Home Articles India poised to emerge as engine manufacturing hub

India poised to emerge as engine manufacturing hub

With the Volvo Eicher engine plant going on stream recently, India looks set to emerge as an engine manufacturing hub

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Last updated: March 20, 2024
by and Alex Morrell is a senior correspondent at Business Insider covering Wall Street at large.

Volvo Eicher commissioned its engine plant at Pithampur near Indore recently. Built with an investment of Rs 288 crore, the plant has 30 per cent automation built-in. Expected to play a crucial role in Volvo Group’s global growth strategy, the plant will supply five- and eight-litre engines to the European commercial vehicle giant conforming to emission standards as stringent as Euro 6.

The plant will also cater to the domestic requirements of commercial vehicles, including trucks and buses, marketed by Volvo Eicher in India. For Volvo Eicher the plant will be supplying BS III and BS IV emission compliant engines based on platforms shared with engines supplied to Volvo’s other locations.

The intention seems clear: For Volvo to benefit from low manufacturing costs. Eicher, in turn, will get an opportunity to play a role in Volvo Group’s global strategy. The plant has an initial (Phase 1) capacity of 25,000-30,0000 units per annum. It is capable of being scaled to a capacity of 100,000 units per annum. If the new engine facility of Volvo Eicher suggests the transformation of India as an engine manufacturing hub, there are other automakers who have invested in engine facilities in India, suggesting India’s emergence as an engine hub apart from being an attractive manufacturing location. An automaker worth reckoning is Maruti Suzuki. The company invested in a joint venture with its parent company Suzuki Motor Corporation to manufacture diesel engines at a plant near Delhi. It is a company called Suzuki Powertrain.

Located within the company’s Manesar facility, the diesel engine plant has capacity to produce 300,000 diesel engines per annum. The plant turns out a 1.3-litre diesel engine with technology identical to that of Fiat’s 1.3-litre MultiJet diesel engine. Suzuki is said to have acquired the licence to manufacture this engine from General Motors. General Motors and Fiat developed diesel engines jointly at one point in time, and hold the rights to manufacture the engines. In what is regarded as an interesting development in the history of Indian auto industry.

Maruti Suzuki turned to Fiat to source MultiJet diesel engines from a Tata Motors and Fiat India joint venture near Pune in 2012. Due to a rising differential between petrol and diesel prices in India, the demand for diesel passenger vehicles shot up. This brought about the need for Maruti Suzuki to source diesel engines at short notice.

The diesel engine plant inside the Fiat-Tata plant at Pune under Fiat’s Fiat PowerTrain (FPT) business vertical today supplies 1.3-litre MultiJet diesel engines to power not just its own brand of cars, but to cars that flaunt the Tata badge, Maruti Suzuki badge as well as the Premier badge. Looking at the growing demand for diesel engines, Maruti Suzuki announced at the end of 2012 that it would set up a diesel engine plant at its Gurgaon plant with an investment of around Rs 1,700 crore.

A chunk of diesel engines produced in India by Maruti Suzuki is also said to be exported to Suzuki’s European destinations. This is apart from engines that power Maruti Suzuki diesel cars that are exported to various markets around the world. Maruti Suzuki exported 6856 units in May 2013 against the sale of 77821 sold in the domestic market.

Unlike Maruti Suzuki, Fiat enjoys a small market share in the highly competitive passenger vehicle market in India. The Italian company is claimed to generate better revenues as far as its Indian operations are concerned by selling one of the most hi-tech and favourable diesel engines known to the world, than selling automobiles. A chunk of diesel engines made in India by Fiat are also exported to other Fiat destinations in the world, according to informed sources.

The other automaker that has invested in an engine shop in India is General Motors. GM erected a modern engine plant at its second manufacturing site near Pune in 2011 with an investment of US$ 230 million. Among the engines the plant produces is the 1-litre three cylinder Smartech diesel engine that powers the Beat Diesel small car. The engine shop, with an ability to acquire an installed capacity of 300,000 units in Phase 2, turns out the Smartech diesel engine with technology that is identical to Fiat’s MultiJet diesel technology. The reason for GM diesel engine employing technology identical to that of Fiat is mentioned above.

The 1-litre Smartech diesel engine is claimed to be a 1.3-litre MultiJet diesel engine minus one cylinder. Work on the Smartech diesel engine was done at GM Technical Centre in Bangalore in collaboration with GM Powertrain Europe. A modern engine, GM is said to be working upon exporting it to its other manufacturing locations around the world. The engine shop at Pune is GM’s first powertrain plant in the world that manufactures both petrol and diesel engines simultaneously.

Apart from investing in India to transform its Indian operations into a hub for compact SUVs, Ford is concentrating towards turning its Indian operations in an engine manufacturing hub. Supported by suppliers like Jaya Hind, Gary Johnson, Head, Manufacturing Operations, Asia Pacific and Africa, Ford, announced last year that Ford is investing US$ 4.9 billion, and would make India a major hub for cars and engines to be sold in major right-hand drive markets. India could soon turn out to be a global engine manufacturing hub for Lamborghini Tractors of Italy. The company could move its global tractor engine production from Italy and Germany to the plant of its Indian arm, Same Deutz-Fahr India at Ranipet near Chennai in the near future. The Ranipet plant currently has a capacity to make 16,000 engines of up to 100hp per year.

India is also emerging as a major sourcing destination for engine components. Rajkot in Gujarat is one of the most important destinations where engine components suppliers are based. Suppliers at Rajkot are known to supply engine auto parts to German car majors like Mercedes, BMW and Audi. The region specializes in castings and forgings apart from precision machined parts, and is claimed to do business with Germany worth Rs 500 crore annually.

There are auto component manufacturers like Solapur-based Precision Camshafts, which is known to supply camshafts to automakers like Porsche of Germany. The company also supplies camshafts to GM manufacturing destinations in Europe, Korea and Brazil. Ford of Europe is also a Precision client. Raymond Group company, Ring Plus Aqua supplies flywheel ring gears to Fiat in Italy, and Mitsubishi in Japan. The company caters to well established European engine makers like Perkins and

Having launched its first diesel car in India, Honda is investing at its new plant at Tapukara near Alwar to facilitate the export of diesel engine parts to its manufacturing sites the world over. Having launched its first diesel car Amaze in India recently, Honda is working towards using its Indian resources to source key engine components for its other locations around the world.

Honda Cars India (HCI) is investing Rs 2,500 crore to double vehicle production capacity, and set up a diesel engine component production line and a forging unit in the country. The component production line and forging unit is being set up at the plant near Alwar in Rajasthan.

Raman Kumar Sharma, Senior Vice-president & Director (General Affairs), HCI, announced that diesel engine components were made in Japan and assembled in the UK. The diesel unit at Tapukara is the largest for Honda globally and would be used to supply parts to other Honda facilities in Europe. Apart from exporting key engine components, the plant at Tapukara near Alwar will also produce diesel engines. Japanese car maker’s first integrated diesel engine plant in the world, it will have an annual output of 1.6 lakh units. About 30-40 per cent of the capacity, earmarked for export. Honda already exports petrol engine parts such as cylinder head, cylinder block and crankshafts to its Asian (read Thailand) factories from India.

At the root of a strategy to turn India into a global engine manufacturing hub, or an important destination for sourcing key engine components is the ability to offer components that require a degree of complexity. Over China, India is increasingly preferred as a destination that calls for sensitivity to intellectual property rights, and manufacturing in low-to-medium volumes with high degree of variation in products.
Not limiting to cars and commercial vehicles, the ability to turn out parts that require a degree of complexity is translating India into an engine manufacturing hub. Adding to the appeal of making engines in India, and sourcing engine components from India is the fall in the value of Indian currency.

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