Maturing Manufacturing Maneuvers<

Indian manufacturing sector is maturing. The story of Maruti Suzuki, that now is a Suzuki company after government’s exit, proves how it has moved from the phased manufacturing days to in-house design stage. Suzuki hesitated to use India- manufactured transmission gears in its power trains.

Maruti Suzuki India sold 7.11 lakh units in financial 2007-08 that is more than its parent Suzuki that sold 6.73 lakh units in Japan. The Indian subsidiary’s sales grew 11.9%. And the sales of parent fell 2.5% in Japan. Does it not signal the coming of age of the Indian automobile industry? Besides selling over 6.75 million vehicles. It includes 500,000 units of exports too. The company is investing further Rs 9,000 crore. And a new compact car ‘A-Star’ will soon be produced only in India, but sold globally. Indian R&D center will develop cars for the global market. And who knows within few years, with high labour cost of Japan and shortage of skilled talent, Maruti Suzuki India will lead.

Hero Honda, a joint venture of the Munjal family and Japan’s Honda Motor, has held on to the position of ‘World’s Number One two wheeler company’ on unit sales in 2007, for the seventh year in a row. It surpassed two-wheeler sales of Honda in home market Japan about a decade back.

As reported, Tata Motors may start commercial production of ‘Nano’ from its Rudrapur plant. Its Singur plant will soon thereafter add to the number.

After the $2.3 billion Jaguar-Land Rover deal, Ratan Tata is taking the next obvious step to partake in designing automobiles by picking stake in Italian design house Pininfarina, known for designing the likes of Ferraris. Tata Motors already does designing and styling for different companies in the world. Many companies in Tata Group such as Tata Consulting services, Tata Elexi etc. can add value to the business and technologies of Tata Motors and its products to make it better. Pininfarina would set up an R&D and engineering centre in Pune by the end of this year in which Tata Motors will have stake. It will help Tata Motors to expand its product line to global level and to upgrade its features and quality standards globally competitive.

Mahindra & Mahindra is hell bent on entering US, and other SUV market starting with Scorpio followed by its vehicles under development. M&M has also set sights on Italian automotive style company, Stile Bertone – famed for designing iconic models like the Alfa Romeo, Lamborghini, Aston Martin and Ferrari.

India’s potential as a reliable source of auto parts is already recognized by now world over. It is not only what well reputed Deming Prize winners are producing for exports, but also less known companies are equally contributing. For instance, BMW’s global sourcing arm has been procuring made-in-India horns for elite range of BMW 5 Series for years and that too for better performance.

Foreign companies are also setting up manufacturing facilities. For instance, auto component-maker ZF Friedrichshafen AG of Germany will invest Euro 20 million in setting up plant in Pune which will manufacture transmissions, shock absorbers, clutches through its newly formed 100 per cent subsidiary ZF India.

But it is again not automotive sector that is boosting the image of India’s manufacturing. In almost all sectors, there are activities that are indicators of India as a maturing manufacturing destination.

US major Motorola will start its manufacturing facility close to Nokia’s handset manufacturing unit in Sriperumbudur, that will eventually serve both domestic and international markets. Motorola is likely to eventually consolidate its global manufacturing facilities in India for cost benefits, with its manufacturing plant in Singapore being the first to face a ramp down. Nokia currently produces upwards of 80 million phones per year in India and has reportedly invested over $200 million. With many vendors Nokia’s manufacturing establishments cumulatively employ about 5,000 people. Spice manufactures handsets under its own brand in India. LG and Samsung will also join.

India will soon have a booming power equipment manufacturing industry too. With a huge target of power generation in Eleventh Plan by 2012, BHEL can’t meet the requirement even with all its projected capacity expansion. Surprisingly, 22 per cent capacity will come from Chinese companies for the plants being setup in the Eleventh Plan period. India feels uncomfortable with that. There are also concerns about the quality of the Chinese equipment, which typically manage capacity utilisation (plant load factor) of less than 60 per cent. Equipment from Indian companies like state-owned Bharat Heavy Electricals Ltd (BHEL) manages capacity utilisation of over 90 per cent. L&T will enter manufacturing of power plant equipment with JV with Mitsubishi and Toshiba. Many domestic and MNCs may also set up the manufacturing units.

India will no more be only the back office of the developed countries. It will also be manufacturing and then developing through its R&D the products for the huge domestic market and export. The growth of the organized retail sector will encourage the large-scale, low-skill, and low-cost manufacturing. But there will be high-end manufacturing too

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