Rediff Logo

Home >Money > Specials

   Part I:
    Madras, the Detroit
   of South Asia.

   Part II:
    Ford India MD on
   why the auto giant
   chose Madras.

   Part III:
    Hyundai MD says
   plans are on to make
   Madras operations' hub.

    Great infrastructure, uninterrupted power supply, disciplined labour, a friendly government and highly skilled technicians make Madras the ideal spot for auto-makers to set up base in.
    - George Iype in Madras

    If Detroit is the car city of the world, can Madras be far behind? Four years after the government of Tamil Nadu unleashed an investment-friendly industrial policy, Madras is slowly but surely emerging as the Detroit of South Asia.

    Ford, Hyundai and Mitsubishi that chose Madras as the hub of their South Asian operations do not regret their decision. The automobile giants are doing very well. So are Ashok Leyland -- one of the country's oldest auto-makers -- and TVS Group -- the nation's two-wheeler giant.

    That is not all. Madras already commands 35 per cent of India's share of auto components. "Madras is the place to be in if you are an auto-maker in India. Tamil Nadu offered us the best value package amongst the many states seen and evaluated by us. We are now happy that we are growing well to make Madras the Detroit of South Asia," says an enthusiastic Phil G Spender, the Ford India managing director.

    Ford Ikon, the Josh machineThe Ford India chief says that one of the things that the company examined while setting up the plant in Tamil Nadu was to look at the vast pool of skilled technicians in the state. "Moreover, the state has a very disciplined and productive labour environment, adequate basic infrastructure -- seaport, international airport, telecom, power and road network," he adds.

    Spender is particularly happy because Ford's indigenous product-- Ikon -- is faring famously in the market.

    "The customer response to our 'Josh' machine has been overwhelming. Ford Ikon is now the established and innovative leader of the Ikon segment," he claims. "We are thankful to Madras for this," he adds.

    No other city in the country churns out as many technical graduates as Madras does. As per the official figures, the city produces 32,000 engineering graduates every year -- including 15,000 in computer science and software engineering.

    Tamil Nadu enjoys high export intensity with one third industrial output in the country. Madras is South India's largest city. It is booming these days not because of movies, but because of cars, retail flourish and software. Last year, despite the Bangalore boom and the Hyderabad hype, the National Association of Software and Service Companies rated Madras as the best location for software investment and development.

    So auto companies are trying to combine automobiles with information technology. The most concerted effort in this direction has been from the Detroit auto-maker Ford. Ford India has chosen Madras as the hub for all its Asia Pacific information technology initiatives. As part of its e-initiative, Ford will set up an IT centre for e-commerce solutions development and maintenance. The project entails investments worth an estimated $35 million.

    Shaktikanta Das, secretary of industries in the Tamil Nadu government, says that the state has achieved the right growth triggers in the last four years by attracting foreign investment work $36.5 billion.

    "Tamil Nadu has attracted major car companies like Ford, Hyundai and Mitsubishi because it offers excellent social and physical infrastructure," he says.

    Hyundai Motor's plant in MadrasAgrees Hyundai Motor India's managing director Yang Soo Kim: "We have succeeded because Madras offers very good infrastructural facilities. It has an excellent port well suited for exports. Power supply in Tamil Nadu -- uninterrupted and steady -- is the best. What is more, the state government has been very industrial friendly," he says.

    Kim has reasons to be happy about Madras. Three years after Hyundai launched Santro, the company has already climbed up to the number two spot in the Indian auto market. Bookings for Hyundai's best-selling Santro and Accent have increased to such levels that the plant at Sriperumbudur is facing capacity problems. So work will soon begin for the second phase of the company's ambitious car project worth $400 million. After the plant expansion, Hyundai will produce 120,000 to 200,000 cars per annum from Sriperumbudur.

    Kim is so thrilled at being in Madras that he is planning to make the city the hub of Hyundai's Asian operations. "We want to convert our Tamil Nadu plant not just the hub of our Asian operations, but our global operations," he says. Already, Hyundai has begun exporting Santros and Accents to many countries including Algeria and Morocco, and engines to Turkey.

    Car companies like Ford, Hyundai and Mitsubishi point out that they decided to set up the plants in Tamil Nadu as no other state government proffered the kind of co-operation and support that the Tamil Nadu government provided. Madras's main attractions to these car majors were -- port, power, industrial climate, productivity in auto industry, skilled technical manpower and infrastructural facilities.

    For years now, Madras has had an edge in engineering, automobile and allied industries. Though Tamil Nadu started creating industrial infrastructure three decades back, the investment to the state increased in the last few years only.

    According to a survey by the Centre for Monitoring Indian Economy, the outstanding investment to Tamil Nadu as on April 30, 2000, was Rs 1569.18 billion -- a mere Rs 318 billion -- less than Maharasthra, the leader.

    Officials say that Madras and the adjoining Chengalpet district account for more than 50 per cent of the new investments that have landed in Tamil Nadu in the last four years. "Automobile is turning out to be the leading industry in the state. If Bangalore is known for software, Madras has a heady combination of car factories and software companies," says A S Kanakaraj, a city-based consultant to multi-national business firms.

    The Mitsubishi plant in Madras "Madras has become the unstoppable destination for multinationals because the MNCs that are successfully operating out of the city include Ford, Hyundai, Mitsubishi, Matsushita, Caltex, Saint Gobain, Henkel, HLL, Alstom, Caterpillar and Van Melle," he adds.

    Ashok Leyland, one of the oldest auto-makers in the country, has been located in the state for many years now. Leyland officials claim no other state offers the facilities for the development of auto industry like Tamil Nadu. "Tamil Nadu has the availability of ancillary units, technical skills and good markets," says R Seshasayee, managing director Ashok Leyland.

    Yet, most agree that if Madras is emerging as the Detroit of Asia, it is not just because of major car companies setting up shops along, but because of the flourishing automobile components industry in the state. The state now has more than 35 per cent of the total automobile components share in the country. Many reckon that Tamil Nadu offers great potential for investment in the fields of engine management systems, automotive security devices, plastic and rubber-moulded components and die-cast products and auto horns.

    Tell us what you think of this special report

    Design: Lynette Menezes