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Last Updated: Wednesday, 18 April 2007, 23:01 GMT 00:01 UK
Indian auto firms eye global markets
By Jorn Madslien
Business reporter, BBC News, Kancheepuram, Tamil Nadu, India

Korean car maker Hyundai is leading the way as India's embryonic automotive industry eyes export markets.

The drive across Kancheepuram's sprawling paddyfields, through rural villages and past small Hindu temples, does little to prepare for the lush greenery at the end of the dusty, single-track road.

Here, enshrined in an oasis of large palm trees, complete with sprawling tropical gardens, lies one of India's largest industrial complexes.

Hyundai Motor India's factory in the South Indian state Tamil Nadu was set up in 1996, both to supply the fast-growing domestic market and as a production base for the Korean parent's customers around the world.

Ten years later, 300,000 cars a year are produced here, and "by the end of 2007, we will have doubled our capacity", says Hyundai Motor India's P Sudhir Kumar during a tour of the 635 acres site.

Hyundai has invested $500m (250m) in a second, pretty much identical, manufacturing plant that will start production later this year, so by the end of 2008 some 10,000 people will be working here - churning out 600,000 cars per year.

Exporting hub

Enter the pressing plant, where vast rolls of steel are shaped into body parts, and it is easy to see how Hyundai has become both the second biggest and fastest growing car maker in India.

India exports

"When we produce door panels, we do so for the whole shift," observes Mr Kumar.

Such mass production techniques are essential, given that every second - 24 hours a day, seven days a week - a car rolls off the Hyundai assembly line.

Each and every car is tested on the 1.6km on-site test track, before being taken to a vast car park where a sea of 25,000 cars appears to be floating in the shimmering heat, ready to be loaded onto big trucks and shipped to the nearby Madras (Chennai) port for exports.

Hyundai is already India's biggest car exporter by far, and "by 2008, we plan to export 300,000 vehicles", explains Mr Kumar.

Consequently, this plant has become a blue-print, not only for the adjacent second factory, but for India's grand ambitions to become an exporting hub for car and car parts makers, targeting markets across the world.

Rightful place

India's goals were formalised earlier this year in the Automotive Mission Report.

The report was written by senior industry figures and published by the Indian government in a joint effort to create a deregulated and competitive automotive industry that should transform India into a global production hub, serving both its fast-growing domestic market and export markets.

Hyundai cars ready for shipment
Indian car makers are eager to sell more cars to other countries

Tata Group chairman Ratan Tata, sometimes referred to as the "godfather of Indian industry" and one of the project's backers, says he would take "pride in India taking its rightful place in the world economy".

Selling cars, motorcycles and parts to the world would go a long way to do that, whilst at the same time sparking economic growth and job creation at home.

"The current export value of the automotive sector is about $4.1bn," explains Sontosh Mohan Dev, cabinet minister for Heavy Industries and Public Enterprises.

"This needs to be increased to a minimum of $35bn to make India a substantial player in the global market."

Exporting hopes

India's exporting base would not be limited to the shipment of complete cars.

Car makers in India are also helping parts vendors set up near their factories, essentially to secure the supplies they need themselves.

"In four years from now, we should be exporting a million compact cars," says Maruti Udyog chief Jagdish Khattar.

In Hyundai's case, 80% of the parts used come from vendors based within a 50km radius of its factory.

Indian rival Maruti Udyog operates a similar scheme, which is built on mutual trust and support, according to chief executive Jagdish Khattar.

"We have never changed a vendor," he says. "Once a vendor, always a vendor."

Such stable business conditions have helped some vendors to broaden their markets and sell parts to the automotive industry at large, both in India and abroad. In fact, parts exports are set to make up two thirds of India's automotive exports by 2016, according to official predictions.

The government is doing its bit as well, cutting back on red tape and rolling out the red carpets in order to woo foreign car makers. And its efforts have worked - all the global automotive majors are getting involved and not only with an eye on the fast-growing Indian market.

"We are not only focusing on leveraging our supply base to suit our local needs, we are also looking to source more parts out of India to supply our global operations," says GM's chief executive, Rick Wagoner.

"With India growing its domestic industry, it is going to increase the possibility of India exporting more."

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