Manufacturing MNCs Show Confidence in India

China might have gone far ahead in manufacturing superiority because of the labour cost advantages and the scale of operation. Almost all Fortune 500 companies have facilities in China. However, for sometime now India is attracting a significant number of MNCs in manufacturing to set up manufacturing facilities here. It is because of its internal market size, its engineering talents and managerial strength.

AB SKF, a world reputed precision bearing manufacturing company with its first plant in Pune, is ramping up its production facilities. It plans to invest Rs 420 crore in new greenfield facilities in Ahmedabad and Uttarakhand. Interestingly, the company investment in India was the highest globally for any geography in 2007. The other bearing manufacturer Timken has also manufacturing facilities in India. The presence of these two companies is good enough to prove the prowess of India’s manufacturing capability.

Dassault Systemes was content till now with a joint venture, but now going to set up a fully owned subsidiary in India.

UTC well known for its brand Carrier (air-cooling) and Otis (elevators and escalators) is in discussion for fabricating helicopters in India. It has a dedicated R&D Centre in Bangalore. Carrier is investing Rs 200 crore to build a new global research and development (R&D) centre, develop industry-leading products and technology for local markets and enhance Carrier’s manufacturing operations.

Siemens with 18 manufacturing plants and three more in construction and 18 subsidiary companies in India is a leading infrastructure and industry solution provider with total sales of Rs 9,000 crore now. It also exports from India. Currently, 35% of Siemens India’s revenue comes from export. The revenue in 2007 grew by 71%. Interestingly, 10% of Siemen’s global development happens out of India at present. A new power transformer plant of Siemens has gone on stream.

ABB uses ABB India facility as a global factory for high and medium voltage circuit breakers and other subassembly components. ABB is increasingly leveraging India as a resource base for products, projects, services and also for global engineering and R&D. India has also been designated as the hub for the South Asia Pacific region, which includes countries ranging from Afghanistan, Pakistan, Singapore, Indonesia, Malaysia, Thailand, The Philippines and Vietnam to even Australia and New Zealand. ABB has clocked a CAGR of 40% per annum during past few years with business volume in excess of Rs 4000 crore and an order backlog of over Rs 5000 crore. The company has completed investment of $100 million and has commenced further investment of another $50 million for capacity and range expansion.

Every significant player in the automobile market now has presence in India. Auto components companies are too rushing to India. For example, Websasto AG’s joint venture with Motherson manufactures sunroofs that are exported to Germany. Vege Europe is shifting a part of engine remanufacturing business from Europe to India and plans to manufacture automatic transmissions, turbochargers, air-conditioning pumps and cylinder heads. Eaton Technologies is planning to open a plant for making gears.

Recent tie-ups of Renault and Nissan with Ashok Leyland, Mahindra and Mahindra, Bajaj Auto in one go are indicators of the interest shown by MNCs to use India as manufacturing partner. Last month, Carlos Ghosn, an icon of auto industry signed a $599 million joint venture to build 100,000 light commercial vehicles with Ashok Leyland. Renault-Nissan and Mahindra and Mahindra are building a $ 905million plant to make 400,000 cars a year. Renault-Nissan will help Bajaj Auto build a $3000 car to compete with Tata Motors’ Rs 1-lakh car.

Only last week, it has been reported that the UK-based BAE Systems has zeroed in on M&M and is believed to have signed a Memorandum of Understanding (MoU). The proposed JV will manufacture combat vehicles and other land-based defence equipment.

Another news report from a precision engineering company in Hyderabad- based company MTAR technologies deserve attention. US private-equity giant, The Blackstone group, has chosen to partner with MTAR and invest $65 million (Rs 260 crore) for a 26% stake in MTAR. Many year ago I had visited MTAR and was amazed to see its innovative way of machining some very complicated parts of difficult-to-machine material for nuclear plants. Currently, around 65% of MTAR’s revenue comes from nuclear projects, about 25% from space and the remaining 10% from defence. It is one of the two private sector companies involved in the manufacture of successfully tested cryogenic engines for the Indian space programme.

According to a report from Motilal Oswal Securities, a research and advisory-based stock broking house, on a scale of 1-10, India scores 7.5 in designing and machining prowess. It’s pitted against the likes of Germany, considered an engineering pioneer. And that is the India’s attraction not the cheap labour any more.

Let Indians be proud of its manufacturing capability. Indians may be known to Americans through a ‘The New York Times’ derogatory report to supply only manhole covers to US as manufactured engineering items. However, India has built much more sophisticated capabilities in manufacturing.

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