Multi-location plants will become a necessity: Maruti Suzuki
Maruti’s MD Kenichi Ayukawa urges component manufacturers to gear up for multi-locations facilities and align investments accordingly
New Delhi: Maruti Suzuki India Ltd said auto makers in the country will have to build factories nationwide, including at new untapped regions, to diversify their production bases and meet an expected more than threefold surge in sales by 2030.
“Multi-location plants will be a business necessity for both OEMs (original equipment manufacturers) and component manufacturers to grow and de-risk our business,” Kenichi Ayukawa, Maruti’s managing director, said at the annual conference of the Automotive Component Manufacturers Association of India.
India’s automotive industry is mainly dominated by the hubs of Gurugram and Manesar belt in Haryana, Gujarat and Chennai, with pockets of automotive manufacturing presence in Rajasthan, Uttar Pradesh and Andhra Pradesh.
Citing the example of Gurugram, where the Suzuki Motor Corp. unit began its journey in the 1980s, Ayukawa said “many such auto-clusters have to be developed throughout the country”.
“This will help us sustain the next phase of growth and insulate us from unforeseen business risks. I urge component manufacturers to gear up for multi-locations facilities and align investments accordingly,” Ayukawa said.
The new regions would need the latest infrastructure and other facilities to make it attractive for people to reside, he added.
An 8-9% expansion of the Indian economy would grow the passenger vehicle industry to about 10 million units a year by 2030 from about 3.2 million units, Ayukawa said.
The government expects the passenger vehicle market to triple to 9.4 million units by 2026 from 3.2 million currently if the economy grows at an average of 5.8% a year, said a document titled Automotive Mission Plan (AMP) 2016-26.
A 7.5% annual expansion of the economy will expand the market further to 13.4 million units, making it the world’s second largest after China.
On the same premise, the commercial vehicle industry is expected to grow to 2 million and 3.9 million units, respectively, from 700,000 at the end of 2014-15.
The two-wheeler market is likely to grow to between 50.6 million and 55.5 million units from the 18.5 million units currently.
To achieve the projections, the auto industry will need additional investments of ₹4.5 trillion to ₹5.5 trillion.
“As you note, the scale of operations before us will increase nearly three times of the present levels. Clearly, we have to triple our efforts to meet the growth in volumes. It implies a transformation in our mind set and change in our outlook. Our businesses will therefore, need to be re-looked and aligned to new scale of operations,” Ayukawa said.
Over the next decade, the auto sector is expected to contribute more than of 12% of India’s gross domestic product (GDP), up from 7% now, and comprise more than 40% of the manufacturing sector, compared with 16% now, according to Automotive Mission Plan 2016-26.
Auto industry will contribute about 13% of total excise duty collection. The projections come at a time when the government is seeking to attract foreign investment in manufacturing through the Make in India initiative. Share of manufacturing in GDP has stagnated at about 15% in the past decade.
Ayukawa also stressed on the need to invest in new technologies.
“Even if we look at a small EV penetration by 2030, still a large volume of (internal combustion) engines will need some form of electrification. So, please have a good appetite for new technologies, its research and adoption to Indian market conditions,” he said.
“Efforts are needed to set up a complete ecosystem from procurement of raw materials to charging infrastructure and recycling of the batteries. Similarly, connected cars will require special infrastructure at another level,” he added.
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