The trending news is that Tesla might set up their EV factory in India. And guess who has a better chance to get the deal?
Tamil Nadu!
Tamil Nadu is called the ‘Detroit of India’. It’s a nod to the American city of Detroit which was the world’s automotive Centre, thanks to Ford…
Early 1990s. After decades of a fairly closed-door policy that promoted only Indian companies and a lot of red tape even for them, India liberalized its economy. We opened up to foreign companies. We wanted them to come and invest into the country and create jobs. And foreign companies were excited about the potential of a massive population in a new market. Carmakers such as Ford wanted in too.
And when Ford was looking for a spot to set up its manufacturing unit, Tamil Nadu rolled out the red carpet. TN government handed over 36 acres of land belonging to the Chennai municipality to Ford for just ₹30 crores and set up building roads, drainages, and everything else in the area. There were tax exemptions, subsidies for capital investment, and an initial discount on power tariffs. Ford was quite happy.
Maybe being in proximity to a major port helped too. It would make exporting cars easier.
Pretty soon, when Hyundai saw that setting up manufacturing in the state wasn’t hard and the government’s policies were quite friendly, it decided to flock to the region too. And that set the ball rolling for carmakers in the region — Nissan, Renault, everyone rushed to the state. An entire automobile ecosystem began to emerge. Oragadom, Maraimalainagar, Sriperumbudur, Ranipet, Hosur, there were many pockets of auto industry in the state.
But in Tamil Nadu The foreign carmakers relied on suppliers to provide parts for their cars. So, auto ancillaries boomed in the region too and it created the entire automobile value chain. Other states in India couldn’t quite boast of that and it gave Tamil Nadu the advantage.
And by 2010, the state government claimed that 1 out of 3 cars produced in India came from Chennai and its surrounding areas. Tamil Nadu had transformed into the Detroit of India.
Now sure, Tamil Nadu had its fair share of problems on the journey too. The shine began to wear off because, by the early 2010s, automakers began to complain about bureaucracy and red tape. The state was plagued by power deficits which raised the cost of doing business as electricity got more expensive. Auto ancillary companies had to pay 3 times more for generators to supply power. And real estate prices shot up too.
Tamil Nadu dropped like a rock in the Ease of Doing Business Rankings and carmakers began to rethink their proposition in the state. They were looking elsewhere.
People feared that towns in Tamil Nadu dependent on this automobile ecosystem would suffer Detroit’s fate too — become bankrupt.
And maybe Tamil Nadu’s government figured out what was happening. They knew they needed to flip the script again. So they doubled down on their efforts to stay relevant. They launched the Automobile and Auto Component Policy in 2014 with the intention to get the state into one of the top 5 automobile clusters in the world.
Did it work?
Well, just this year Tata Motors announced its first investment in Tamil Nadu with a massive ₹9,000 crore plant.
But there’s something else that’s happening. Tamil Nadu doesn’t want to miss the EV bus either.
It already has a special EV policy that’s doling out incentives and tax exemptions for EV makers. And around 40% of the country’s EV production comes from the state — we’re talking 2-wheelers, 3-wheelers, and cars.
VINFAST the Vietnam EV Company has started its factory construction in Thoothukudy, Tamil Nadu.
And maybe it’s this storied legacy as a carmaker and the state’s commitment to EVs that promoted Vietnamese EV maker VinFast to commit $2 billion to set up a manufacturing plant.
With so much happening, what can stop Tesla from giving Tamil Nadu the first priority location for their Indian debut.
Let’s wait and watch…. !
