La hora de volver a casa

From FY 2001–02 through FY 2005–06, total investment in the Indian automotive components industry nearly doubled to an estimated $4.4 billion.54 _{Of known foreign direct}

investment, roughly one-half of such projects were in higher technology items such as engine components, drive trains, and electronic systems. Most of the FDI represented new projects rather than expansions of existing operations, and focused on manufacturing rather than R&D and other automotive-related activities. As would be expected because of their leading positions in the global automotive industry, U.S., German, and Japanese firms were the principal sources of foreign investment in the Indian components industry.55

Additionally, foreign firms increased their total investment in Indian automotive parts producers by a minimum of $600 million from 2002 through YTD 200756 _{with 44 announced}

or completed acquisitions.57 _{U.S. firms led in total number of deals for single countries, with}

10 reported acquisitions, and Japanese firms were involved in 8 deals. Europe as a whole took part in 17 acquisitions, with the United Kingdom and Germany accounting for 5 and 4 acquisitions, respectively. The largest deal for which value was reported was the $128 million acquisition of the majority stake of Ashok Leyland by the Hinduja Group, a London- based multinational with interests in manufacturing, banking, and trade, completed in August 2006.

TABLE 7-8 Asia-Pacific automakers with assembly operations in India Automaker Year operations commenced JV partner ownership share Number of plants/ location Total installed capacity

Examples of recently announced investments

Honda 1995 Siel

/99%

1/Noida 50000 • Greenfield plant in Rajasthan announced in 2006—50,000 initial capacity online by 2010, eventually reaching 200,000 • Expanding Noida to 100,000 by

2007 and to 150,000 by 2010 • Expanding dealership network

from 53 to 100 by 2010

Nissan 2004 Ownership/

100%

NA NA • JV greenfield plant in Chennai—Mahindra (50%), Renault (25%), and Nissan (25%)—eventual annual capacity of 400,000—to be operational in 2009, reaching full capacity by 2016 Suzuki 1982 Maruti/ 54% 4/Gurgaon & Manesar 600000 • Upgrading Gurgaon

• Expanding the new Manesar plant opening in 2007 to 300,000 by 2009—large supplier park included at new facility • Plan to build R&D center, test

track, and collision evaluation facility

• Expanding dealership network from 405 to 600 by 2010

Toyota 1997 Toyota/

89% Kirloskar/ 11%

1/Bangalore 60000 • Considering a greenfield plant as an expansion of its current facility—annual capacity would be 100,000—decision awaiting government approval of site selection

• Expanding dealership network from 63 to 200 by 2010

Hyundai 1998 NA 1/Chennai 300000 • Greenfield plant in Chennai being completed in 2007 to expand total capacity to 600,000

• Adding a $40 million R&D center, to employ 800

• Expanding dealership network from 183 to 250

• Expanding service network to 1,000 in 2007

Naza 2006

(announced)

NA NA NA • Greenfield plant in Tamil Nadu

announced in 2006; output expected in late 2008

Source: Various industry reports, company Web sites, press releases, LocoMonitor FDI database, and

SIAM Web site.

58 _{KPMG, Manufacturing in India.}

59

Huber, “The Indian Automotive Scenario.”

Many multinational automotive parts producers from these and other major producing countries have been manufacturing in India for years, producing a wide range of products from basic commodities such as castings and forgings to highly sophisticated electronic systems (table 7-9). Some of these firms have also located technology or development centers in India. Of the 400 substantive Indian component producers, roughly 40 percent are joint ventures with foreign manufacturers.58 The Indian government has encouraged local industry to partner with foreign firms to enhance its potential as an outsourcing location and global R&D resource center.59

TABLE 7-9 Examples of global automotive parts suppliers manufacturing in India

Company Country Product examples

Aisin Seiki Japan Door latches, window regulators, door

hinges

Bosch Germany Development center for electronic

diesel injection systems

Dana United States Clutches, piston rings, axle housings

Delphi United States Steering systems, wiring harnesses,

driveshafts, catalytic converters, technology center

Denso Japan Auto electrical components, fuel

pumps, radiators, HVAC units, and heaters

Faurecia France Automotive seating and interior

components

Siemens VDO Germany Dashboard instruments and

accessories

Visteon United States AC systems, engine cooling systems,

instrument panels

Yazaki Japan Wiring harnesses

60

Wells, “Hub or Hubris? Prospects for the AMP to 2016.” 61

Wells and Sadana, “Hub or Hubris? India and the Automotive Mission Plan 2006–16,” 29. 62 _{Government of India, Ministry of Steel, National Steel Policy 2005.}

63 _{Wells and Sadana, “Hub or Hubris? India and the Automotive Mission Plan 2006–16,” 29.}

64

Ramachandran, “A Grand Plan for Indian Automobiles.”

Conclusion

The key to continued FDI in India’s auto sector rests with continued expansion of the domestic market, which seems ensured, and the further development of India as an automotive export hub. “Much will depend upon individual corporate strategies, particularly in terms of manufacturing locations in relation to market served.”60 _{Moreover, because of}

extensive forward and backward linkages, the viability of the AMP and the accomplishment of its goals are reliant on related industries and domestic developments.61 _{The slow progress}

on improvements to the transportation infrastructure and the uncertain availability of inputs such as steel may make it difficult for India to meet its AMP targets. Like the auto industry, the steel industry also has a national plan specifying production and other targets.62 _However,

meeting these targets depends on expansion of the railway network in order to move iron ore, coking coal, and finished steel around the country. The supply of fuel for individual motorists is also problematic in India.63 _{Some automakers also note that frequently changing}

CHAPTER 8