Chennai: Emerging Detroit of India?


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Ashok Leyland is planning to invest around Rs 4150 crore including a LCV project in Tamil Nadu along with its partner Nissan. The JV has already brought the Dost LCV in the market which was well received and now to penetrate the market, the company would launch two more products by December 2012. The proposed investment will lead to setting up a Greenfield plant to produce LCVs which is coming up at Pillaipakkam. The Dost LCV was able to grab 17% LCV segment market share that witnessed sales of 7760 units.
The MoU for the proposed investment was signed by R Seshasayee, Executive Vice Chairman, Ashok Leyland with the Tamil Nadu government yesterday in Chennai.

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Ashok Leyland investing Rs 4150 Crore in Tamil Nadu
 
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Ashok Leyland Limited has entered the European market, via Turkey by joining hands with Turkish company Utikar. The tie-up is producing a new range of inter-city and intra-city buses for West Asia, North Africa and the CIS markets. According to company officials, this is a stepping stone for the company into the European market in a big way.

The Hinduja Group flagship company ALL is planning to develop 8-metre buses and with Katmerciler and Volkan, a special equipment manufacturer, to produce special application vehicles such as the garbage compactors, hook loaders and fire trucks. All these vehicles will be specially-built on the Ashok Leyland's chassis and will be developed along with Utikar, according to company sources.
The company will strongly leverage technology, manufacturing capabilities and skilled labour of its local partners. Besides, due to its geostrategic importance, Turkey will become the company's distribution base to reach markets like Turkmenistan, Kazakhstan, Georgia, Algeria, Morocco, Tunisia, Egypt and West Asia.
These operations will complement the bus supplies from the company’s manufacturing facility at Ras Al Khaimah in the UAE. In addition to this, AVIA Ashok Leyland Motors represents the company’s presence in Europe that makes and markets the popular D-Line series of trucks, according to company sources.
Going forward, ALL also plans to produce 6-metre, 7-8 metre and 11-metre bus chasses for inter-city and intra-city applications and will also develop rear engine buses in partnership with Utikar.
Apart from bus chassis, Ashok Leyland is also likely to export trucks which have capacity in the range of 9 tonne, 16 tonne and 25 tonne with the chasses built locally in Turkey. The trucks will cater to the growing demand for municipal application vehicles. Ashok Leyland also plans to set up a branch office in Turkey to streamline operations there.

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Ashok Leyland enters European market via Turkey
 
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The Sriperumbudur belt, around 60-70 kms away from Chennai is where part of the action is. In addition to good manpower being available, the other factors are probably that some of the India JV partners always had a presence there in TN, so when their foreign partners joined hands it was logical to expand there.

Also the real estate costs in TN is supposed to be lower (for such investments) as compared to other states like MH, Rajasthan, Delhi etc. This has however resulted in the residential real estate cost going up significantly in those areas.

Gujarat is no doubt catching up by competing on governent flexibility and promoting ease of doing business there.
 
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Testing times for Southern auto cluster


The state of Tamil Nadu and in particular, the Chennai-Sriperumpudur-Oragadam area, is one of India’s busiest automotive hubs. The biggest names in the global auto sector have established their bases here including Ford India, an early entrant, along with Hyundai Motor India and the Renault-Nissan joint production unit and most recently, Daimler India Commercial Vehicles (DICV). BMW India, which has an assembly plant, recently rolled out its 25,000th car from the facility near Chennai.

Hyundai, India’s largest car exporter, has two plants in the region and has invested an estimated US $ 2 billion in the sector so far. The Renault-Nissan factory that rolls out the Micra is one of two global hubs for the hatch, the other being Thailand. DICV unveiled its BharatBenz range of vehicles in February this year and the first lot of vehicles will roll out from the facility that has one of India’s most modern testing tracks.

The big names have spawned a variety of automotive suppliers, many overseas while the homegrown ones have flourished in what is sometimes called the ‘Detroit of Asia’. Among suppliers, the top names are the Rane Group, a clutch of seven companies, Lucas-TVS, Saint Gobain, and the Amalgamations Group, to mention but a few.

What attracted the new entrants to this automotive belt in Tamil Nadu were a host of factors including a well-entrenched automotive component industry. The state government has gone out of its way to woo investors and has gone the extra mile to support industry. It is believed that as part of Hyundai’s MoU with the state government, a dedicated rail line was to be established between the factory and the port. Ford India too would benefit substantially from such a facility, what with carmakers keen to drive global exports from the region.

Another key factor that makes Tamil Nadu attractive is the availability of engineering talent. The state’s engineering colleges churn out 300,000 graduates a year and companies here have a larger pool to choose from. As Ford India’s chief Michael Boneham says, “The technicians are diploma holders, ambitious, want to get ahead aggressively, and this capability of people gives us the leading edge in competition.” But there’s also a different point of view. “Things have changed however since the days when a factory manager could choose from among people lining up outside the gate,” says Ram Venkataramani, director, India Pistons.

Driving R&D activity

Given its abundance of engineering talent, it is no wonder that carmakers have also established their R&D hubs here too. If Mahindra & Mahindra has the Mahindra Research Valley (MRV), then Hyundai has its own R&D centre at Hyderabad where, among other projects, the Eon hatchback was designed. In addition, the longstanding players in the sector have been quietly going about their own R&D. Ucal Fuel Systems set up its R&D unit way back in 2002 at Ambattur and has to its credit a host of unique products.

Tamil Nadu’s other key advantages are its ports – Chennai and Ennore – from which players such as Ford India, Hyundai and more recently, Renault-Nissan have exported cars to markets globally. Meanwhile, Karnataka too is setting a fast pace.

Need for top-class infrastructure

However, not all is hunky-dory. The region has some serious issues with the infrastructure such as roads and more importantly availability of power. Venkataramani says power-intensive businesses like foundries face a major problem.

Despite these issues, OEMs are investing in the south. India Yamaha Motor and Triumph Motorcycles have recently announced plans for plants in south India, the Japanese bikemaker for a Chennai site and the British manufacturer opting for Bangalore.

Toyota Kirloskar Auto Parts (TKAP) is setting up its third plant for automotive components at Bidadi, on Bangalore’s outskirts at an investment of Rs 500 crore. And staying with Karnataka, component major Bosch has said it will relocate manufacturing activities with related support functions of its city plant at Adugodi to Bidadi in two phases from now till 2015-16. It will spend nearly Rs 600 crore for development of the facility in both phases.

On the real estate front, land prices are another key issue that is of concern to the industry. In Chennai, some parts are more expensive than Manhattan, one source told this correspondent.

So what is the overall picture looking like? What are the areas of concern?

Success breeds its own problems. Land issues can be very litigious if things go wrong as the Singur case in West Bengal has shown.

In the last year, the developments in Gujarat that have resulted in Peugeot (which Tamil Nadu was so confident it had got) and Ford investing there is giving the south a run for its money.

“The state government has to wake up to the reality and look at what is happening in other states. There is a need for proactive measures to be taken. We must highlight problems here and not stay silent,” urges M Rafeeque Ahmed, chairman, FICCI, Tamil Nadu State Council.

Today, a lot of companies are attracted by better governance practices, easier approvals and the virtual red-carpet treatment that Gujarat has laid out for potential investors, including automotive, is being seen as a great example to follow. Clearly, Tamil Nadu cannot take it for granted that it can pick and choose who it wants any longer.

There are also talent issues. Poaching is rife in the south and one has to sieve the wheat from the chaff. A raft of private engineering colleges churn out graduates of suspect quality. While talent paucity is a country-wide issue, it is more exacerbated in states like Tamil Nadu. No wonder, FICCI has requested the Centre to allow a permanent chair in the board that decides the syllabus and running of ITIs across the country and has got it, says C N Rajasekar, president, Tamil Chamber of Commerce.

There’s no gain saying the fact that the automotive investments have galvanised industralisation in the south, and Tamil Nadu. R Dinesh, head of CII’s Tamil Nadu State Council, says a proposal for a global auto research centre has been suggested to further boost the south’s credential. However, the need of the hour is top-class infrastructure. OEMs and component suppliers are increasingly looking at their cost structures which ultimately determine margins and profitability. The success and pitfalls of the Southern auto cluster have key lessons for India’s automotive sector. What is heartening is that despite some trials and tribulations, a clutch of South India-based companies are leading the way with innovation and dynamism.

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Tamil Nadu targets aggressive growth, signs MoUs with Hyundai, TVS Group and Danfoss Industries

In a major boost to the investment scenario in Tamil Nadu, as many as 12 Memorandums of Understanding (MoUs) were signed between the state government and companies from various industries including automotive. In addition to Hyundai Motors India Ltd (HMIL) which had earlier announced a $300 million (Rs 1,615 crore) investment for a flexi-engine plant to be set up in its existing facility site at Irrungattukotai, the TVS Group also signed an MoU announcing an investment of Rs 700 crore and HVAC systems manufacturer Danfoss Industries inked another for a project with an investment of around Rs 500 crore. In all, 12 companies, including major glass manufacturer Saint Gobain and Finnish mobile phone manufacturer Nokia signed MoUs worth Rs 20,925 crore with the Tamil Nadu government.

Reacting to this development, R Dinesh, chairman, CII Tamil Nadu State Council, says, “Obviously it’s a great positive step as far as we (CII) are concerned. We see this in two ways. First, the ‘Vision 2023’ is getting into action, and second, since Tamil Nadu has been seen as an auto and automobile hub, going forward this is a big momentum. To have a mega event like this when the market is not so great, we are very happy with this.” ‘Vision 2023’ is a policy by the Tamil Nadu government that “warrants a provision of world-class infrastructure.”

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Renault-Nissan plans another 3 lakh units capacity at an investment of Rs 2,000 crore

In these times of a slowdown, when major automotive companies are reviewing expansion plans, the Renault-Nissan alliance in India is going whole hog with its expansion plans.

With Nissan exports clocking over one lakh units per annum and Renault's Duster attracting strong demand from the market, ET has learnt that Renault-Nissan Alliance, which was planning to utilise 4 lakh units capacity by 2015, is expected to be ahead of its plans by one year and is planning to add another 3 lakh units capacity for its entrylevel cars (Nissan) Datsun (Codenamed K2 and i2) and Renault (A Entry), which will entail an additional investment of Rs 1,500-2,000 crore.

The decision on expansion is likely to be taken in the second half of this year. The company is already in negotiations with the several state governments, including Tamil Nadu and Gujarat. People close to the development say Renault-Nissan alliance is planning to produce 15-17 models by 2016-17.

"With mass volume models like Datsun from Nissan and A-Entry from Renault planned in the next couple of years, Franco-Japanese alliance would need additional capacity. The likelihood of alliance expanding in Oragadam, near Chennai, are more as it already have an established set up, but it are also exploring Gujarat, which too has a good port facility for exports," said one of three people in the know of the development.

Last year, the partners created an additional 2 lakh units per annum production line to churn out more models in the future, which took the overall annual capacity to 4 lakh units.

Toshihiko Sano, MD, Renault Nissan Automotive India, declined to divulge specific information on investment or timelines, but told ET, "We have already set up two manufacturing lines for our existing products. We will have to set up new line for entry-level cars. The decision on the additional line will be taken later this year."

The Renault-Nissan partnership is currently building a casting and machining shop, which will help the company move from engine assembly to engine manufacturing. This will increase the localisation content to 75 per cent.

The Renault-Nissan alliance is aiming for 90 per cent localisation, going ahead. And it has, in fact, invited vendors to set up shop in Chennai to reduce the logistic cost.

"Already 40 of out key vendors have set up shop at Chennai, which has helped us reduce cost by 5-15 per cent depending on the components," added Sano. The JV structure, which was originally envisaged to be 50:50, had to be changed, as Renault had decided to go slow on its India investment, due to the global recession.

ET learns that the final share of Renault's investment is 30 per cent and Nissan has invested a major share of 70 per cent. The decision, which was taken in 2010, saw Nissan having a larger focus on manufacturing in India, Renault will focus its investments in the plant in Morocco.

Renault-Nissan plans another 3 lakh units capacity at an investment of Rs 2,000 crore - The Economic Times
 

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Tamil Nadu woos Japanese companies to invest in the state Chennai

The government of Tamil Nadu along with the CII, ACMA and Japan External Trade Organisation (JETRO) organised a seminar yesterday in Chennai in a bid to woo Japanese automotive companies to invest in the state. Fifty-five delegates representing 46 companies from across Japan formed the contingent that participated in the seminar titled ‘Tamil Nadu – A potential investment location for automotive related industry’. The event was preceded by the delegation’s visit to Renault-Nissan Alliance Pvt Ltd’s manufacturing facility in Oragadam, Chennai on February 25.

Soichi Yoshimura, executive vice-president, JETRO, said that the objective of the mission is “To promote network building between existing Japanese companies and interested parties regarding the investment environment in Tamil Nadu.” L Ganesh, past chairman, CII Southern Region and chairman, Rane Group, said that Japan has always been an integral part of India’s ‘Look East’ policy. “Tamil Nadu has 340 Japanese companies, the maximum of any state in India. Sixty percent of the FDI that comes from Japan into Tamil Nadu is for the automobile sector,” Ganesh added.

Representing the Japanese government, Masashi Iwanaga, director, Financial Cooperation Division, Ministry of Economy, Trade and Industry of Japan, said, “The third round of talks between the Japanese government and Tamil Nadu state government will take place on Wednesday.” On behalf of JETRO, Shinya Fujii, director general, JETRO Chennai, said that in a recent survey conducted by his office, 83 percent of Japanese companies in India said that they have plans to expand their operations here. The task of wooing potential investors on behalf of the Tamil Nadu government was shouldered by M Velmurugan, IES, executive vice-chairman, Guidance Bureau, Pooja Kulkarni, IAS, joint secretary, Industries Department and Joseph Ravi, additional director, Directorate of Industries & Commerce. To facilitate interactions with the Japanese companies, JETRO’s representatives included Fujii, Yoshimura and Hajime Sato, director, Overseas Investment Division, JETRO.

While the Japanese delegation mainly consisted of small and medium-sized enterprises, there were several large-scale companies whose activities included general trading, banking, manufacture of plastic components, catalytic converters for cars and two-wheelers and aluminium die casting.


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