With Korean and Chinese auto majors such as South Korea’s Kia Motors and China’s SAIC Motor, Great Wall Motors and Changan Auto eyeing to enter the Indian market, the Gujarat government is all set to roll out red carpet for automakers to re-establish the state’s position as a manufacturing hub in the country.
Undeterred by GM’s plans to exit Gujarat, the state government is revisiting its existing auto policy to attract more players. In an exclusive interview with The Financial Express, Gujarat finance minister Saurabh Patel confirmed that a new auto policy is on the anvil, and promised that it would be as lucrative as the earlier ones.
“Any automobile manufacturer who does not have a plant in Gujarat will not be able to compete and sell his vehicles in the rest of the country. We have given VAT incentives in the range of 15%. If there is a difference of 15% between goods produced and sold, then companies need a unit in Gujarat for their survival,” Patel said.
It may be recalled that the Gujarat government, under the stewardship of then CM Narendra Modi, had lured Tata Motors to set up Nano plant in the state following the Singur fiasco in West Bengal in 2008 by providing 1,100 acres of land within weeks and offering a sweet deal with the auto giant. Though the Gujarat government and Tata never made the agreement public, reports suggested that the state government had agreed to extend R9,750-crore worth soft loans to the automaker over a period of 20 years. The amount was equivalent to 330% of the initial investment of R2,900 crore made by the company in the first phase of the project. According to the Gujarat FM, state governments are at a liberty to work out exclusive deals with investors on a “case to case basis” within the ambit of larger policy framework.
With Kia Motors scouting for a location in India for its all-new plant, Gujarat is on its radar along with Maharashtra and Andhra Pradesh. Japanese auto giant Suzuki is already in the process of setting up a manufacturing facility in Gujarat, which will begin operations next year. With a total investment of R18,500 crore envisaged, the new plant is Suzuki Motor’s first wholly-owned car plant in India and will supply vehicles and components exclusively to Maruti Suzuki India. Osamu Suzuki, chairman of Suzuki Motor Corp, said, “As planned, operations will start in 2017… Our plan is going accordingly.”
Suzuki’s Gujarat plant will have an annual capacity of 2,50,000 units. Currently, Suzuki owns 56% of Maruti Suzuki India — India’s biggest automaker. The Japanese partner expects to source majority of its growth from India, which is projected to become the third-biggest market in the world after China and US by 2020.
Apart from this, Honda Cars India too is scouting for land to set up a third facility in Gujarat, which is likely to come up in close vicinity to the Suzuki plant in Vithalapur.
Elaborating on the policy, Patel said, “The policy will be based on two fundamental requirements, namely the amount of employment they generate and the distribution of income they facilitate.”
The state’s reputation as an emerging auto hub was severely dented last year when GM announced its plan to shut operations at its Halol plant, and increase production at the Talegaon plant in Maharashtra.
While SAIC Motors was keen to buy the plant, the Gujarat government’s refusal to allow the closure until GM submits a settlement plan for 1,100-odd employees toppled the move. When asked about the future of GM plant, the minister said the company has given an assurance that the plant would be operational till March 2017. “Attempts are being made to find a solution, including a possible buyer for the plant, while protecting the interests of workers,” he said.