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Murali Gopalan
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Kel Kearns, Director Manufacturing, Sanand Vehicle Assembly & Engine Plant, Ford India Pvt Ltd, explaining the construction work at Ford India's second plant that is coming up in Sanand, Gujarat. Photo : N. Ramakrishnan
Bijoy Ghosh Kel Kearns, Director Manufacturing, Sanand Vehicle Assembly & Engine Plant, Ford India Pvt Ltd, explaining the construction work at Ford India's second plant that is coming up in Sanand, Gujarat. Photo : N. Ramakrishnan

How the Nano project sparked Gujarat's ambitions of becoming the country's new auto hub

General Motors and Atul Auto were among the few high profile automotive residents of Gujarat till a decade ago.

Most of the other big brands, right from Toyota, Honda and Suzuki to Hyundai, Ford and Volkswagen, had their bases in Haryana, Tamil Nadu and Maharashatra. Gujarat was never on the radar as an automobile base though it was already home to big names such as Reliance and Essar in the energy space.

All this changed when Tata Motors announced the dramatic withdrawal of the Nano project from West Bengal and its relocation in Gujarat instead. It is all too well known now how Chief Minister Narendra Modi personally reached out to Ratan Tata and laid out the red carpet.

Beginning of journey

It was the beginning of an exciting journey for Gujarat in the automotive segment. Getting a Tata project was no mean achievement and reports soon began doing the rounds of the extraordinary levels of efficiency displayed by the State Government to get things done quickly.

The entire relocation of the Nano plant was done in record time, an incredible achievement considering that a lot of the machinery had to be moved from Singur thousands of kilometres away. The Gujarat administration was, in parallel, readying the infrastructure for the new plant at Sanand with the result that the Nano was all set to roll in barely 18 months.

Word soon got around in industry circles about the Gujarat experience and it was only a matter of time before other big auto brands began making a beeline for the State. It was enough to rattle rival States and the classic instance was when Tamil Nadu hurriedly issued a press release to announce Peugeot’s plans to set up a facility. The French carmaker wasted little time in denying this report and promptly announced some months later that Sanand would be its new home.

Ford, likewise, had been operating in Tamil Nadu for over a decade, but decided to settle for Gujarat when it came to its second phase of growth in India. Maruti Suzuki, traditionally confined to Haryana, soon announced its intent to join the Gujarat parade. By this time, Peugeot changed its plans about investing in India since it was bogged down with heavy losses. Yet, that did not take away the fact that Gujarat was going to be a name to reckon with in the automobile space.

Two-Wheeler makers too

The two-wheeler industry was not going to be left far behind either. Hero MotoCorp could be the first to move in once plans are finalised. Bajaj Auto was exploring the option of expanding in Gujarat but has now put this on hold. There have been talks of Honda looking at a facility in the western region and Gujarat, once again, is being spoken of as the hottest contender though no official confirmation has come in yet.

Clearly, the State has come a long way since the Nano and what is remarkable is that it has managed to attract new names in just five years. Chief Minister Modi makes no secret of his desire to put Gujarat right on top in the auto space though a lot more needs to be done to make this a reality. Neighbour Maharashtra already has a portfolio of big names. These include old residents such as Bajaj Auto, Tata Motors and Mahindra & Mahindra as well as new players such as Fiat, Volkswagen and General Motors. Similarly, Tamil Nadu has been home to Hyundai, Ford, Renault-Nissan and BMW for many years now and is still perceived to be the best bet from the viewpoint of a robust supplier base. This is equally true for Haryana which boasts heavyweights such as Maruti, Honda (both cars and two-wheelers) and Hero MotoCorp.

In contrast, Gujarat is still some way behind but all this will change once Maruti and Ford commission their plants over the next 3-4 years and spawn a new ecosystem (translated as a vendor base) in the process. This is precisely what happened to Tamil Nadu when it first began attracting big-ticket auto investments in the mid-1990s which have since become a deluge of sorts. This was also the time Maharashtra lost out some big names because it was not quick enough to respond to the situation. However, this was soon set right with a policy that helped draw impressive names such as Tata-Fiat, GM and VW.

More investments, More jobs

As automakers expand operations, it is only logical for them to seek out States that are perceived to be investment-friendly. An ambitious Gujarat would only be too keen to lay out the red carpet because more investments will translate into tremendous employment opportunities for its youth. It also has the right infrastructure to support this vision which includes top-class roads and ports as well as reliable supply of water and power. This could well be Gujarat’s decade in the Indian automotive journey.

(This article was published on May 24, 2013)
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