India’s Manufacturing Prospective

I was talking to Babulal. At one time he worked for me. Today he heads a company in Kolkata that manufactures hardware and exports to US. I wouldn’t have believed it, if the source of information had been anyone other than Babulal. At one time, Kolkata used to be the manufacturing hub of India. But for many years manufacturing in the state had declined to almost nonexistent level. Budhha babu has focused on it again. With facilities of Tata Motors coming up at Singur for Nano, West Bengal is almost daily in news for good reasons. Tata Motors will be having a large cluster of auto components makers all around the main plant.

Tata Motors started from Jamshedpur, where it still continues the production of some models of commercial vehicles. However, it has moved out its manufacturing facilities to different locations. Latest one is Singur in West Bengal for ‘Nano’. The other major facility has come up in Rudrapur (Uttarkhand) for its very popular mini-truck ACE. Pune remains the head quarter.

Indian manufacturing is trying its best to make a mark globally. It is acquiring, investing and expanding domestic facilities in multi-locations. Beside Tata Motors, M&M, GM, and Honda are another automakers that are setting up new plant in different locations to add to its capacity. Tata Motors is investing Rs 6,000 crore to increase capacity in its Pune plant by about 40% to over 600,000 units a year. Tata Motors jointly with its partner Fiat is also investing $1 billion at the latter’s plant in Ranjangaon. Mahindra & Mahindra plans to invest Rs 4,000 crore in manufacturing capacities at Chakan near Pune. While GM is setting up another manufacturing facility in Maharashtra, Honda will have its second plant in Rajasthan.

Both Tata Motors and M&M are also acquiring manufacturing facilities in other countries to cater to those markets locally. Latest for Tata Motors was the prestigious Jaguar Land Rover deal. M&M in one of its latest acquisitions, has joined hand with ICICI Venture to buy Italian gear maker Italian gear manufacturer Metalcastello SpA that manufactures gears and shafts used in vehicle transmissions and drivelines.

Maruti Suzuki India (MSI) has gone in fast gear to expand it facilities at its second plant in Manesar and is investing Rs 2,500 crore to triple its annual capacity. The existing annual capacity at Manesar is 1,00,000 units, which will be scaled up to 1,70,000 units by the end of March, and to 300,000 units by the end of October this year as the part of the grand plan to manufacture 1 million cars annually. It will include the expansion of its diesel power train manufacturing too at the same plant. Suzuki Motors of Japan intends to source 30% of the three million cars it wants to sell worldwide from Maruti Suzuki in India. And Suzuki wants to make small cars exclusively in India for export to Europe.

Hyundai Motors India is another company that is sticking seriously to the government’s ‘India small car hub’ theory. It exports to over 90 countries and has recently shipped its half-millionth vehicle that primarily consisted of compacts like ‘i10’ and the ‘Santro’ along with some ‘Getz’ and sedan ‘Accent’.

Interestingly all the manufacturers are trying to set up the product design and development centers in India.

Suzuki Motor Corporation (SMC) is considering moving out its small-car design centre to India and is already investing Rs 6,000 to Rs 7,000 crore in its research and development (R&D) centre in India. MSIL is aiming to double the number of engineers from 480 to 1,000 by 2010.

Even in other sectors, manufacturing strength of the country is getting established. Korean consumer durables maker Samsung plans to double its total number of research and development engineers in India to 4,000 by 2010, to strengthen product development and introduce customised technology for the domestic market.

Indian companies too are trying to build its design strength by enhancing the domestic facilities as well as by acquisition. Mahindras has acquired an Italian design company. Another interesting development is the agreement forged between Pininfarwa, the Italian design firm specialising in cars, especially the luxury makes and the National Institute of Design (NID), Ahmedabad. It will certainly be a boost for the manufacturing sector of India.

Another development pushing manufacturing sector is the entry of the big companies in defence production and other specialty manufacturing. Tata Motors, M&M, L&T and Ashok Leyland are getting in defence manufacturing since the government has open the door of defence to the private manufacturers for a share of the Rs 2,00,000 crore of business that India’s Ministry of Defence (MoD) is likely to generate over the next five years.

Larsen & Toubro is cleared to export nuclear power generation equipment to the US and to Europe. L&T is getting into shipbuilding too. According to one estimate, the Indian shipbuilding industry is slated to grow at 30 per cent CAGR to $22 billion in 2020, from around $3.7 billion at present. India’s share in the global shipbuilding will jump from the present 1.17 per cent to around 15 per cent by 2020.

With the focus of the government for power sector and failure of BHEL to meet the demand, Larsen & Toubro (L&T) is also ramping up the manufacturing capacity of super-critical boilers and super-critical turbine generators to 4,000 Mw per annum through two separate joint ventures with Mitsubishi Heavy Industries (MHI) of Japan with an investment of Rs 1,500 crore.

Boeing while eyeing commercial and defence aircraft orders worth over $50 billion over the next ten years from India, has drawn up ambitious plans to source products and services from the country to stay “agile and competitive” in the global marketplace. In last one year, Boeing has inked five agreements with top information technology and engineering companies, which will result in key components for its civilian and military aircraft being manufactured in India. The most significant of these took place last month when Boeing signed a sourcing deal with TAL Manufacturing Solutions Ltd, a 100 per cent Tata Motors subsidiary, for floor beams made with titanium and composite materials for its 787 Dreamliner. After the first 100, all 856 Dreamliners Boeing will use these beams, as “Nobody else has this technology”.

Two Tata group companies – INCAT and Tata AutoComp – have entered into a strategic alliance to offer complete design and development service for global automotive manufacturers. The INCAT-Tata AutoComp alliance has already secured a major project for the complete design and development of a new vehicle platform for a leading Chinese automotive OEM. INCAT, a major in Engineering Services Outsourcing (ESO) and Product Development IT services, will provide comprehensive vehicle level integration expertise to the alliance, while Tata AutoComp will provide module integration for a full range of automotive components, said the release.

And the news of manufacturing marathon covers many sectors.

Diesel engine manufacturer Cummins is to invest Rs 850 crore to start plants at Phaltan in Satara district for manufacturing truck and bus engines, diesel and gas gensets and diesel engines.

Bharat Forge, based in Pune, already has manufacturing operations across 12 locations in six countries-four in India, three in Germany, and one each in Sweden, Scotland, the US, and two in China. It is setting up a plant for the non-automotive-component-making that will manufacture safety components for aerospace, marine, rail, power, energy, mining, and construction equipment.

And when the business gets going in fast gear, every one gets allured to reap its benefits. The cost of hiring for drilling rig works out $450,000 a day makes more business for a company such as Reliance industries to plan to manufacture these equipment on its own.

Nokia is expanding its manufacturing in India. Videocon is trying to acquire the mobile manufacturing of Motorola.

It is big plans everywhere from PSUs to private corporate house. India plans to undertake 70 space missions in five years, a nearly three-fold jump from the previous half-decade, as it seeks to address requirements and develop new technologies to meet future needs.

And will not it mean big business for manufacturing in high-tech sector?

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