Tamil Nadu Business Review. Vehicle, auto component sectors in overdrive

Post-Independence, Tamil Nadu was quick to accelerate the pace of industrialisation and create a unique place for itself in manufacturing.

While the State has a manufacturing legacy across sectors such as agro-processing, leather and textiles, it has carved a niche for itself in the production of automobiles and components. It contributes over one-fourth of export of auto parts and 70 per cent of passenger vehicles. In 2017-18, more than a million passenger vehicles were produced in factories near Chennai for the domestic and export markets.

Export hub

Tamil Nadu houses the manufacturing units of global passenger vehicle makers such as Hyundai, Renault-Nissan, Ford and BMW; truck makers like Ashok Leyland and Daimler; and two-wheeler makers such as TVS Motors, Royal Enfield and Yamaha.

For Hyundai and Nissan, Chennai is the export hub. Recently, Daimler India Commercial Vehicle also made its Oragadam truck manufacturing facility the export hub to address markets in Asia and Africa.

Tamil Nadu was able to script a success story in auto manufacturing mainly due to a vibrant and competent supply chain. The auto-ancillary industry in the State is truly international, winning a number of global awards and recognition for production quality. The State hosts the highest number of Deming Award (a global recognition for quality quality) winners. Some of the leading auto parts groups from the State include TVS, Amalgamations and Rane, which components to several global brands.

The State is said to account for about a third of auto components production in the country. Chennai alone has over 300 tier I-III suppliers besides a few thousand small/medium units in the sector.

Tyre making

In recent years, with growing automobile production, Tamil Nadu has also attracted top tyre producers, which have set up factories near Chennai. Some of the big names include French tyre maker Michelin and domestic majors such as Apollo Tyres and JK Tyres. A few weeks ago, Mumbai-headquartered Ceat announced plans to set up a factory near Chennai at an investment of ₹4,000 crore.

The State is already home to companies like MRF and TVS Srichakra tyres. With more tyre units now, Tamil Nadu is the largest tyre manufacturing State in the country.

Major factors that help the State attract investments in the auto sector are port connectivity and the availability of skilled manpower, particularly with knowledge of shop floor and manufacturing activities.

Also, the National Automotive Testing and R&D Infrastructure Project (NATRiP), a Government of India project, has been established at the Oragadam manufacturing corridor.

It has a test track to examine vehicles on safety, emission and performance standards.

Wooing investors

While Tamil Nadu has inherent strengths in manufacturing, particularly in automobiles, the volatile political situation in the last couple of years has posed challenges in attracting investments.

Though the present government is taking some steps and has activated the government machinery to woo investors, neighbouring States like Andhra Pradesh and Telangana offer tough competition, going all out to attract manufacturing investments.

The Tamil Nadu government needs to do a lot more to put the State back on the investment map. This is particularly critical given the growing need to generate jobs for lakhs of students graduating every year in the State.

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