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Now, the Chinese beat a path to Andhra Pradesh’s door

V Rishi Kumar | Murali Gopalan | Updated on February 20, 2020 Published on February 20, 2020

The KIA Seltos rolling out of the assembly line at Anantapur plant in Andhra Pradesh   -  THE HINDU

After Kia and Isuzu, automakers from China explore options in the State

Andhra Pradesh could soon be home to a thriving Chinese automotive ecosystem if the script goes according to plan.

Reports have been doing the rounds for a while now that Changan Automobile has zeroed in on Andhra Pradesh as one of its potential locations. Likewise, SAIC Motor Corp, which already has a facility in Gujarat, may consider the second phase of its expansion plans in the State.

Neither company has confirmed the news since these are early days yet. They could also be looking at other States though, for now, Andhra Pradesh looks particularly attractive from the viewpoint of sops, infrastructure etc.

“At least three automotive companies have shown interest in setting up their manufacturing facilities in the State,” Mekapati Goutham Reddy, Minister for Industries, Commerce and IT, told BusinessLine. According to him, some of them have also visited sites and discussions are now “at various stages”.

Andhra Pradesh has been on an overdrive in offering attractive sops. And, even while there was a momentary burp with the rumour on Kia’s relocation plans, the fire has long been doused. The Korean automaker has a sprawling facility in Anantpur, which was commissioned in record time. It is from here that Kia successfully launched the Seltos, which has already become a force to reckon with in the SUV space.

“We are in the process of attracting investments from automotive companies which have a long-term commitment to the State; they look for a mutually beneficial association,” said Reddy.

‘Ideal’ location

In his view, the State is “ideally suited” for setting up auto plants given its infrastructure and a conducive business environment. “However, while we want to attract industries, this should not just be incentive-driven as in the past,” clarified Reddy while driving home the point that the business model would eventually need to be “mutually beneficial”.

Apart from Kia, Andhra Pradesh is home to Isuzu Motor, which has a plant in Sri City and is now set for the second phase of its growth plans. Both Kia and Isuzu have also set up vendor bases, which is precisely what Changan and SAIC would also do, should they decide to set up shop in Andhra Pradesh. When that happens, it will be a Chinese vendor base coexisting with the Japanese and Koreans.

According to sources, a decision could be made over the next three or four months though there could be delays owing to the coronavirus outbreak, which has paralysed China and, in turn, the rest of the world. Automakers in the country have cut back on production while supplies of components to other countries has also been severely impacted.

By the end of the day, the fact remains that China is virtually the centre of gravity of the automotive world and any disruption could wreak havoc in the supporting supply chain system. This is precisely what is happening with the coronavirus scourge where every passing days brings more than its quota of bad news. Yet, things will get back on track eventually and it is only a matter of time before both Changan and SAIC finalise the location for their plants and kick off the India story. The reason why Andhra Pradesh stands a good chance, beyond infrastructure, talent, etc, is that it offers easy proximity to ports, which is a huge plus from the viewpoint of exports.

Electric vehicle hub

“We are also keen to develop Andhra Pradesh as a hub for electric vehicles…possibly a Detroit for EVs,” added Reddy. Tamil Nadu has often been referred to as the Detroit of Asia, thanks to some of the big ticket names that are its residents but other States are as keen to join the automotive bandwagon.

Decades earlier, Maharashtra and Haryana were at the forefront of the Indian auto story, thanks to names such as the Tatas, Bajaj, Mahindra, Premier, Kinetic, Maruti and Hero. Tamil Nadu threw its hat into the ring when reforms kicked off in the early 1990s, and bagged huge brands such as Hyundai, Ford, Daimler Trucks, Renault-Nissan, BMW and, more recently, Citroen from Groupe PSA.

Meanwhile, Maharashtra also quickly put its house in order over the years and went all out to woo automakers. The move paid off, with vibrant auto hubs created in Chakan and Ranjangaon near Pune, which are home to Volkswagen, Fiat Chrysler and many others.

Gujarat also joined the race in recent years and hit the headlines when it got the Tatas to relocate its Nano plant to Sanand from the jinxed West Bengal facility at Singur. The other heavyweights which followed included Maruti, Honda Motorcycle and Ford.

The emergence of Andhra Pradesh into this club was only a matter of time considering that the previous heads of the State government had gone the extra mile in attracting automakers there. There was a time when Proton of Malaysia was being touted as a prime candidate, as also VW, in later years.

The persistent efforts over the years have clearly helped, with Kia and Isuzu now among the prominent residents of Andhra Pradesh. If the Chinese also join the list, it will be a huge boost from the viewpoint of employment generation.

There was a time when Suzuki Motorcycles was also eyeing Andhra Pradesh for its second phase of growth but changed its mind subsequently with its familiar base, Haryana, more likely to do the honours.

This decade will see the Chinese play a big role in India’s automotive story. SAIC has already hit the road running with its MG brand and the positive market response to its Hector SUV. Changan, Great Wall Motor and FAW are the others that now make up for the rest of the Chinese menu. Perhaps more will follow, which will be music to the ears of States like Andhra Pradesh.

Published on February 20, 2020
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