EV from Tamil Nadu Consumer Electronics & Textiles . to diversify manufacturing

A delegation from India’s Tamil Nadu state government visited Taiwan in late October, at the end of the quarantine requirements for travelers from Taiwan. The delegation held meetings with electronics manufacturers Foxconn, Pegatron, Taiwan Electrical and Electronic Manufacturers Association (TEEMA), and Taiwan Footwear Manufacturers Association (TFMA) and many others during their visit to Taiwan.

The Tamil Nadu delegation included Mr. Saranyan Krishnan, Additional Chief Secretary, Department of Industries, Investment Promotion and Commerce, Government of Tamil Nadu, and Ms. Pooja Kulkarni, CEO and MD, Guidance Tamil Nadu, the nodal investment promotion agency of the Government of Tamil Nadu. ,

Tamil Nadu contributed 9% of India’s national GDP, or about US$300 billion, in 2021. The southern state plays an important role in India’s manufacturing sector, with industries thriving around the state capital, Chennai, and other industrial locations in the state. ,

Foxconn’s iPhone production is primarily based at RIM in Chennai; The Hyundai Motor Company has also built its facilities closer to the capital city. Pegatron, Delta Electronics, Dell, Flex, Daimler, Yamaha, Salcomp, Tata Electronics, Ola Electric and Taiwan’s largest shoemaker Feng Tay Enterprise are also manufacturing in Tamil Nadu.

The delegation visited Taiwan with the mission of attracting more investment from electronics manufacturing, technical textiles and footwear, and electric vehicle (EV) manufacturing to help the state achieve industrial diversification and grow into a US$1 trillion-economy by 2030. Visited.

Apart from Taiwan, countries like Japan, South Korea, Singapore, Germany, France and the US are the focus countries for Tamil Nadu. The delegation’s objectives include accelerating the state’s industrial development and navigating the post-pandemic “China plus one plus one” strategy.

Caught by the ongoing US-China dispute like many other countries of the world, India, especially the state of Tamil Nadu, has seen large amounts of foreign investment. India has also imposed strict restrictions on Chinese investments since the Pulwama attack. 2019, resulting in a deterioration in relations between India and China.

Krishnan said that the state government provides flexible incentives and takes prompt action to remove barriers for foreign investors. “Tamil Nadu offers a flexible and customized incentive structure to meet various industrial requirements”, he added.

Since 1992, the State Government and Investment Promotion Agency Guidance Tamil Nadu have been formulating region-specific policies and making changes and amendments for foreign manufacturers. Policy flexibility and political stability have allowed the state government to maintain dynamic communication with companies and help manufacturers resolve issues.

Krishnan said the state’s political parties share a mutual goal – that of bringing in more investments to drive economic growth, so whichever party comes to power, there is policy stability and continuity.

Industrial diversification from electronics, textiles, footwear to EV

The global pandemic was a lesson learned the hard way for the supply chain. In the post-pandemic times, Tamil Nadu is trying to diversify in terms of economic growth and industrial development, realizing that the economy cannot depend on only a few sectors. This was evident during the first wave of the pandemic, where Tamil Nadu was registering positive growth among some of the states in India.

According to Krishnan, one of the ways to diversify the economy is through chips, components, cameras, end-devices, car electronics to EV batteries, non-leather footwear and etc. Other ways to achieve industrial diversification include developing an EV manufacturing ecosystem. Tamil Nadu seeks to diversify geographically by creating more industrial clusters across the state and spreading manufacturing activities more evenly.

Electronics assembly typically requires line workers to live in dormitories and work round the clock; In contrast, textile factories are mostly set up in rural areas and workers can work 9-5 shifts regularly. Krishnan said the quality of life of labor workers in textile and footwear companies has generally seen an improvement. Therefore, the Tamil Nadu government wants to bring more textile and footwear manufacturers to India.

Feng Tai established their first facility in Tamil Nadu in 2006 and now they are already building a third factory. The shoemaker has created around 40,000 jobs, so the state government is keen to replicate that business model. Krishnan said the government plans to set up about 30 such large factories across the state, with at least one in each district.

During a visit to the TFMA in Taichung, Kulkarni said that 50% of India’s footwear exports were made to Tamil Nadu and the state plans by providing varying amounts of subsidies on land acquisition, IP protection, environmental infrastructure construction, and more. To encourage new investment. , depending on the scale of investment, location and number of job opportunities created.

PwC Taiwan partner for international tax services Tim Pao said India does not exempt corporate income tax, but manufacturers entering production in India by March 2024 can opt for a 15%-subsidy for income tax. However, compared to the rewards for large manufacturers, subsidies for small and medium-sized manufacturers seem much less attractive.

Pao said that in order to create a new industrial cluster and have a strong supply chain, the Indian government needs to increase subsidies for SMEs.

A ‘trillion-dollar economy’ target

Being India’s second largest GDP contributor, Tamil Nadu is looking at developing a complete ecosystem of EV manufacturing from two wheelers, cars, car electronics to EV batteries. Krishnan said Tamil Nadu already has a strong foundation for manufacturing EVs, and currently, a third of EVs manufactured in India are made in Tamil Nadu.

“Tamil Nadu has a large segment of two-wheeler and three-wheeler production and car manufacturing is booming. For example, Hyundai has the largest factory outside South Korea in Tamil Nadu,” Krishnan said.

For the past three years, the state has seen investment proposals of around US$50 billion, combining domestic and foreign investments. Even during the post-COVID years, Tamil Nadu received the highest investment proposals among all states – around US$10-15 billion annually.

The ratio of college graduates in Tamil Nadu to the college age group of 17 to 23 population is more than 50%, almost two times higher than the national average of 27%.

Tamil Nadu is moving towards a trillion dollar economy by 2030. Its economic size is now around US$300 billion.

According to PwC’s POW, India’s Special Economic Zones (SEZs) were mainly export-oriented but restrictions on domestic sales have been eased.

Manufacturers in SEZs are now able to find ways to access India’s domestic consumer market. In addition, India’s new bill, the “DESH” (Development of Enterprise and Service Hubs Bill), aims to upgrade SEZs and open them up to the service sector, Pao said.

DESH is expected to come through parliamentary discussion in the first quarter of 2023.

Krishnan concluded the interview by stating that Tamil Nadu offers a diverse, profitable place to do business and a large consumer base. As India’s income level rises, consumer electronics and footwear are two items that India wants to produce at affordable prices for Indians.

Tamil Nadu delegation meeting with TEEMA; Source: ITA