West India offers diverse opportunities for automakers
The automotive industry has always been at the forefront of technology and process innovations. They include assembly line, kaizen and just-in-time production. These innovations have transcended the boundaries of the automotive sector and benefited other industries as well. The same trend continues today. The initiatives of the Union government, such as ‘Make in India’ and ‘Digital India’, are efforts to foster technology adoption and global standards in industries. The government is promoting the adoption of ‘Industry 4.0’ and smart manufacturing throughout the manufacturing sector.
The Western region of the country has much strength that can be leveraged to make it an attractive investment destination. The region is the manufacturing hub of several OEMs like Tata Motors, Mahindra & Mahindra, MercedesBenz, Volkswagen, Fiat Chrystler Automobiles, Force Motors, Bajaj Auto, Ford, Suzuki and Piaggio.
The region already has a strong auto ancillary ecosystem. An automotive cluster comprising more than 1000 auto ancillary companies has been set up. Besides the MSME cluster, big suppliers are also present around this region. With top-level quality accreditation they cater to the needs of the automotive components manufacturers across various geographies. Quality of the workforce is a major strength of this region. The automotive industry in this area has not seen major labour unrest, unlike many other automotive plants in others parts of India. The region is well positioned to access the markets of various states in north and south India. The region is also well connected to all major manufacturing sites within the country through the road network.
The state of Maharashtra on the western coast has automotive clusters in the cities of Mumbai, Pune, Nagpur, Aurangabad, and Nashik. Pune, with 4,000 units, is the largest of these locations. MSMEs and Large-Scale Industries (LSIs) are eligible to receive Industrial Promotion Subsidy, Interest Subsidy, and Electricity Duty Exemption on fixed capital investments in the sector. Industrial units may also receive an additional incentive if they employ more individuals (double the number of original employees) from local communities.
The acquisition of land and termloans by MSMEs and LSIs are completely exempt from the payment of stamp duty. MSMEs are also exempt from payment of duty on the electricity consumed. In the western city of Pune, 225 German companies and Indian automotive groups are located in the Chakan industrial area. In Mumbai, ports, roads, and skilled workers are the favourable factors for companies such as Bajaj Auto, Mercedez-Benz, Tata Motors, and Mahindra & Mahindra.
Gujarat is the most recent auto component manufacturing hub in the country. As of 2017, 15 engineering parks have been established around the metropolitan cities of Ahmedabad and Rajkot. Rajkot, in central Gujarat, contains more than 500 auto component manufacturers. Fifty of these are OEMs and the rest are SMEs catering to the retail (after-sales) market. Gujarat’s Industrial Policy of 2015 guarantees projects 10-year tax holidays, ranging between 70% and 90% – depending on the location and the amount of fixed capital investments. Mega projects worth US$153.40 million (Rs 1,000 crore), with a minimum of 2,000 employees, are eligible for financial assistance from the state government and assistance for identifying appropriate project sites by the Gujarat Industrial Development Corporation (GIDC). The state’s ports of Kandla, Mundra, and Pipavav have dedicated terminals for automotive exports.