This story belongs to the Fortune India Magazine February 2025 issue.
ADVERTISEMENT
ONLY A FEW IN INDIA would have heard of Joseph Cyril Bamford, but everyone knows his acronym, JCB. It is synonymous with a large digger, bulldozer or earth mover in India. Bamford, who started manufacturing agricultural tipping trailers from Uttoxeter, Staffordshire of the U.K. in 1945, scaled up by manufacturing heavy construction machines. JCB’s entry into India in 1979 was another strategic move. With five factories across India, JCB manufactures 60 products in nine categories for the domestic market and, more importantly, exports to more than 125 countries.
The JCB facility at Ballabgarh, near Delhi, is the world’s largest factory for backhoe loaders — a tractor-like unit with a loader-style shovel on the front and a backhoe at the back — that are used for road maintenance. JCB chief executive Graeme Macdonald recently said that sales of backhoe loaders have been strong in India, besides North America.
As India’s economy progresses towards $5 trillion, with a strong demand outlook for branded, premium products, the role of MNCs only gets bigger. The economic scenario offers a business case for global giants, which invest in core science research, engineering and deep technology; Indian companies still lag in core R&D.
No wonder that the manufacturing unit of LG Electronics India in Uttar Pradesh’s Greater Noida has no time to pause its rolling production lines, which manufacture refrigerators, washing machines, air conditioners, microwave ovens, and water purifiers, among others. This facility of the South Korean consumer durables giant, which commenced commercial operations in 1997 and has expanded to 10 production lines, witnessed capacity utilisation rising to 86% in Q1FY25 compared to 66.7% in FY22. Meanwhile, capacity utilisation at LG’s manufacturing unit at MIDC Ranjangaon, Pune, increased to 69% from 54% in the same period.
And LG is expanding its manufacturing base in the country. The company and its parts suppliers plan to invest ₹7,000 crore to build LG’s third factory and create a vendor base in Sri City, Andhra Pradesh. The company plans to raise ₹15,000 crore via the IPO route. Incidentally, Hyundai Motor India, another South Korean company, raised ₹27,870.16 crore — the highest ever in India — via its IPO last year.
In the EV space, Chinese auto major BYD and Vietnamese MNC VinFast are in a hurry to introduce their new cars. Warren Buffett’s Berkshire Hathaway-backed BYD’s Blade battery is used in Mahindra’s new EVs. And Tata Motors has partnered with China’s Octillion Power Systems to source battery packs for its Curvv EVs.
Meanwhile, Taiwanese chipmakers are making a beeline to partner with Indian giants to tap opportunities in the domestic market. And core engineering companies like Honeywell and Siemens are expanding their manufacturing footprint and building India as a hub for their aerospace, defence, and civil aviation businesses.
In recent times, the country crossed a significant economic threshold with FDI inflows exceeding $1 trillion since April 2000, because of a 26% increase in the first half of FY25. India’s improving appeal as an investment destination is driven by policy reforms, strategic initiatives like Make in India, and liberalised FDI norms. Services, manufacturing, and technology witnessed robust inflows.
Cashing In On Core Science
Let’s come to German engineering giant Siemens. Its history in India goes back to 1867 when Werner von Siemens and his brothers laid the groundwork for the Indo-European telegraph line. Siemens, which founded its first branches in Mumbai in 1922, has a strong manufacturing footprint across the country, with more than 23,000 employees. Its net profit rose by 39% to ₹2,717 crore in the October 2023 to September 2024 fiscal on revenue of ₹21,983 crore, which increased by 12%. Its market capitalisation (m-cap) is more than ₹2 lakh crore.
Longstanding players are reaping the benefits. Otis Worldwide, which installed India’s first elevator in Kolkata in 1892, sells 70,000 new units annually and its market here is 2.5x bigger than its market in the US. ABB India, a Swiss tech giant in electrification and automation that launched its operations soon after independence, posted a 22% rise in profit to ₹1,242 crore in the year ended December 31, 2023. Its m-cap is ₹1.3 lakh crore.
Siemens Ltd chairman Deepak S. Parekh said in its 2024 annual report that the company is investing around ₹1,000 crore: ₹460 crore for a power transformer factory in Kalwa; ₹190 crore for a metro train manufacturing facility at Aurangabad; ₹330 crore for a gas-insulated switchgear factory and ₹56 crore for a vacuum interrupter factory, both in Goa. “These investments will enable the company to meet the growing demand both in India and globally,” he wrote.
In core science and engineering, MNCs face less competition from Indian companies. For instance, automobile original equipment manufacturers (OEMs) had to initiate multi-sourcing of motor, battery and power electronics to produce EVs of global standard from India.
“The large and traditional MNCs see India as an arrowhead for exports to global markets. While Suzuki built a facility in Gujarat solely for global exports, Schneider Electric is investing heavily to make India a manufacturing hub for its exports,” says Tarunesh Madan, co-Managing Partner at Amrop India, a leadership advisory firm. JCB manufactures 80% of its global products in India, underscoring the growing trend of using India as a manufacturing hub, he adds.
However, there are some core sectors, such as heavy manufacturing, where MNCs are less active. For instance, in steel manufacturing, India never had a global player until ArcelorMittal formed a joint venture with Nippon and acquired bankrupt Essar Steel. In petroleum refining, Reliance Industries never had competition, but the entry of Russian oil major Rosneft with the acquisition of Essar Oil has changed the landscape. The cement sector has no big global player after Holcim, the world’s largest cement maker, exited India, selling ACC and Ambuja to Gautam Adani. “Some MNCs are exiting sectors like steel and cement due to concerns over ESG factors, carbon credits, and emissions, choosing instead to fund operations in emerging markets,” says Madan.
Emerging Opportunities
Energy transition and carbon emission reduction offer abundant opportunities for Indian companies to collaborate with global firms that specialise in technologies in these areas, says Jeroen van Hoof, Global Energy, Utilities & Resources Leader at PwC.
Then there are the fast-emerging sectors, such as semiconductors. The Central government early last year approved the Murugappa Group’s plan to set up a semiconductor unit in Sanand, Gujarat. CG Power and Industrial Solutions, a subsidiary of Murugappa Group firm Tube Investments of India, has tied up with Japanese giant Renesas Electronics and Thailand-based Stars Microelectronics to build an assembly and test facility that will cost ₹7,600 crore.
Similarly, Tata Electronics has partnered with Powerchip Semiconductor Manufacturing Corporation (PSMC) of Taiwan for tech transfer to build India’s first semiconductor fabrication unit. It has also signed a pact with Massachusetts-based Analog Devices to make semiconductors in India. And HCL Technologies has partnered with Taiwan’s Foxconn and Intel Foundry to develop semiconductor chips and other semiconductor-related products. The Adani Group is entering chipmaking via a joint venture (JV) with Israel’s Tower Semiconductor. Key reforms like the Semicon India programme, worth ₹76,000 crore, is likely to support the new ventures in semiconductor and display manufacturing.
MNCs are pursuing JV-led strategies through which tech transfer is also playing out. For instance, Boeing has a JV with Tata Advanced Systems to produce aerostructures for global exports. In EVs, Sajjan Jindal’s JSW Group picked up a 35% stake in MG Motor India a year ago. “Many mid-sized MNCs, previously focussed on sales in India, are now creating manufacturing capacities in India to cater to Asian markets,” says Madan.
The PLI schemes introduced in 2020 have resulted in ₹1.32 lakh crore in investments and a significant boost to manufacturing output of ₹10.90 lakh crore as of June 2024. Exports have surged, with an additional ₹4 lakh crore generated due to the PLI schemes, according to government data. The new entrants will get policy support for growing the businesses as the country wants to cash in on the new opportunities in the supply chain that emerges out of China’s slowdown.
Fortune India is now on WhatsApp! Get the latest updates from the world of business and economy delivered straight to your phone. Subscribe now.