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