GM, Tata Motors, now Maruti...

MOVE OVER, HARYANA and Chennai. Gujarat is on the road to becoming India’s next automobile hub. The Narendra Modi government in the state is pitching hard for this. A senior government official said about 1,500 hectares (about 3,700 acres) of land have already been bought in and around Sanand in central Gujarat for this purpose. “The land has been purchased at market rates to avoid any controversies in future,” he added.

This proactive pitching follows Modi’s success in snagging the Tata Motors Nano plant after the company had to leave West Bengal. The Tata plant at Sanand produces 2.5 lakh cars annually (with space to double that). There is also a General Motors factory at Halol making 85,000 cars every year, and a thriving vendor base near Rajkot: Tata Motors found vendors already present, says Tata Motors spokesperson Debasis Ray.

Maruti and Ford are both looking to expand production in western India. Analysts say that if both companies set up in Gujarat, a new ecosystem of vendors wiill be created, attracting other manufacturers. The Maruti plant is initially expected to manufacture up to a million cars annually, while Ford plans to produce up to 2 lakh cars every year. The U.S.-based company has said that it will launch between six and eight new models in India over the next two years.

Apart from easy land procurement, there has been a vast improvement in infrastructure: Gujarat is one of the few states with surplus electricity. The clincher is how the state’s ports, could lower export costs. For example, Maruti already has an agreement with Mundra port for a mega export car terminal.

Gujarat also has little history of trade union agitation, something Maruti is sure to consider after the recent 13-day strike at its Manesar plant in Haryana.

The country’s other major automobile hubs are in Gurgaon, Haryana, with Maruti, Hero Honda, and Honda Motorcycles and Scooters; the Chakan region near Pune has the Tata Motors and Bajaj Auto factories, and international names such as General Motors, Volkswagen, and Mercedes-Benz. A third large auto cluster is in Chennai with Hyundai, Nissan-Renault, Ashok Leyland, and BMW factories.

Although the Gujarat government has yet to sign a deal, Maruti executives say the company is keen on a production site to cater to the growing markets in South and West India. “We are evaluating options and will decide over the next four months,” says Puneet Dhawan, senior manager and head of corporate communications
at Maruti.

The company sold 1.2 million cars during 2010-2011, a growth of 25% over the previous year’s sales. There are two new manufacturing lines commissioned at its second plant in Manesar, which will take production capacity to 1.7 million units. However, the company is keen to expand, as the Indian passenger car segment is expected to grow at almost 14% in the next couple of years.