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Last Updated: Monday, 30 April 2007, 20:23 GMT 21:23 UK
India eyes 25 million automotive jobs
By Jorn Madslien
Business reporter, BBC News, Chengalpattu, Tamil Nadu, India

Entering Ford's manufacturing plant near the South Indian city of Madras (Chennai) feels a bit like travelling back in time.

The automotive industry is creating a lot of new jobs in India

The metallic noise, the sparks, the industrial smell: here is a good, old-fashioned car factory, the kind whose closures in the West - along with the loss of thousands of jobs - used to spark industrial strife.

"In Europe, you see robots," explains plant manager Kevin Whipp as he leads the way through the dimly-lit factory. "Here you see people."

India's labour intensive car industry has become a tremendous job creator and as such a crucial driver of economic growth.

Already, some 10 million people are working in factories across India - making cars and motorcycles, tractors and trucks - or in sales and service centres.

And their numbers are set to swell.

Employment in India's automotive sector

By 2016, the automotive industry should have created employment for 25 million people in India, according to government predictions, set out in its Automotive Mission Plan. (To put this into context; MG Rover's collapse in 2005 led to the loss of 6,000 jobs.)

For every job created directly by the automotive industry, a further seven are created indirectly in the economy at large, explains Jagdish Khattar, managing director and chief executive of India's best-selling car maker, Maruti Udyog, and a contributor to the report.

Engine for growth

The new jobs that are being created by the automotive industry in India are not all about sweat and muscle on the shop-floor.

The auto industry is just a multiplier, a driver for employment, for investment, for technology
Arvind Mathew, Ford India managing director and president

Leave the noisy factory floor behind and venture into the baking Indian heat, and the Ford plant tells a very different story.

Footpaths lined with palm trees leading into whitewashed corridors make the site resemble a university campus, or a corporate headquarters in Silicon Valley.

Indeed, only about half of the almost 4,000 people employed by Ford India in Madras are blue-collar workers, and even they are highly trained, points out its managing director and president, Arvind Mathew.

"The assembly itself is no longer a non-skilled job," agrees Ajay Dua of the Ministry of Commerce & Promotion. "It still requires a lot of investment and training."

The Indian government predicts that in 10 years, no more than one-tenth of the jobs created by the automotive industry will be unskilled, with some two-thirds of the new jobs being classed as skilled and the remaining classed as managerial or general work.

Ford of India's operations in Madras are a case in point.

In addition to its manufacturing plant, Ford India's IT department serves Ford Motor as a whole, and the group is running the entire group's business invoicing out of Madras.

Suzuki Zen advert, with man on foot and man on motorcycle passing

"With the auto companies, you get so much peripheral growth," insists Mr Mathew.

"The auto industry is just a multiplier, a driver for employment, for investment, for technology. It is a significant engine for the economy.

"It doesn't mean that you're just building cars. You've got the supply base doing their thing. You've got the IT industry doing their thing. You've got the infrastructure, you've got the oil companies."

Serious suppliers

Adjacent to the Ford factory, a separate industrial site has been established by automotive supply firms.

Initially, the suppliers built their businesses on the back of the orders they got from Ford India, though over time many of them have branched out to supply both Ford's divisions in other countries as well as Ford's rivals in India.

BMW India
BMW aims to benefit from and contribute to India's growth

"You've got this manufacturing base that is diversifying into other areas," observes Mr Mathew.

Indeed, the mere fact that the suppliers were here was a key reason why German car maker BMW opened its assembly plant nearby a few weeks ago.

"Chennai has a developed infrastructure, it benefits from having suppliers nearby and we've been able to hire motivated employees," explains Frank-Peter Arndt, BMW Group board member in charge of production, during a visit to the BMW facility.

This pattern of supplier growth can be seen across India, with indigenous car makers producing vehicles or parts under contract for sale for foreign car makers, or parts makers going directly to automotive groups outside India.

Growing importance

Much of the foundations for the future importance of the automotive industry in India are being laid this year.

A string of companies - including Tata Motors, Maruti Udyog and Mahindra & Mahindra, as well as several global automotive groups - are investing heavily in new manufacturing and assembly plants in automotive hubs across the country.

Automotive contribution to GDP
India GDP
India's GDP is set to double over the next decade
In percentage terms, the automotive industry's contribution should also double
In dollar terms, the sector's contribution is set to quadruple to some $145bn
"2007 is the year of India," insists Norbert Reithofer, chief executive of BMW Group.

"We want to benefit from this growth potential, but we also want to make an active contribution to this growth."

Indeed, collectively the automotive industry is set to have a major impact on India's future economic growth.

Currently, the sector accounts for 5% of India's economic output, but it is set to grow much faster than the rest of the economy. Consequently, by 2016 its output in dollar-terms should have quadrupled, while GDP is expected to have merely doubled.

This will make the automotive sector an ever more important contributor to economic growth in India: by 2016 it should account for 10% of India's GDP, according to the government.

The consequence is a remarkable transformation of India's entire economic landscape.

And just as the country's population is learning to depend on the car, so the government could soon come to depend on the car industry.

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