When a high-powered delegation of top executives of Maruti Suzuki held lengthy confabulations with Gujarat chief minister Narendra Modi last week over the possibility of setting up its seventh plant in India, and the first outside Haryana, with a whopping one million car manufacturing capacity in Gujarat, it sent the state?s already overheated PR engine into overdrive. Those at the helm of affairs in the Modi government have already anointed the state as the automobile hub for the country even though Maruti officials took pains to underline the fact that though Gujarat was undoubtedly on their radar for setting up yet another manufacturing facility, it was early days yet as they are eyeing other states as well.

But knowing Modi?s ability to charm his way into the hearts of industrialists, he may well end up driving in the country?s largest car manufacturer into Gujarat as well. After all, few could have forgotten the way in which the Gujarat government sealed the deal with the battle-scarred Ratan Tata to provide a 1,000-acre home for his dream car Nano in a matter of three days flat.

At that time, in October 2008, while inking the deal for the manufacture of the Nano plant, Modi had first made public his dream of turning Gujarat into a hub for the automobile industry. Three years since the Nano?s triumphant drive from Singur to Sanand, auto companies have been queuing up at Gandhinagar exploring the possibilities of setting up units in Gujarat. To be fair to Modi, for all its inherent advantages, Gujarat is today being perceived as the most attractive investment destination by corporates thanks to his marketing ace?the high-decibel Vibrant Gujarat Global Investor Summits.

But it?s largely on account of Gujarat?s track record as an ideal haven for industrialists with labour, land and world-class infrastructure available in abundance, not to mention its bustling public and private sector ports, which ensure connectivity to facilitate exports. This has the corporates, particularly auto manufacturers including auto giants like Hyundai, Ford, Honda and Ferrari to name but a few, flocking in to conduct recces and feasibility studies.

Gujarat had no known names in the auto space till 1991?it was Apollo which first set up a tyre manufacturing facility in Limda that year pumping in an investment of R2,000 crore. GM followed suit four years later setting up a R2,000-crore plant at Halol. In 2002, Asia Motor Works homed in on Bhuj for its R1,400-crore facility. But it was the Nano coup staged by the CM, bagging Ratan Tata?s dream project from under the noses of established auto hubs such as Tamil Nadu and Karnataka, which proved to be the turning point, making Gujarat the cynosure of auto majors across the world. The following year, in 2009, Ceat Tyres pumped in R700 crore to set up a tyre manufacturing unit in Halol.

Over the past few years, in particular, the automobile sector has been growing at a breakneck speed in Gujarat. One of the reasons being cited by industry observers is the presence of engineering, foundry and casting industries, which enables the sourcing of local components required for the automobile assembly/passenger cars. Rajkot has been a key leader in diesel engines for decades and has a major share in auto component businesses across the country, supplying the major share of spare parts used in automobiles in the country. Apart from Rajkot, Ahmedabad and Vadodara are also becoming major automobile component manufacturing bases, owing largely to the emergence of automobile majors in recent years. With Gujarat contributing 9.5% of India?s total engineering production, the engineering and auto sector in the state has grown at a CAGR of 8.5% in the last two decades.

The growth of the auto sector, especially in the post-Nano era, can also be linked to Gujarat?s unique assistance in Mega/Innovative Projects Scheme, which was notified in 2009 with the specific aim of promoting and facilitating mega projects in some focus sectors, including automobiles and auto components. That apart, Gujarat is also famous for laying down the red carpet for projects close to the CM?s heart. The fact that financial assistance and incentives running into thousands of crores (the Opposition alleges sops worth a mind-boggling R30,000 crore) were doled out for the Nano project has also lured many auto majors into the state. Not surprisingly, all details of the preliminary discussions with the Maruti-Suzuki team are being kept strictly under wraps for the time being.

But what is perhaps Gujarat?s trump card in the auto space currently is its buoyant port sector. With the public sector Kandla port and the private sector Adani, Pipavav and Dahej ports becoming strategic gateways on the western flank of the country, locating manufacturing units in their vicinity makes eminent sense for auto manufacturers eyeing the lucrative export market to shore up their profits. While Maruti has been among the early birds, which has forged a partnership with the Mundra port for a unique roll-on roll-off terminal exclusively for export of its cars, other auto majors too are believed to be exploring similar tie-ups. But even with a dedicated terminal, Maruti is coughing up as much as R25,000 per car as transportation costs of ferrying cars from its Manesar facility to Mundra.

For further progress in the sector, the pro-active Gujarat government has already planned an auto ancillary park for Sanand district along with the precision engineering park in PCPIR in Dahej. To cut costs, more and more industries are engaging in the cluster formation. A SEZ for auto parts spread over an area of 155 hectares is also slated to come up in Kutch. Though Gujarat is still a long way away from established auto hubs like Chennai and Pune on the road to becoming a hub for automobile manufacturing, its investor-friendly government and its fast-developing infrastructure in tandem with its easy connectivity to ports and rail transport are the strongest cards that Modi has up its sleeve. In addition, its medium-and-small enterprises and the entrepreneurial spirit of its people are a force to reckon with.

With several goliaths in the auto space including Kia Motors, Peugeot and Proton training their sights on India, Asia?s second-fastest growing auto market, Modi can still count on handsome gains if even a handful of new auto players opt for Gujarat. The recently held Surat Auto Expo will play an important role in positioning Gujarat as a manufacturing hub for automobiles. Players like BMW, Audi, Volkswagen, Maruti Suzuki, Bajaj Auto and Skoda participated in the Expo generating business worth R100 crore at this four-day long event.

Industry watchers also reveal the possibility of Gujarat establishing a vendor park near Mundra Port at some stage as it will be a strategic location for the export of auto components that is turning out to be India?s core competence on the global landscape. With so much going for it, minor speed breakers like the recent prolonged labour unrest at GM?s Halol facility or the not so impressive market debut of Nano notwithstanding, Gujarat can emerge as serious competition for Tamil Nadu and Maharashtra in the race to bag the title of the country?s auto hub, provided it negotiates the hurdles with dexterity.