Gujarat under the bonnet: Why automakers are racing to Modi-land

From nowhere, it seems, this state of traders has realised the importance of manufacturing also, and the auto industry is among the earliest to take advantage. Historically, Gujarat was where trade flowed from, in the Mughal era and before. Today, it seems, Maharashtra's loss will be Gujarat's gain

In a not so remote corner of Nashik lies an automobile plant which is not used for much other than some paint-shop work by Mahindras. Reports suggest it may have been used for the Renault/Mahindra Logan ( now re-named Verito) also. Initially meant for Ford's production of cars in India, the earlier Ford Escorts were made there, till circumstances and political issues resulted in Ford moving to Tamil Nadu, rather abruptly in 2001.

Almost overnight, Ford abandoned Maharashtra as a manufacturing base, and moved lock, stock and barrel. Government officials from Maharashtra looked on in wonder; it was something they had never expected. After all, it was established that once a manufacturer, especially foreign, had chosen a location, the state government in question and its cohorts tightened the screws. But now, increasingly, the manufacturers were responding by moving out.

Eicher did it in the early days by moving from Faridabad to Pithampur when the Chautalas were in charge; but then Vikram Lall was always a different kind of corporate head, and simply handed matters over to Subodh Bhargava with a simple brief to start afresh and grow in Madhya Pradesh. Likewise, the Tatas and Ashok Leyland have always secured their options by putting up manufacturing and assembly plants in a variety of states all over the country, giving them the flexibility of continuing and growing operations at other locations if one becomes troublesome.
Premier Auto and Peugeot, on the other hand, suffered tremendously due to inter-plant octroi and other state and city government issues in and around Mumbai. They have never really recovered since. Maruti Udyog did well in Gurgaon and Haryana as long as it had the protection of the powers that be, but even that is, along with the other heavy and automobile industry in Haryana, beginning to show signs of fraying at the edges. Karnataka, despite a coastal region and ports, was never in the business, barring Toyota and a few other small ventures. The story in West Bengal is too well known to repeat. Uttarakhand, out of the blue, has become an assembly centre. Andhra Pradesh suffered majorly because of the Volkswagen corruption and brazen theft of funds scandal and never really recovered.
But it is Gujarat that is in the headlines again. After General Motors set up shop in Halol about 20 years ago, there was a bit of a lull till the Tata Nano plant came up. And it seems the floodgates are now opening. Ford has announced that it will set up a huge plant to manufacture about a quarter of a million cars in the first instance. General Motors hopes to notch their numbers up some more. Tata Motors are not doing too badly. Maruti Suzuki is believed to be seriously looking around for options in Gujarat. And if reports are to be believed, three different two-wheeler manufacturers are looking at setting up shop in Gujarat as soon as they can, including a major south Indian manufacturer.

So what's it with Gujarat? Multiple aspects.

For one, the proximity to some really efficient new and old ports, both in the private as well as public sector. As small cars and other vehicles from India head into the world global export market, access to a seaport becomes extremely important, and that's in place. There is a strong engineering base coming up in terms of support and ancillary industries, not least of all because of the massive growth in the ship-breaking industry providing vast amounts of experience. Labour is usually not local, appears to be rotated often, and barring the odd skirmish here and there, is reported to be easy to handle and control, whatever that means.

The quality of life for management cadre-level people is another aspect. Gujarat has an increasing number of good schools and colleges, and while the local language is certainly important, the Gujaratis have enough self-confidence in themselves to ensure that English is not swept away in some sort of misplaced regional fervour. In addition, there are other industries which are reportedly moving to Gujarat, not the least being the global diamond industry, apparently tired of being bombed by rapacious extortionists in the name of terror in Mumbai. Rural Gujarat is a joy to visit and makes for a complete experience for those who need to get away from work and roan the countryside more often.

The state is power surplus and way ahead of others in pro-actively motivating renewable energy options, which will reflect in cost factors very soon. The state road network is about the best in the country and adherence to overloading laws helps keep the roads in better condition and to last longer, reflecting in a higher usage of motor vehicles too.

Most of all, it is the cleanliness of land acquisition from private parties as well as the state government, as well as subsequent clearances and interaction that appears to appeal to the companies. Everybody stays off the record, obviously, but there is a single-window approach that seems to work. In addition, in every case, there is also very heavy support from the Gujarati community across religious lines which everybody comments on.

Contrast this with the attitude all over India; there is no dearth of examples and experiences as well as blatant declarations by those in power, that providing of land to anybody, industry or people without bribery, is setting a wrong precedent for our elected representatives. In addition, let us be very frank that Gujarat is one of the cleanest states in the country-both in terms of air quality and hygiene it scores way above some of the larger cities and industrial areas in India.

1 decade ago
Sure the lagger gets highlight for every investment that happens. TN was a lagger for several years post independence. Today TN has India's largest SMEs and India's automobile capital. Even if one counts Peugeot, Ford, Tata, Hyundai already setting factories in Gujarat that would still not give claim of the title "Detroit". Most spare parts are made in Tamil Nadu. TN also has multiple automobile hubs and Chennai is just once city. The HQ of TVS is in Madurai. Coimbatore, Hosur, Ranipet etc have their respective share. As we speak we have two smaller investments - Eicher (Enfield) and Mahindra going to TN for a new bike and car plant respectively. These investments may not be highlighted much by the media - as they are a trickle for an already established automobile leader.
1 decade ago
Sorry to say, but the article is like the PR work for Guj govt. A writter should be balance in approach rather than biased. Sure guj govt and modi done some extraordinary work in attracting investment community by having single window clearance. But there should be some chink in the armour which author fails to explore. Because identifying these chinks will help them guj govt to grow better rather than praising in general terms like good gov, good people, good community, good engg base, good air, good hygiene, good road, good ports. Nothing was said how other auto hubs like pune, gurgoan, chennai etc failed to attract mfg.

Babubhai Vaghela Ahmedabad 9427608632
1 decade ago
URL for my comments. Shortened one.
Babubhai Vaghela Ahmedabad 9427608632
1 decade ago
Deemed NA for land along highways is one policy decision by Govt of Gujarat that is developing Gujarat, like India, in-pockets with rural area left out. Further, after reportedly huge largesse to Tata for setting up Nano Plant at Sanand near Ahmedabad, Auto & Ancillary as also other industries are scrambling for Sanand area overcrowding the Ahmedabad area. Similarly, IT and Educational Institutes are concentrating at Gandhinagar and in between Ahmedabad - Gandhinagar. This heavy concentration in two Districts leaving apart 24 Districts that include Saurashtra Area cannot be considered good all-inclusive development. Scattering of industrial development in Gujarat and in India is highly essential. My email to CM Gujarat in this regard has not been responded to even after more than two years -!topic/right-to-information-act-2005/ssMnO70qMr8
Chirag Shah
1 decade ago
Understandably correct.
Replied to Chirag Shah comment 1 decade ago
Thank you for writing in.

Free Helpline
Legal Credit