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Cars Drive India’s Manufacturing Growth

APICS CEO

Friday January 12, 2018


For the past few decades, India has been known for its world-class information technology. During the past few years, however, national leaders have been working to boost the country’s manufacturing capabilities as well. In September 2014, Prime Minister Narendra Modi launched the Make in India campaign with the goal of building India into global hub for design and manufacturing. According to a recent article from The Atlantic, India’s best chances for manufacturing success might lie in its auto industry.

Through a series of partnerships, acquisitions and manufacturing improvements since the 1980s, India has quietly grown its auto industry into the sixth largest in the world, producing 3.8 million cars annually. Its production already is on par with South Korea’s, and it’s quickly catching up to Germany’s level. The industry also directly and indirectly employs 19 million people and makes up 7 percent of India’s gross domestic product (GDP).

The Indian government planted the seeds for its manufacturing success back in 1982. State-owned enterprise Maruti Udyog partnered with Japan’s Suzuki to manufacture subcompact cars for India’s growing middle class. One year later, the joint venture released the Suzuki Fronte in India. In the mid-1990s, India welcomed foreign investment in its auto industry. Later, Indian leaders started to look abroad for growth. Mumbai-based Tata Motors acquired Jaguar Land Rover from Ford in 2008, and Mahindra and Mahindra took majority stakes in Korea’s SsangYong and Italy’s Pininafrina.

Today, India is home to Maruti Suzuki, Tata Motors, Mahindra and Mahindra, Hindustan Motors and Premier Automobile, and Audi, BMW, Ford, General Motors, Honda, Hyundai, Mercedes-Benz, Mitsubishi, Nissan, Renault, Skoda, Suzuki, Toyota and Volkswagen all have a presence in the country. And these are just the automobile manufacturers. India also is home to manufacturers of scooters and motorcycles, which make up the majority of the country’s vehicle sales.

In the Indian state Gujarat, a manufacturing enclave dominated by a highly automated, 460-acre Ford facility offers a glimpse into the country’s manufacturing future, according to article author Alyssa Ayres. The Ford plant produces 240,000 vehicles and 270,00 engines a year. To piggyback on this manufacturing success, nearly two dozen suppliers also have set up sites nearby to help create a just-in-time auto manufacturing industry.

If this success continues, India’s auto industry could influence a major industrialization movement in the nation, as auto manufacturing has done in other countries. At present, about half of India’s workforce relies on agriculture to earn their living. However, this industry contributes only 17 percent of the country’s GDP, which leaves little room for socioeconomic growth for these workers. In addition, approximately 12 million Indians reach working age each year, further saturating the economy and job market.

Transitioning more workers to the manufacturing industry — which the government hopes to grow from 17 percent to 25 percent of the country’s GDP and add 100 million jobs to within the next decade —could help reduce national poverty and raise living standards, as manufacturing has done across East Asia. Plus, because the automotive industry is one of the largest employment multipliers of any industry, India’s growth in this industry is especially important. According to the Ann Arbor, Michigan-based Center for Automotive Research, each U.S. vehicle-manufacturing job creates seven other related jobs, which range from supply chain manufacturers, dealers, financial specialists and individuals who provide aftermarket services. If India can achieve similar results, the country will be well on its way to meeting its employment goal of generating 65 million auto industry jobs by 2026.

Tapping in to supply chain strategy

As India is realizing, manufacturing success depends on supply chain. It takes a well-coordinated group of suppliers, manufacturers, distributors, vendors and others to source materials, build a product, and distribute it to the end-customer. Successful supply chains often are built upon strategic supplier partnerships, which the APICS Dictionary defines as, “Alliances with top supplier and buyer performers to enhance a firm’s performance.”

Similarly, your organization can benefit from identifying the best supplier and buyer partners and nurturing those relationships. APICS offers a wide variety of resources to help you cultivate and maintain supplier relationships. For example, the APICS Certified Supply Chain Professional (CSCP) program helps individuals understand the fundamentals of supplier relationship management and learn how to develop supply plans based on buyer-supplier relationships. Start your APICS CSCP journey today at apics.org/cscp.

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  1. Hardeep Singh January 13, 2018, 04:19 AM

    Great article!! Just a slight correction worth noting on the "Make in India" campaign is that it shouldn't be portrayed as the beginning of everything. Though the initiatve was there, much before the Narendra Modi government came to power, it was just a naming ceremony in 2014.

    Likewise, we have the Swacch Bharat campaign which aims to keep India clean and provide sanitation to all. That has been an initiative since the 1980's. Just trying to highlight, how people get carried away when you try to brand public service.

    Do agree, India would turn out to be a major in the Auto segment; only because its population can now afford to buy cars and trucks; the credit of job creation, which needs to be passed on to Modi's predeccessors. Come, Live & See india!!

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