Karnataka occupies the fourth position in automobile production in India. The state’s contribution amounts to 8.5% of the national output in this sector.
The automotive industry in Karnataka is responsible for providing employment to more than 55000 people in the state. The state has more than 50 automobile component manufacturers carrying out their operations within its boundaries.
The Industrial Policy of Karnataka for 2014-2019 has identified automotive as the focus sector. This indicates the state’s commitment to ensure further growth in this sector and to emerge as the largest player in the automobile industry in India.
Key Factors Influencing the Growth of the Automobile Sector in Karnataka
The automobile output in Karnataka has doubled in the last five of years. The state has registered an impressive compound annual growth rate (CAGR) of 36.5%. The primary factors influencing the growth of the automobile sector in Karnataka are:
- The presence of a wide ecosystem that helps the growth of the automobile sector. This includes component manufacturers, Original Equipment Manufacturers (OEMs), and R&D Centers.
- Presence of highly skilled workforce in the state
- Karnataka has three auto clusters. One auto component cluster, and one industrial valve cluster
- The state has a huge local market with a robust customer base
- Easy connectivity and accessibility to national and international markets
- Automotive giants have their manufacturing units in the state:
- Tata Marcopolo
- Toyota Kirloskar
- TVS Motors
- Mahindra Reva
- L&T Komatsu
- JK Tyres
- Karnataka has SEZ Zones marked for the automobile industry
- Leading OEM, Tier I and Tier II companies are located in the state
- Upcoming manufacturing hubs in Vemagal and Narsapur Industrial Areas in the Kolar District
Policies and Initiatives by the State Government
The government is undertaking various steps in order to enhance the growth of the automobile industry in the state. Among the policies and initiatives of the state government to boost the automobile industry in the state are the following:
- Proposal to commission the ‘Karnataka Automobile Research & Innovation Centre’.It would also act as an incubation centre.
- The government plans to establish the centre based on a PPP model with government support.
- Single window clearance mechanism through a software called e-udyami. It is to facilitate the obtaining of approvals for new investments and other necessary approvals from various departments and organisations
- Issuing Green Card to exporters having a good track record. This is to ensure easy movement of goods without the hassles of check post delays and verification of papers and documents
- Providing opportunity to OEMs to establish partnership with ITIs and to offer industry-specific training and skill development/upgradation.
- Proposed setting up of Sectoral Training Institute for auto within the state
- Improving the Mangalore port and boosting its connectivity to prime industrial clusters within Karnataka
- Proposed reduction of road and registration taxes as indirect incentives to facilitate manufacturers of Hybrid and Electrical Vehicles
- Improving and fostering connections between the automobile industry and the academia for the purpose of research
- Institutionalizing the R&D environment for auto sector in Karnataka
- Proposed formation of an industry group that would study and suggest ways for boosting the auto component sector in Karnataka
- Declaration of automotive sector as public utilities under the Industrial disputes Act 1947 during the period of the policy
Investment opportunities for automobile industry in Karnataka
The state government is keen on attracting investments for the automobile industry in the state. In order to fulfill this objective, the government plans to offer various concessions and incentives. This will depend on the location and proportion of the investments.
Why is Karnataka the Best Investment option?
The following are some of the factors that highlight Karnataka as an investment destination for the automobile sector:
- Exemption from Stamp Duty for Ultra Mega, Super Mega, Mega, and Large enterprises based on their investments in the state’s automobile sector
- Concession in Registration Charges
- Reimbursement of Land Conversion Fee
- Exemption from Entry Tax
- Subsidy to set up ETPs and no-interest loans on Net VAT and CST
- Investment promotion subsidy for small, medium, and micro enterprises depending on their investments
- Proposal to provide support to MSMEs for finance, marketing, and infrastructure
- Location of auto clusters in different places within the state, such as at Hoskote in Bengaluru Rural, at Dharwad, and at Bidadi in Ramanagara
- Location of Industrial valve cluster at Hubballi – Dharwad belt
- Location of auto components clusters in Belagavi and Shivamogga districts
- Proximity to the Western (Gujarat and Maharashtra) and Southern (Tamil Nadu, Karnataka, and Andhra Pradesh) auto clusters in the country through Dedicated Freight Corridor between Mumbai-Bengaluru and Chennai- Bengaluru
- Easy connectivity to six ports through national highways and state highways
- Availability of highly skilled manpower due to the presence of than 1400 ITIs, 350 R&D centres, and 200 engineering colleges within the state
The automobile industry in Karnataka holds immense potential. With the presence of the manufacturing units of prime international OEMs in the state, the industry has the potential to make its entry into the supply chain of international OEMs at the global level. This will facilitate direct export to the international market.
Looking at its present strengths and growth rate, the automobile industry in Karnataka seems set to reach new heights in the coming years.