News: A Detroit rises in Pune

(FE 15/08/2006) Pune - Pune’s tryst with successful contemporary automotive products started with the 1998 launch of Indica by Tata Motors. It continued with Bajaj Auto’s Pulsar, Mercedes from Daimler Chrysler India to forgings from Bharat Forge. And, today, the most audacious attempt ever made in Indian automotive industry — Ratan Tata’s one lakh car — is taking shape at Tata Motors engineering research centre in Pune.

But this is just scratching the surface. According to B N Kalyani, chairman, Bharat Forge, Pune has potential to attract investment flows of $10 billion and morph into a global automotive hub. By 2015, an auto component exports opportunity of $8 billion will be available to the Pune industry creating a million jobs in the Pune region. “The present size of India’s automotive component industry is about $10 billion. It would be safe to assure that Pune-based industry’s share is in the region of $2.5 to $3 billion. The component industry’s exports amount to $2 billion, out of which Pune industries contribute about $600 million,” says Kalyani.

Pune’s engineering strength, its proximity to the Mumbai port and booming export-oriented businesses have it buzzing with activity. (See graphic.) The frenetic pace of activities in the auto sector has attracted venture capitalists (VCs) into Pune as well. International Finance Corporation has invested $7.7 million in RSB Transmissions. Temasek-owned India China Pre IPO Equity (Mauritius) Ltd is investing $3 million in Uma Precision, a transmission parts maker. Other deals are in the works.

Apart from the VCs, global sourcing executives of leading auto companies too can be seen in the city scouting for suppliers. “International Purchasing Offices are coming to Pune. Both Cummins and DaimlerChrysler are here. Other international players are initiating enquiries and some of them have even struck deals with our members. Of the 500 ACMA members, 160 come from western region,” says Ramchandra Rao, chairman, western region, Auto Component Manufacturers’ Association. Deutz AG, Uzel, DaimlerChrysler, Same Deutz, Cummins Inc.,Lambhorgini and GM are among those looking for suppliers. Deutz AG’s sourcing alone would be worth €1 billion by 2008, say sources, adding DaimlerChrysler is sourcing parts from India and has an independent team on the job.

“Global OEMs are under cost pressure and looking for solutions. They will move $375 billion worth of production to low-cost centres. India’s share of this could be $25 billion as it has an advantage in metal and metal-based parts, rubber and plastic components and one third of this opportunity could come to Pune,” says Kalyani. Adds Arun Jethmalani, CEO of ValueNotes: “Offshore Indian vendors stand to gain substantially, as outsourced engineering and design is set to witness double-digit growth for the next five years. India is well-positioned to exploit this given the growing maturity of its automobile industry and proven offshoring capabilities.”

Global players trooping in include Grupo Antolin Pune Engineering Design Centre, which works for global auto companies, that is moving into prototyping and has also set up a Rs 40-crore manufacturing facility. John Deere has set up an engineering back office and Bosch Chassis a technology centre in Pune. Rinder India Pvt Ltd, subsidiary of Rinder Industrial SA Spain, which is into automotive lighting and signalling equipment, is shifting some of its high volume products to India. “We are in the process of shifting some standard products to India for cost benefits," Sagar Kulkarni, CEO Rinder India says. Varroc Engineering has tied up with Delphi Corporation to make 1.6 million catalytic converters. Kirloskar Oil Engines is investing Rs 60 crore in an engine valve export oriented unit.

The focus clearly is global. “Kinetic is focussing on exports. Kinetic is the only two-wheeler manufacturer to export its Lunas (two-wheeler mopeds) to the US. Talks are on with a local player for exports of Blaze scooters to Japan,” Kinetic’s Firodia said. “We are also developing our Bhima Koregaon facility for component exports.”

As Pune evolves, it is also seeing the birth of an eco system to support the city’s ambitions of being an auto hub. The first facility under the Rs 1,700 crore NATRIP, short for National Automobile Testing and R&D Infrastructure Projects, has begun in Pune at the Automotive Research Association of India. This includes an emission certification laboratory and an R&D, testing and validation centre for the forgings industry. Further fillip has come from the launching of the first auto cluster — the Rs 118-crore Auto Cluster Development and Research Institute Ltd — set up by Mahratta Chamber of Commerce, Industries and Agriculture, the central government and local civic bodies. The idea is to give SMEs design, development and prototyping support through shared facilities to keep pace with dramatically changing markets.

While the boom is visible, there are challenges on the horizon. “This kind of industry requires ancillary support and skilled workforce, which is available here. The next 10 years will see huge investments coming into Pune. The only problem is not enough land. The last big space in Talegaon was taken by GM. I do not think there is any more available. If Pune has to grow, authorities will have to develop new land,” says Kalyani. Firodia agrees that Pune still has a long way to go before it can compete with Stuttgart and Detroit: “For a city to compete with Detroit, you need Detroit-like facilities. We need continuous power, good roads, proper labour reforms.”

Talent crunch is another issue. Bharat Forge has set the ball rolling. Apart from a part-time engineering course on its campus with BITS, Pilani, this year the company is offering a post graduate degree in manufacturing engineering management together with University of Warwick, UK. Bajaj Auto is setting up a learning centre at its Pune plant. ACMA’s Rao has made representations to the industry ministry to upgrade ITIs. With such plans taking shape, Pune in the coming years may well achieve its ambitions of taking on the mantle of being the real Detroit of the East.

Investments in Pune

• Tata Motors is going for joint production of small cars and engines in India with Fiat and make 100,000 cars and 200,000 engines and transmission boxes a year at the latter’s Ranjangaon plant with investment plans of Rs 2,000 cr

• Bajaj Auto has acquired 250 acres for expansion at Chakan for its three and four-wheeler greenfield project and is planning a 260-acre SEZ at Waluj, Aurangabad

• Bharat Forge, looking to scale the $1-bn revenue mark, is setting up an SEZ

• General Motors bypassed 20 other locations across various states to set up a 300-acre facility in Pune which will roll out its mini-car. Investment: Rs 1,350 cr

• DaimlerChrysler India has started locally assembling its upper-end S class cars and has just launched its Actros truck

• Force Motors is bringing in high-tonnage trucks from MAN Nutzfahrzeuge AG

• Kinetic Motors’ tie up with Taiwanese two-wheeler major, Sanyang Industry Co Ltd will see new launches in the next few months