MUMBAI: India, a major base for exporting small cars, is becoming a preferred hub for some global auto makers to develop and source compact engines.
Ford Motor Co, which exports its Figo small car and EcoSport compact sport-utility vehicle from India, plans to source a new generation of small-capacity petrol engines, called Dragon, from its local unit.
Renault SA’s research unit in Chennai is developing a 986 cubic centimetre petrol engine, codenamed B4D, in collaboration with the French auto maker’s facilities in Brazil and Europe. The B4D will be an enhanced version of a 0.8-litre engine that Renault would use in a car it plans to launch in 2015-16.
While Ford plans to use India as a base for manufacturing the engines, its French rival is relying on the capability of its Indian research and development base. Both are trying to gain from India’s low-budget capabilities.
Auto makers are looking at frugal technologies because of changing customer preference towards lower-priced vehicles. Though sales have been hit by a slowdown in the economy, India is a major market for auto companies who are building new capacities here, especially to manufacture small cars that account for most of the local sales. For these companies, leveraging the manufacturing capacity in India to meet export demand helps keep costs low.
“The cost advantage of India over other markets remains strong, and it (manufacturing in India) is a good 30% more cost effective than a matured base of Europe," said Deepesh Rathore, director of EMMAAA, an automotive research and advisory firm specialising in emerging markets. "There are competent suppliers in India. With volumes getting larger, it is natural for companies to source key modules of cars like engines and transmission from this country.”
Ford’s Dragon range of engines is likely to be ready by 2016-17, and the US company plans to produce 1.5 million units of the 1.2- and 1.5-litre engines a year globally, a person with knowledge of the matter said. India would be the main supplier with 4 lakh engines a year, and Ford’s proposed plant in Gujarat’s Sanand would be the lead producer, this person said. “Besides India, the Dragon engine will also be made in China, Europe, Brazil and Russia," the person added.
“We don’t comment on speculations related to future programmes or product strategies,” a Ford India spokeswoman said in an email response to a request for comment.
Ford has an engine-production capacity of 3.4 lakh units at Chennai and it exports 40% of this output. Once the Sanand plant goes on stream by mid 2015, its capacity will go up to more than 6.1 lakh engines. At Renault, it isn’t clear yet whether India will become the main production hub for the new engine. While the Indian R&D facility will play a key development role, the company is still exploring manufacturing bases such as Brazil and Europe apart from India for the best-cost sourcing, people close to the company said.
Renault refused to provide any details. “As company policy, we don't comment on any project development not formally announced by Renault,” a spokeswoman said.