India's Automobile Industry
India's Auto Clusters
Why car and parts makers concentrate in regions like Chennai, Pune and the Delhi region, and how clusters create economies of agglomeration.
India’s auto industry is concentrated in a few clusters.
The main clusters
- Delhi NCR (Gurugram, Manesar): home to Maruti Suzuki, Hero and Honda plants and many suppliers.
- Chennai: Hyundai, Renault-Nissan and many parts makers; sometimes called the “Detroit of India”. Ford operated here too.
- Pune and the Chakan belt: Tata Motors, Bajaj, Mercedes-Benz, Volkswagen and others.
- Gujarat (Sanand, Hansalpur): Tata Motors and Suzuki plants.
- Bengaluru-Hosur and Jamshedpur also host important plants.
Why clusters form
- Supplier networks: parts makers locate near carmakers, cutting transport costs.
- Skilled workers gather where jobs are.
- Knowledge spillovers between firms.
- Infrastructure and ports, such as Chennai’s port for exports.
- State incentives.
These are agglomeration economies: being near other firms lowers costs and raises productivity.
State competition
States compete to attract auto plants with land, tax incentives and infrastructure, as when Gujarat attracted Tata’s Nano plant in 2008 after it left West Bengal amid land protests.
Risks
Clusters depend on the auto industry’s health. When a plant closes, as when Ford stopped manufacturing in India in 2021, local suppliers and workers suffer.
When a carmaker opens a plant in Sanand, Gujarat, dozens of suppliers set up factories nearby within a few years. A new auto cluster forms around the anchor plant.
Supplier networks, skills and infrastructure pull auto firms into clusters.
- India's auto industry clusters in NCR, Chennai, Pune and Gujarat.
- Suppliers, skills and infrastructure create agglomeration benefits.
- States compete with incentives, as with the Nano plant in 2008.
- Plant closures, like Ford's in 2021, can hurt clusters.
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