It has been a fabulous growth story over past several years. Tamil Nadu flaunts production facilities of numerous foreign and domestic Original Equipment Manufacturers (OEMs) as well as over 100 local suppliers in its capital city and neighbouring districts.
Chennai is nicknamed as the ‘Detroit of India’. This evolution of the city can be traced back to as early as 1953 when Simpsons pioneered India’s automobile industry in Chennai by manufacturing motor cars, diesel engines, and steam passenger buses. The industry has grown steadily since then. The state, in the 1990s and early 2000s, witnessed the second wave of the automobile boom. Currently, several car manufacturers, including Hyundai, Renault, Nissan, Mitsubishi, and BMW, have their manufacturing units in Chennai.
In a latest development, Tata Motors signed a Memorandum of Understanding (MoU) with the Tamil Nadu government for setting up a Rs 9,000 crore worth vehicle manufacturing facility in the state. The initiative is expected to provide direct and indirect employment to around 5,000 people.
The state has managed to attract two such big investments in the automobile sector within a span of a few months, indicating Tamil Nadu’s continuing growth as a leader in the sector. Vietnam-headquartered VinFast Auto Limited had recently signed an MoU to set up an electric vehicle manufacturing facility worth Rs 16,000 crore in Thoothukudi district.
Education as primary step
The foundation stone for developing Tamil Nadu as a major industrial player was laid between 1955 and 1960. As an initial step, the state government made substantial investments in primary and secondary education. During the 1960s, there was a concerted effort by the government to enhance technical education, establishing institutes to train technicians and mechanics. The involvement of the private sector in worker training was also encouraged by the government.
As a result, after over six decades, Tamil Nadu now produces the largest number of technical graduates. In the 1990s, the government actively attracted Foreign Direct Investment (FDI) and established government agencies to entice the automobile industry. According to industry estimates, the state churns out at least 20 lakh vehicles annually.
“In the interest of future development and consolidation of the automobile and components industry, the government introduced the Tamil Nadu Automobile and Auto Component Policy in 2014. The objective was to generate five lakh jobs and position the Chennai belt among the top five auto clusters around the globe,” noted a consultant.
Chennai’s Oragadam, better known as the city’s industrial suburb, is home to many top automobile manufacturers. This includes Hyundai Motor India, the largest passenger car exporter in the country; Renault-Nissan; Daimler India Commercial Vehicles; and Royal Enfield, which also inaugurated its second plant in the same area.
Sources attribute Tamil Nadu’s leadership position in the automobile sector to multiple factors. The presence of three modern ports in Chennai and Thoothukudi provide easy access for exports and imports. The container terminal in Chennai is termed as one of the most efficient in India. Both the Chennai and Ennore ports have dedicated berths for automobile exports too.
The availability of skilled manpower at various levels, including shop floor operators, technicians, diploma holders, and graduate engineers, is noteworthy. The state also enjoys commendable industrial peace and harmony.
A section of industrialists say that the state’s auto cluster manufactures a wide range of products and commands a disproportionate share of the automotive market due to the presence of three major domestic players – Ashok Leyland, TVS Group and Brakes India.
Furthermore, the number of vehicles registered in the state has increased by 17-19 lakh annually since 2011. Official data from the state revealed that during 2019-20, India produced 3.1 crore vehicles, of which 2.6 crore were sold.
“During 2019-20, Tamil Nadu alone registered 19.27 lakh new vehicles. Between 2022 and 2023, the number was 17.35 lakh. This data implies that nearly 9% of all vehicles sold in India were registered in Tamil Nadu, indicating a significant demand,” said an office bearer of the Tamil Nadu Automobile Dealers Association.
According to the Annual Survey of Industries (ASI) report for 2019-2020, Tamil Nadu ranked first in terms of the number of factories (38,837) and the number of people employed in factories (26.63 lakh). The state was also ranked third in parameters such as Gross Output (Rs 9.27 lakh crore), Net Value Added (Rs 1.32 lakh crore), and Invested Capital (Rs 4.3 lakh crore).
Out of the total invested capital of Rs 4.3 lakh crore, the automobile and other allied sectors received Rs 93,646 crore, constituting 24.58% of the total investment in India during 2019-2020.
In the automobile and electric vehicles (EV) sector, significant investments from both global and domestic players were garnered through special conclaves conducted during February 2023, facilitating investment commitments of nearly Rs 11,000 crore and generating jobs for over 5,000 people.
TATA TO SET UP Rs 9,000 CR PLANT
Tata Motors has signed a Memorandum of Understanding (MoU) with the Tamil Nadu government for setting up a Rs 9,000 crore worth vehicle manufacturing facility in the state. The initiative is expected to provide direct and indirect employment to around 5,000 people.
38,837 - Factories
26.6L People employed in factories
Rs 9.2 lakh crore Gross output
Rs 1.3 lakh crore Net value added
Rs 4.3 lakh crore Invested capital
Source: Annual Survey of Industries report on Tamil Nadu for 2019-2020