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Gujarat under the bonnet: Why automakers are racing to Modi-land

From nowhere, it seems, this state of traders has realised the importance of manufacturing also, and the auto industry is among the earliest to take advantage. Historically, Gujarat was where trade flowed from, in the Mughal era and before. Today, it seems, Maharashtra's loss will be Gujarat's gain

In a not so remote corner of Nashik lies an automobile plant which is not used for much other than some paint-shop work by Mahindras. Reports suggest it may have been used for the Renault/Mahindra Logan ( now re-named Verito) also. Initially meant for Ford's production of cars in India, the earlier Ford Escorts were made there, till circumstances and political issues resulted in Ford moving to Tamil Nadu, rather abruptly in 2001.

Almost overnight, Ford abandoned Maharashtra as a manufacturing base, and moved lock, stock and barrel. Government officials from Maharashtra looked on in wonder; it was something they had never expected. After all, it was established that once a manufacturer, especially foreign, had chosen a location, the state government in question and its cohorts tightened the screws. But now, increasingly, the manufacturers were responding by moving out.

Eicher did it in the early days by moving from Faridabad to Pithampur when the Chautalas were in charge; but then Vikram Lall was always a different kind of corporate head, and simply handed matters over to Subodh Bhargava with a simple brief to start afresh and grow in Madhya Pradesh. Likewise, the Tatas and Ashok Leyland have always secured their options by putting up manufacturing and assembly plants in a variety of states all over the country, giving them the flexibility of continuing and growing operations at other locations if one becomes troublesome.
Premier Auto and Peugeot, on the other hand, suffered tremendously due to inter-plant octroi and other state and city government issues in and around Mumbai. They have never really recovered since. Maruti Udyog did well in Gurgaon and Haryana as long as it had the protection of the powers that be, but even that is, along with the other heavy and automobile industry in Haryana, beginning to show signs of fraying at the edges. Karnataka, despite a coastal region and ports, was never in the business, barring Toyota and a few other small ventures. The story in West Bengal is too well known to repeat. Uttarakhand, out of the blue, has become an assembly centre. Andhra Pradesh suffered majorly because of the Volkswagen corruption and brazen theft of funds scandal and never really recovered.
But it is Gujarat that is in the headlines again. After General Motors set up shop in Halol about 20 years ago, there was a bit of a lull till the Tata Nano plant came up. And it seems the floodgates are now opening. Ford has announced that it will set up a huge plant to manufacture about a quarter of a million cars in the first instance. General Motors hopes to notch their numbers up some more. Tata Motors are not doing too badly. Maruti Suzuki is believed to be seriously looking around for options in Gujarat. And if reports are to be believed, three different two-wheeler manufacturers are looking at setting up shop in Gujarat as soon as they can, including a major south Indian manufacturer.

So what's it with Gujarat? Multiple aspects.

For one, the proximity to some really efficient new and old ports, both in the private as well as public sector. As small cars and other vehicles from India head into the world global export market, access to a seaport becomes extremely important, and that's in place. There is a strong engineering base coming up in terms of support and ancillary industries, not least of all because of the massive growth in the ship-breaking industry providing vast amounts of experience. Labour is usually not local, appears to be rotated often, and barring the odd skirmish here and there, is reported to be easy to handle and control, whatever that means.

The quality of life for management cadre-level people is another aspect. Gujarat has an increasing number of good schools and colleges, and while the local language is certainly important, the Gujaratis have enough self-confidence in themselves to ensure that English is not swept away in some sort of misplaced regional fervour. In addition, there are other industries which are reportedly moving to Gujarat, not the least being the global diamond industry, apparently tired of being bombed by rapacious extortionists in the name of terror in Mumbai. Rural Gujarat is a joy to visit and makes for a complete experience for those who need to get away from work and roan the countryside more often.

The state is power surplus and way ahead of others in pro-actively motivating renewable energy options, which will reflect in cost factors very soon. The state road network is about the best in the country and adherence to overloading laws helps keep the roads in better condition and to last longer, reflecting in a higher usage of motor vehicles too.

Most of all, it is the cleanliness of land acquisition from private parties as well as the state government, as well as subsequent clearances and interaction that appears to appeal to the companies. Everybody stays off the record, obviously, but there is a single-window approach that seems to work. In addition, in every case, there is also very heavy support from the Gujarati community across religious lines which everybody comments on.

Contrast this with the attitude all over India; there is no dearth of examples and experiences as well as blatant declarations by those in power, that providing of land to anybody, industry or people without bribery, is setting a wrong precedent for our elected representatives. In addition, let us be very frank that Gujarat is one of the cleanest states in the country-both in terms of air quality and hygiene it scores way above some of the larger cities and industrial areas in India.




6 years ago

Sure the lagger gets highlight for every investment that happens. TN was a lagger for several years post independence. Today TN has India's largest SMEs and India's automobile capital. Even if one counts Peugeot, Ford, Tata, Hyundai already setting factories in Gujarat that would still not give claim of the title "Detroit". Most spare parts are made in Tamil Nadu. TN also has multiple automobile hubs and Chennai is just once city. The HQ of TVS is in Madurai. Coimbatore, Hosur, Ranipet etc have their respective share. As we speak we have two smaller investments - Eicher (Enfield) and Mahindra going to TN for a new bike and car plant respectively. These investments may not be highlighted much by the media - as they are a trickle for an already established automobile leader.


6 years ago

Sorry to say, but the article is like the PR work for Guj govt. A writter should be balance in approach rather than biased. Sure guj govt and modi done some extraordinary work in attracting investment community by having single window clearance. But there should be some chink in the armour which author fails to explore. Because identifying these chinks will help them guj govt to grow better rather than praising in general terms like good gov, good people, good community, good engg base, good air, good hygiene, good road, good ports. Nothing was said how other auto hubs like pune, gurgoan, chennai etc failed to attract mfg.


Babubhai Vaghela Ahmedabad 9427608632

6 years ago

URL for my comments. Shortened one.

Babubhai Vaghela Ahmedabad 9427608632

6 years ago

Deemed NA for land along highways is one policy decision by Govt of Gujarat that is developing Gujarat, like India, in-pockets with rural area left out. Further, after reportedly huge largesse to Tata for setting up Nano Plant at Sanand near Ahmedabad, Auto & Ancillary as also other industries are scrambling for Sanand area overcrowding the Ahmedabad area. Similarly, IT and Educational Institutes are concentrating at Gandhinagar and in between Ahmedabad - Gandhinagar. This heavy concentration in two Districts leaving apart 24 Districts that include Saurashtra Area cannot be considered good all-inclusive development. Scattering of industrial development in Gujarat and in India is highly essential. My email to CM Gujarat in this regard has not been responded to even after more than two years -!topic/right-to-information-act-2005/ssMnO70qMr8

Chirag Shah

6 years ago

Understandably correct.



In Reply to Chirag Shah 6 years ago

Thank you for writing in.


Indian stocks to open in positive: Monday Market Preview

The US deal on Sunday to hike the nation’s debt ceiling and cut the fiscal deficit is expected put some life into the markets worldwide

The US deal on Sunday to raise the nation’s debt ceiling and reduce the fiscal deficit pushed Asian stocks higher in early trade on Monday, a move which will auger well for the domestic market. Earlier the US markets closed lower on Friday, down for the fifth day in a row, on poor GDP data and the stalemate over the debt deal. The SGX Nifty was up 56.50 points 5,547 in early trade on Monday compared to its previous close of 5,490.50.

Back home, the HSBC Purchase Managers’ Index, a measure of manufacturing growth, for July that will be released today, will give further direction to the market.

The market closed lower last week mainly on account of the 50 basis points hike in key rates by the Reserve Bank of India (RBI). The impasse in the US over raising the debt limit before the 2nd August deadline added to the concerns and the market ended 3% lower.

On Monday, the market closed with modest gains, continuing from the previous week. But the RBI rate hike on Tuesday erased almost all the gains of the previous two days. The cautious outlook expressed by the finance minister and indications of more monetary tightening to come kept the market lower on Wednesday.

Selling in heavyweights led the indices lower on Thursday. The losses were trimmed on Friday, but the market closed in the negative for a fourth consecutive day. The Sensex lost 525 points during the week, to end at 18,197, and the Nifty finished at 5,482, a loss of 152 points. The market is directionless, with the Nifty expected to trade in the range of 5,440 and 5,540.

Markets in Asia were trading in the positive following a deal on Sunday to raise the US debt ceiling and cut its fiscal deficit.

In economic news, China’s factory sector recorded its weakest activity in 28 months in July as data showed China's official purchasing managers’ index (PMI) dipped to 50.7 in July from 50.9 in the previous month. Besides, South Korea’s consumer price inflation index surged 4.7% in July from a year ago, well above the 4.4% rise that analysts had estimated, and its highest rise since March this year. It remains above 4%, the top of the central bank’s target range.

The Shanghai Composite added 0.05%, the Hang Seng jumped 1.34%, the Jakarta Composite surged 1.18%, the KLSE Composite gained 0.54%, the Nikkei 225 climbed 1.84%, the Straits Times rose 0.74%, the Seoul Composite advanced 1.71% and the Taiwan Weighted was 0.34% higher in early trade.

In the US, leaders of the Republican and Democrat parties on Sunday reached an agreement that will reduce the US deficit and avoid a default. Congressional leaders reached an agreement to raise the debt ceiling by at least $2.1 trillion, sufficient to serve the nation’s needs into 2013. They are also working out a deal to cut $917 billion in spending over a decade, raising the debt limit initially by $900 billion.

Earlier last week, Wall Street closed lower on Friday for the fifth day in a row on a late sell-off amid weak economic data and the deadlock over raising the country’s debt limit. US gross domestic product (GDP) for the second quarter came in at a poor 1.3%, lower than the 1.8% expectation by analysts. Besides, the first quarter’s reading of 1.9% was revised to a paltry 0.4%, suggesting that the economy is nearing a double dip despite liquidity from the Federal Reserve and government stimulus.

This added to the gloom after House of Representatives Speaker John Boehner failed to garner enough support for his plan to raise the debt ceiling before Tuesday’s deadline.

The Dow declined 96.87 points (0.79%) at 12,143.24. The S&P 500 shed 8.39 points (0.65%) at 1,292.28 and the Nasdaq fell 9.87 points (0.36%) at 2,756.38.

Meanwhile, gold hit another all-time high on Friday as investors sought a safe haven option after weak US economic data led to fears of a possible recession. Gold futures for December delivery surged $15, or 0.9%, to settle at $1,631.2 an ounce, after trading in the range of $1,613 to $1,637.50 on the Comex division of the New York Mercantile Exchange, whereas the spot gold prices added $10 to $1,627.20 an ounce.

Back home, Iran on Sunday said a payment row over crude exports to India had been resolved after Indian refiners began paying for the oil they buy through a Turkish bank.

Refiners such as Mangalore Refinery and Petrochemicals (MRPL) have opened rupee accounts in the New Delhi branch of Union Bank of India, which will route euro payments to state-owned Turkiye Halk Bankasi (Halkbank) in Istanbul. Halkbank will then transfer that money to the account of NIOC.


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