The global financial meltdown only underscored the importance of cost control and cost effectiveness for auto manufacturers

The metamorphosis of Pune city over recent decades from a verdant, easy-paced abode of choice for retirees to a bustling metropolis has been complete and today, although it is a major information technology hub, the automotive sector occupies pride of place as the prime mover behind the rapid development of Pune and surrounding areas.

Detroit of India

The proliferation of automobile manufacturing units and component suppliers that populate the landscape of outer Pune, particularly Pimpri-Chinchwad, Chakan and Talegaon areas have increasingly earned it the sobriquet of being the ‘Detroit of India' and it continues to elicit interest and attract investments despite challenges from the newer auto hubs dotting outer Chennai and Gurgaon near Delhi.

The entry of the heavyweights of Indian automobile industry — Tata Motors and Bajaj Auto — in the 1960s resulted in and subsequently escalated the mushrooming of allied industries that catered to the outsourcing requirements of these principals. While the first original equipment manufacturer (OEM) was Mercedes-Benz in the 1990s through a joint venture with the Tatas and later on its own, others followed suit but only in trickles.

However, in this millennium, global heavyweights like General Motors, Fiat, Volkswagen and more recently India's largest utility vehicle maker Mahindra & Mahindra (M&M) have committed large investments in this region and their entry seems to have opened the floodgates for auto investments here.

The global financial meltdown only underscored the importance of cost control and cost-effectiveness for auto manufacturers and further re-affirmed their decision to move to cheaper manufacturing locations available in India, particularly as quality was not going to be compromised.

Today, the Pune automobile landscape includes the ‘who's who' of Indian and increasingly international automobile majors.

Tata Motors is the largest followed by Bajaj Auto, Force Motors, Mahindra Two-Wheelers, Mercedes-Benz, GM, JCB construction equipment, Volkswagen, M&M, Premier Motors and Fiat.

Inflow of investment

Speaking to The Hindu, Anant Sardeshmukh, Executive Director General, Mahratta Chamber of Commerce, Industry & Agriculture (MCCIA), a nodal body for investment in the region, said there was a surge in the period between 2006 and 2008 when around Rs.12,000 crore was spent on projects in the region.

“However,” he said, “the period between 2008 and 2013 will see the inflow of around Rs.40,000 crore in terms of investment in this sector.

“Simultaneously, there is substantial investment proposed from auto ancillary and component manufacturers and over the same period an investment of around Rs.10,000 crore is proposed by them,” Mr. Sardeshmukh said.

The new projects include the Fiat-Tata joint venture at Ranjangaon with a proposed investment of Rs.4,000 crore, GM's Rs.1,400-crore investment with a further Rs.900-crore expansion, Volkswagen's project of Rs.3,800 crore, Mercedes' Rs.250 crore investment and Mahindra & Mahindra planning a huge Rs.5,0000-crore investment by 2012. Bajaj Auto proposes Rs.300-crore investment in two-three wheelers and a further Rs.1,000-crore investment in the car plant.

Among large auto suppliers are Cummins Engines which set up shop in the 1960s with Kirloskar and later alone, Kirloskar Oil Engines and Bridgestone's new Chakan plant for tyres with an investment of Rs.2,600 crore.

Commitment by MNCs

In the last 18 months, large multinational auto component suppliers like ZF Group of Germany have committed around Rs.50 crore, Prembo of Italy is setting up a Rs.100-crore disc brakes facility and Norma of Germany plans to invest euro 3 million (about Rs.18 crore).

Pune's USP

In addition to the auto OEMs (original equipment manufacturers), Pune has a range of Tier-1, Tier-2 and infrastructure suppliers, including Bharat Forge, among the top forging companies in the world and Sandvik's large cutting tools facility.

Arun Firodia, Chairman, Kinetic Group, said the easy availability of skilled manpower is the prime reason for the rapid development of the auto sector in Pune.

Skilled manpower

“At present, one lakh engineers are working in and around Pune, a figure probably unmatched anywhere in the world. Maharashtra Industrial Development Corporation (MIDC) has created mega industrial estates at Pimpri-Chinchwad, Chakan and Talegaon on a scale that too is unmatched. These have fostered the growth of automobile companies. As automobile companies grow, it is but natural that auto component industry flourishes in Pune.” Concurring with this view, Mr. Sardeshmukh said, “This region has a steady supply of trained technical manpower with more than 1,000 technical and engineering institutions dotting the landscape. There is a steady availability of a 3-lakh-strong qualified manpower here.”

Mr. Sardeshmukh said the development of Pune's unique selling proposition (USP) is not far to seek if one looks at the history of this region's industry.

“The seeds were sown in the 1960s when Bajaj and the Tatas invested heavily in their facilities in the region and this fostered the mushrooming of first generation technocrat promoted units to cater to the needs of these facilities. These have developed to such an extent that the small and medium enterprises (SME) segment today can fulfil any component requirement of the auto sector now, irrespective of the scale.”

What was lacking though is a focussed vendor development programme and access to quality technical training. That need is now being directly addressed by interested parties including an aggressive approach by the state government.

The first automobile cluster is Pune although it is not really a cluster because all the players are not located in a particular demarcated area.

State support

“In fact, Pune was the first to have manufacturing clusters with one being auto and the other being white goods. There has been funding from the State government and units have been encouraged to increase capacity and upgrade technology.

“Recently, a joint programme for supplier development was tied up with UNIDO and the Italian Government.”

There is a general lament about the quality of power in Pune city, although there is no doubt that infrastructure in the region is still good compared to other parts of the country.

“The city was the first in the State to give a ‘Pune model' of buying power from the open market about three years ago and it has been implemented successfully. The Maharashtra Government is in the process of formulating the new industrial policy the first draft of which is expected to be announced in the next two months.

“Industry is confident that issues like quality of power and other infrastructure bottlenecks will be adequately addressed in the policy,” said Mr. Sardeshmukh.

Mr. Firodia felt that although Chennai and Gurgaon are catching up as alternatives as auto hubs, the USP of Pune would continue to “attract the best talent from all parts of India and all parts of the world, thanks to its salubrious climate, fabulous education facilities and superb cosmopolitan cultural scene.”

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