Western India's brand new Motown steps on the gas

Last Updated : 19 April 2015, 19:08 IST
Last Updated : 19 April 2015, 19:08 IST

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The Detroj-Sanand-Bechraji-Halol-Mehsana-Hansalpur-Vithalapur belt in Central Gujarat is all set to become the Detroit of Asia, Gujarat chief minister Anandiben Patel proudly pronounced at the inaugural of a $1-billion car manufacturing unit at Sanand recently. The plant has an annual capacity for 240,000 vehicles and 270,000 engines, would employ 2,500 people directly and give jobs to more than 7,500 through ancillary units. So far, 19 vendors have set up shops in the vendor park.

Such data on automobile manufacturing have become all too common in this part of the world, along with claims that Rs 15,000 crore has already been invested. “This belt will see production capacity of over 1.25 million cars and over two million two-wheelers operational in 4-6 years,” Anandiben said. Today, names such as Maruti Suzuki, Ford, GM, Tata Motors, Honda, AMW, Apollo Tyres, Bosch and countless others have set up base in Gujarat.

The journey, many believe, began with Tata Motors shifting its Nano project from Singur in West Bengal to Sanand near Ahmedabad in 2007. This saw the spotlight focus on this sleepy industrial town. The belt was also known for its enterprising farmers who used to sow, grow, and reap a rich harvest of cash crops.

But other companies — the likes of General Motors, Apollo Tyres , Asia Motor Works (AMW), and CEAT — had already set up base in Gujarat. Apollo Tyres has one of its largest plants in Vadodara, from where the first tyre rolled out in September 1991 — in a record 14 months. Till date this plant has seen an investment of around Rs 1,600 crore. “The state has been very proactive, single-window clearance of all papers have made things easier. Its proximity to ports, good roads and air connectivity, along with stable political and regulatory environment and readily available trained manpower, are the biggest pluses for Gujarat,” Satish Sharma, President (Asia Pacific, Middle East & Africa), Apollo Tyres, said. “We have had a very positive experience, to say the least, since the time we chose Gujarat as the destination for General Motors’ first manufacturing facility way back in 1996,” said P Balendran, Vice President, General Motors India.

“Ford selected Gujarat because of its pro-business environment, infrastructure, access to ports in north-western India, and skilled workforce,” a Ford India spokesperson said. Ford has invested $1 billion in its integrated vehicle manufacturing facility and engine plant at Sanand. The vehicle plant has stamping, body, paint and assembly operations; while the engine plant has machining and assembly operations.

The adage is that every OEM (original equipment manufacturer) job would create 10 jobs in the overall industry. Today, hordes of youngsters are being “skilled” in trades like fitter, turner, machinist, welder, and painter; others are being trained as motor, automobile, diesel, and tractor mechanics. They are paying for training that would enable them to move away from traditional rural jobs and work in thriving industries without leaving their villages.

For Honda, increased investment by vehicle companies, OEMs, and suppliers, has already kick-started a revolution in the state. “Further, a reliable supply-chain is becoming a boost,” Yadvinder S Guleria, senior vice president (sales & marketing), Honda Motorcycle and Scooter India.

Dream melts for the Tatas
At its peak in 1950, the city of Detroit was the fifth most populated in the US. It continued its dream run over the next few decades. But between 2000 and 2010, the city’s population declined 25 per cent. Unlike other cities, Detroit did not move beyond cars. As US car companies like GM, Ford, lost market share, so did Detroit.

Like Detroit saw its dream melt, so did Tata Motors’ micro car. The Tatas are believed to have almost, if not completely, stopped manufacturing the Nano at Sanand. The company, which was granted innumerable sops, was later reported to have renegotiated them with the state as its dream car began sputtering. When contacted, Tata Motors said it was “currently in a quiet period owing to the forthcoming rights issue”.

Europe’s second-largest car maker PSA Peugeot Citroen of France too signed a ‘state support agreement’ with Gujarat, in the presence of none other than Narendra Modi. It was looking to invest over Rs 4,000 crore to set up an initial capacity of 165,000 vehicles a year, to be expanded to 340,000 units. This plant was expected to be commissioned by 2014 and generate up to 5,000 direct jobs and 25,000 indirect jobs. However, external factors like the slowdown in demand forced Peugeot to backtrack and the Sanand plant never even took off.

There have also been murmurs of protests in the past from the farm community. But the protests weakened once adequate compensation was paid. “A unique characteristic of those at the helm of affairs in Gujarat as well as people involved with business in the state is that they are very patient. They wait for an investor to come and invest a sizeable amount. And once that is done, they come up with their demands, and seek favours!,” a senior auto company official said on condition of anonymity.

The locals and their leaders from surrounding villages, however, say that having moved into their backyard, these companies are part of their community. “They have been set up on our lands. Traditionally, big businessmen used to shell out monies for betterment of societies. These companies have replaced big businessmen here and so we look to them to fund CSR activities,” a member in the team of a very senior BJP national leader said. “Who else can we ask for? So I just tell the collector or any government official to approach the companies.”

Such hiccups notwithstanding, the Gujarat government has realised that it cannot put all the eggs in one basket. Unlike Detroit, the state is not banking solely on auto industry but is keen on attracting global giants in other sectors, be it capital goods, FMCG, or even agro-based industry.

“I would not like to compare it with Detroit or any other auto hub. It has grown as a manufacturing destination in recent times. With several leading auto manufacturers setting up their bases here, it is definitely on its way to be among the biggest automotive clusters in Asia-Pacific,” Sharma of Apollo Tyres summed it up.

To set up: Three plants at Hansalpur, 60 km away from Sanand
Total investment expected:
Rs 3,000 crore
Land area: 640 acres
Annual Capacity: 2.5 L units that could be scaled up to 7.5 lakh units

Tata motors
Has set up: A Nano plant in a record 14 months
Total investments made:
Rs 2,900 crore
Plant area: 750 acres
Annual Capacity: 2.5 lakh units that could be scaled up to 3.5 lakh units

General Motors
Has set up: First manufacturing facility in 1996
Total investments made:
Rs 1,500 crore
Land area: 170 acres
Annual Capacity: 110,000 units

Has set up: Second plant in India
Total investments made:
$1 billion
Land area: 460 acres
Annual Capacity: 240,000 vehicles and 270,000 engines

Published 19 April 2015, 16:19 IST

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