Multilocation plants will become a necessity: Maruti’s Ayukawa
Suzuki India Ltd said auto makers in the country will have to build factories nationwide, including at new untapped regions, to diversify their production bases and meet an expected more than threefold surge in sales by 2030.
“Multi-location plants will be a business necessity for both OEMs (original equipment manufacturers) and component manufacturers to grow and de-risk our business,” Kenichi Ayukawa, Maruti’s MD, said at the annual conference of the Automotive Component Manufacturers Association of India.
India’s automotive industry is mainly dominated by the hubs of Gurugram and Manesar belt in Haryana, Gujarat and Chennai, with pockets of automotive manufacturing presence in Rajasthan, Uttar Pradesh and Andhra Pradesh.
Citing the example of Gurugram, where the Suzuki Motor Corp. unit began its journey in the 1980s, Ayukawa said “many such auto-clusters have to be developed throughout the country”.
“This will help us sustain the next phase of growth and insulate us from unforeseen business risks. I urge component manufacturers to gear up for multi-locations facilities and align investments accordingly,” Ayukawa said.
The new regions would need the latest infrastructure and other facilities to make it attractive for people to reside, he added. An 8-9% expansion of the Indian economy would grow the passenger vehicle industry to about 10 million units a year by 2030 from about 3.2 million units, Ayukawa said.
The government expects the passenger vehicle market to triple to 9.4 million units by 2026 from 3.2 million currently if the economy grows at an average of 5.8% a year, said a document titled Automotive Mission Plan (AMP) 2016-26.
A 7.5% annual expansion of the economy will expand the market further to 13.4 million units, making it the world’s second largest after China.
On the same premise, the commercial vehicle industry is expected to grow to 2 million and 3.9 million units, respectively, from 700,000 at the end of 2014-15.
The two-wheeler market is likely to grow to between 50.6 million and 55.5 million units from the 18.5 million units currently. To achieve the projections, the auto industry will need additional investments of ₹4.5 trillion to ₹5.5 trillion.
“As you note, the scale of operations before us will increase nearly three times of the present levels. Clearly, we have to triple our efforts to meet the growth in volumes. It implies a transformation in our mind set and change in our outlook. Our businesses will therefore, need to be re-looked and aligned to new scale of operations,” Ayukawa said.