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Tamil Nadu eyes major investments in state's auto, auto components industry

Tamil Nadu claims that Chennai is the largest contributor to the automobile sector in the country in terms of industrial output

Gireesh Babu  |  Chennai 

Auto Industry
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With the second Global Investors' Meet (GIM) scheduled to be held in on January 23 and 24, the government of is expecting its strengths in the auto and auto component industry to attract major in the sector. The state claims that is the largest contributor to the automobile sector in the country in terms of industrial output and is one among the top 10 global auto hubs with an annual of 1.46 million units for passenger cars
has an of producing one car every 20 seconds (three cars per minute) and one commercial vehicle every 90 seconds. The total for cars is 14,60,000 of which the production during 2017-18 was around 10,90,000 units. For heavy vehicles, the installed capacity is 2,18,000 units of which the production for 2017-18 was 1,32,000. The installed capacity for two-wheelers is around 48,20,000, of which the production for the year 2017-18 was 3.18 million, according to the state government data.

Of the total capacity, Motor has an installed capacity of 7,00,000 units, followed by with 4,80,000 units and Motors with 2,00,000. BMW has an installed capacity of 14,000 units, while Mitsubishi, which has of late joined the Alliance, has an installed capacity of 12,000 units. There are around 1393 factories producing motor vehicles, trailers and semi-trailers in

Motor India, a part of Korean auto major Motors, in November 2018, had signed a MoU with the state government to further invest around Rs 7000 crore to increase production capacity, new model launches and powertrains. The investment will be used to expand capacity to 8,00,000 units, including 50,000 completely knock down units among others. The proposed investment also includes the development of electric vehicles.

The state's image as an auto-hub took a hit in the recent past with reports suggesting that the state is falling out of favour with automobile companies like Kia Motors, a part of the Hyundai Motor Group, and others opting to set up a facility in Andhra Pradesh instead of The state government said that the decision was part of the group's policy under which two of its companies cannot have a facility at the same location.

According to the export data for the last five years, the exports of automobile and auto components from Tamil Nadu has seen a decline from $6.4 billion in 2014-15 to $5.79 billion during 2015-16 and further down to $5.74 billion before growing 17 per cent, back to $6.76 billion in 2017-18.

The state government is expecting to bag more in various sectors including the automobile industry, in the upcoming Global Investors Meet.

Tamil Nadu has the largest base and accounts for 35 per cent of India's production of auto components. Chennai's auto components sector is likely to grow by 20 per cent annually, with exports likely to grow by 30 per cent over the next five years. The high level of indigenisation achieved in the vehicle industry shows the capability of the industry to develop and manufacture components as per the requirement.

At present, Tamil Nadu has over 100 major auto component manufacturers with an investment of $553.85 million. The output is worth $1.2 billion with exports of $140 million directly employing about 45,000 people. Chennai has over 350 tier I to III suppliers apart from 4,000 under tier IV segment. Auto component manufacturers like Visteon, and others produce more than 25 per cent of their components in Chennai. Just in time (JIT) practice by automobile manufacturers has resulted in the growth of the auto components sector around the plants. The industry is also exploring opportunities to venture into non-auto sectors to reduce the over-dependence on the vehicle market.

The availability of port logistics, testing and certification centres, availability of skilled manpower and policy support are some of the strengths the state government is betting on. There are around eight research and development centres including those of Mahindra and Mahindra, Nissan, Daimler, Hyundai, Ashok Leyland, Ford, Visteon, and a national automobile testing and R&D centre.

The state government is also offering various infrastructure facilities like power, rail, road and port connectivity with various expansion plans also in the pipeline, apart from fiscal incentives.

First Published: Fri, January 04 2019. 12:06 IST