jayalalithaa-made-Chennai-the-Detroit-of-India.html
9 http://www.acma.in/docmgr/ACMA_Presentation/ACMA_Presentation.pdf
10 http://www.thehindubusinessline.com/companies/nissan-set-to-open-design-centre-in-chennai/article9650589.ece
11 http://auto.ndtv.com/news/how-j-jayalalithaa-made-chennai-the-automotive-capital-of-india-1635099
12 http://www.marutisuzuki.com/our-history.aspx
13 http://www.acma.in/docmgr/ACMA_Presentation/ACMA_Presentation.pdf
14 http://www.ey.com/Publication/vwLUAssets/EY-making-india-a-world-class-automotive-manufacturing-hub-1/$FILE/EY-making-india-a-world-class-automotive-manufacturing-hub.pdf
15 http://yamunaexpresswayauthority.com/yep
16 http://timesofindia.indiatimes.com/city/ahmedabad/Rise-of-an-Auto-hub/articleshow/50791613.cms
17 http://www.business-standard.com/article/companies/sanand-the-new-global-auto-hub-115032200818_1.html
18 https://gidc.gujarat.gov.in/pdf/gidc-presentation/GIDC_Sanand_Industrial_Estate.pdf
19 https://gidc.gujarat.gov.in/pdf/gidc-presentation/GIDC_Sanand_Industrial_Estate.pdf
20 http://www.firstpost.com/business/gujarat-poised-to-challenge-chennai-as-auto-hub-heres-why-50497.html
21 http://www.business-standard.com/article/companies/sanand-the-new-global-auto-hub-115032200818_1.html
22 http://www.business-standard.com/article/companies/sanand-the-new-global-auto-hub-115032200818_1.html
23 http://www.business-standard.com/article/companies/tata-motors-sanand-plant-to-touch-100-capacity-in-a-few-months-117040300645_1.html
24 https://www.india.ford.com/about-ford/media/newsroom/2015/mar-26-2/
25 http://pib.nic.in/newsite/mbErel.aspx?relid=147797