Last year I made a presentation about doing business with India and highlighted Tamil Nadu as the place to be. I spoke of Chennai as being the Detroit of India…
What a difference a year makes. Here in Chennai, the Auto industry has moved on and using Detroit as shorthand for auto success is about as accurate as comparing the ransacked port of Ancient Carthage with the boxopolis of Shanghai. The Auto industry in the developed world has been challenged but it is not just a shortage of cash.
The Detroit paradigm has run out of road and India, China and Brasil are transforming the auto industry around a very different logistics eco system of producers large and small; formal and informal players buzzing around target consumers and their needs. The product is affordable and, above all, constantly adapting to local concerns.
Here in Chennai Auto makers such as Nissan Renault; Hyundai; BMW and Ford are gathering momentum – even in the downturn. Commercial vehicle manufacturing is also a feature of the auto landscape in Tamil Nadu with Ashok Leyland siting much of their 80,000 capacity in the State – though production fell to 50,000 vehicles this last year due to the recession. Insiders are sure that previous levels will return soon as massive infrastructure projects absorb the slack.
Meanwhile, up in Mundra, Suzuki are working with the Adani Group and over in Bangalore, Toyota are going ahead with a plant costing $650 million. And this is a useful example of how the industry is being transformed logistically. Toyota are linking with a local Logistics company to compete with unorganised trucking sector who currently handle a huge and expanding auto components business servicing 15 auto manufacturers. Then, confidence in the future has been re affirmed by Global market leader Daimler making moves to enter the market from scratch. They will be based in Chennai and sources suggest that they are looking for 20% market share in India within 10 years and that this may come from a bigger cake than taking a slice out of Northern stalwarts Tata Motors and Southern favourites Ashok Leyland.
A whole new logistics eco system is emerging in Tamil Nadu. Cummings (India) are one of many making engine parts; the TVS Logistics Group are moving components around between tier one to tier three suppliers in all sorts of innovative ways. MVR have become the largest tyre manufacturing company in Asia and Michelin are ready to set up shop here too. The same is true of Gujurat. Suzuki are already there and Tata moved the Nano project from West Bengal to the State where Adani are fast becoming a beacon of enterprise in everything from infrastructure to power.
In a couple of weeks, I will be giving another talk on Business in India in the US. Years back, the Machine that Changed the World took the world by storm and demonstrated how the Japanese had transformed the auto industry. Detroit was shaking then but it is now off the radar. All the fresh signals are coming from the Emerging World and in the next few weeks we will explore how the Auto industry is being transformed.