Chennai is expected to become one of the largest automobile manufacturing hubs in the world in the next couple of years when its production capacity crosses 1.3 million units annually, M. Velmurugan, executive vice-chairman, Tamil Nadu Industrial Guidance and Export Promotion Council, said on Thursday.

Addressing a delegation of Japanese investors and businessmen under the auspices of the Indo Japan Chamber of Commerce (IJCC) and the Federation of Chambers of Commerce and Industry (FICCI), Mr.Velmurugan said the growth of the automobile sector was in line with the Government’s vision of making Chennai one of the top 10 centres for the global automotive industry.

He noted that a few Japanese companies were expected to set up automobile component units shortly. “We expect to double the number of Japanese companies in Tamil Nadu in less than two years,” he said. At present, there are about 170 Japanese units in the State.

Making a pitch for Tamil Nadu as an ideal investment destination on several counts, Mr.Velmurugan said the State’s claims were now backed by international surveys. The UK-based Oxford Analytics study of key Indian cities had ranked Tamil Nadu as the top investment destination. Besides, analysis by Nokia, which operates the world’s largest mobile device manufacturing unit near Chennai, showed that production costs in Chennai were cheaper than China by 11 per cent, he said.

The State’s key differentiators included proactive Government policy, transparent decision-making, cost competitiveness and availability of skilled labour on competitive wages.

Addressing investor concerns of power, Mr.Velmurugan said the State had several important projects in the pipeline that would substantially add at least 7,000 MW to the current capacity of 15,100 MW. Moreover, Tamil Nadu was the world’s fourth largest generator of wind energy and was according priority for energy from renewable sources, he said.

Infrastructure, automobiles, textiles, biotechnology and pharmaceuticals were among the potential sectors where Japanese companies and investors could forge joint ventures, he said.

Kazuo Minagawa, Consul General of Japan in Chennai, said Japanese Foreign Direct Investment to India had surpassed that to China. Japanese FDI to India was an estimated $ 8.6 billion in 2008, while the equivalent to China was $ 6.8 billion, he said.

Yoshihiro Watanabe, Japanese banker who led the 24-member delegation to India, sought to allay concerns about the impact of the recent change of Government in Japan on bilateral relationships. Indo-Japan ties would only grow stronger, he said. One of the key challenges for Japanese companies would be maintain low production costs so that the products are affordable for India’s substantial middle class population, he said.

P. Murari, advisor to FCCI president, said India’s GDP growth rate of 7.9 per cent, the recent FICCI survey that placed India as the most favoured destination and the expected growth of bilateral business with Japan to $ 20 billion by 2010 set an ideal backdrop for strengthening Indo-Japan business partnerships.