COVER STORY South to drive In­dian au­to­mo­tive in­dus­try growth: Vikram Kir­loskar

Strong growth in ve­hi­cle de­mand due to ris­ing in­come, mid­dle class, and a young pop­u­la­tion is likely to pro­pel In­dia to be the third largest au­to­mo­tive mar­ket by vol­ume in the world by 2020. South In­dia, in par­tic­u­lar, is ex­pected to con­trib­ute at least a

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Q: How do you see the cur­rent sit­u­a­tion of the au­to­mo­tive in­dus­try in South In­dia?


The growth of the au­to­mo­tive mar­ket in the coun­try is at­tract­ing more in­vest­ment in pro­duc­tion ca­pac­i­ties in South In­dia in par­tic­u­lar. In­dia has be­come the fourth largest ve­hi­cle mar­ket.The to­tal ve­hi­cle sales dur­ing Jan­uary-May this year was over 1.6 mil­lion units but we have a lot of head­room for growth as there are only 32 ve­hi­cles per 1000 peo­ple com­pared to around 800 ve­hi­cles per 1,000 peo­ple in the US. This makes it a very nascent mar­ket com­pared to other ge­ogra­phies and hence leaves im­mense scope of growth which at­tracted many play­ers like Peu­geot, Kia and SAIC.

Ad­di­tion­ally strong growth in de­mand due to ris­ing in­come, mid­dle class, and a young pop­u­la­tion is likely to pro­pel In­dia to be the third largest au­to­mo­tive mar­ket by vol­ume in the world by 2020. South In­dia in par­tic­u­lar is ex­pected to con­trib­ute at least a third of the out­put.

Q: How do you see the growth in the South­ern re­gion in in­vest­ments, em­ploy­ment and new busi­ness?


In­dia’s au­to­mo­tive in­dus­try is ex­pected to make about $8-10 bil­lion in­vest­ment in the next 3 to 4 years to set up or scale up pro­duc­tion. The in­vest­ment will come from existing gi­ants like Maruti Suzuki and also from new play­ers like Kia Mo­tors, SAIC, Changan, and Beiqi Fo­ton. The in­dus­try will make about Rs 1 lakh crore in­vest­ment to­wards tech­nol­ogy upgra­da­tion alone to meet reg­u­la­tory stan­dards in terms of emis­sions, safety and fuel ef­fi­ciency. South In­dia can ex­pect to at­tract over 40% of the in­vest­ment. We are ex­pect­ing that this will gen­er­ate di­rect em­ploy­ment for about 25,000 peo­ple.

Q: What are the new ini­tia­tives be­ing taken by the in­dus­try to boost the au­to­mo­tive sec­tor in the re­gion?


We are work­ing with the State Gov­ern­ments to come up with poli­cies sup­port­ing au­to­mo­tive re­search and to pro­mote sus­tain­able con­ver­sion tech­nolo­gies to pro­duce blended fu­els like bio-ethanol, bio-diesel and bio­gas. In ad­di­tion we have been work­ing on to im­prove the ease of do­ing busi­ness and fa­cil­i­tat­ing in­dus­try-in­sti­tute part­ner­ships and in­dus­trial projects.

Q: What do you per­ceive as the chal­lenges in the re­gion and how are they be­ing ad­dressed? Kir­loskar:

Is­sues like un­der­util­i­sa­tion of pro­duc­tion ca­pac­ity, feed­stock sup­ply, in­crease in raw ma­te­rial cost and higher in­ter­est rate are some of the ma­jor chal­lenges faced by the au­to­mo­tive sec­tor. We are en­gag­ing with the con­cerned stake­hold­ers to min­imise the im­pact and sup­port the in­dus­try to grow fur­ther.

Q: What are the key ad­van­tages of the South In­dian au­to­mo­tive sec­tor com­pared to other re­gions?


The South­ern States of Tamil Nadu, Te­lan­gana, Andhra Pradesh and Kar­nataka have col­lec­tively emerged as a ma­jor au­to­mo­tive hub. In­dus­try friendly poli­cies, gov­ern­ment sup­port, com­pa­ra­bly good rail, road, and ports in­fra­struc­ture and skilled man­power have con­trib­uted to the growth of auto sec­tor in this re­gion.

Q: In the South, Tamil Nadu and Kar­nataka have a strong au­to­mo­tive in­dus­try base. How do you see the emer­gence of Andhra Pradesh and Te­lan­gana?


In South In­dia, Tamil Nadu clearly scores over its im­me­di­ate neigh­bours in­clud­ing Andhra Pradesh. Ma­jor play­ers like Hyundai, Re­naultNis­san, Ford, Mit­subishi, BMW, and Yamaha op­er­ate out of this State. States like Andhra Pradesh and Te­lan­gana too are woo­ing in­vest­ment in the au­to­mo­tive space. Sri City in Andhra Pradesh has emerged as a ma­jor auto clus­ter in South­ern In­dia and is giv­ing good com­pe­ti­tion to tra­di­tional re­gions

like Chen­nai and Bengaluru. These States are will­ing to meet the ex­pec­ta­tions of the in­dus­try with re­spect to in­dus­try-friendly pol­icy, in­fra­struc­ture, skilled man­power and con­nec­tiv­ity to ports.

Q: What are the im­me­di­ate pri­or­i­ties needed to pro­mote fu­ture in­vest­ments in the re­gion?


Firstly, one of the pri­or­i­ties for pro­mo­tion would be lev­er­ag­ing re­search and de­vel­op­ment ca­pa­bil­i­ties of South In­dia. As we have strong higher and tech­ni­cal ed­u­ca­tion base cou­pled with strong play­ers in IT and elec­tron­ics this re­gion can be pro­moted as most favoured des­ti­na­tion for R&D in hy­brid, e-ve­hi­cles. Be­sides, South In­dia be­ing the soft­ware pow­er­house of In­dia lev­er­ag­ing this strength, the re­gion can be pro­jected as a cen­tre of ex­cel­lence for au­tonomous driv­ing tech­nolo­gies. Se­condly pro­mot­ing Tier 2 cities will help de­con­gest the big cities like Bengaluru, Chen­nai and Hy­der­abad and help the in­dus­try grow fur­ther.

Q: How does CII plan to pro­mote the re­gion as an in­vest­ment des­ti­na­tion?


We need to build on our strength in in­fra­struc­ture by de­vel­op­ing rail, road, and port net­work to world-class lev­els. This will help the au­to­mo­tive sec­tor to grow in the long-term. In ad­di­tion to in­fra­struc­ture the au­to­mo­tive in­dus­try needs a very good sup­plier base. Strength­en­ing the com­pet­i­tive­ness of the com­po­nent sec­tor will go a long way to sup­port the growth of the au­to­mo­tive in­dus­try. These two will be key fo­cus ar­eas for the pro­mo­tion of South In­dia as an in­vest­ment des­ti­na­tion.

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