CHAPTER III

CHENNAI AND AUTOMOBILES

Chennai, the Capital of the South Indian State Tamil Nadu occupies a prime
place in the automobile history of India. The roots of Indian automobile industry can
be traced from the establishment of Simpson & Co., in 1845 at Madras. Till 1996 it
was called as Madras and then it was renamed as Chennai. Madras is closely
associated with Colonial History of India. The British first established their authority
in Madras and it was used as their experimenting ground. Most of the institutions
introduced by the British in India were first implemented in Madras, once they found
it successful they later implemented in other parts of India.

After 1858 Calcutta and Bombay emerged as trading and industrial centres
due to the establishment of Jute and Cotton mills respectively but there was no
industries of a comparable size was established in Madras. This was primarily due to
two factors: 1) there was little encouragement given by the Madras Government at
this time to either indigenous or foreign industrial investment, and 2) the city was not
well situated in regard to raw materials. 218 By the end of 19th century and the early
20th century there was slow growth of Industries in India including Madras. In 1913-
14 the total number of companies in the province of Bengal was 973 (35.4%),
Bombay 613 (22.3 %) and Madras 427 (15.6%). During 1938-39 Bengal increased its
share by 6 % at the expense of Bombay and Madras. In 1947 Madras led in the
number of registered factories, West Bengal was close behind; Bombay had the
maximum productive capital employed, closely followed by Bengal and Madras
employed less than 10% of productive capital.219

3. 1. Industrial Development in Colonial Madras

By the end of the 19th century the Colonial government decided to take up
industrial development in India, the Madras Presidency was the earliest one to
respond to it. The industrial growth in Madras was initiated by Alfred Chatterton who

218
Lewendowski, Susan. J. (1975). "Urban Growth and Municipal Development in the Colonial City
of Madras,1860-1900." The Journal of Asian Studies 34 (2): 341-360.
219
Sinha, Aseema. (2006). The Regional Roots of Developmental Politics in India- A Divided
Leviathan. New Delhi: Oxford University Press, p. 44.
93
was appointed as the Director of Industries. He commenced the manufacturing
activity on a small scale. Lord Morley, the Secretary of State was not in tune with the
idea's of Chatterton, decided the industries should be left to the Private enterprise and
the efforts of Chatterton ended up in failure.

The First World War initiated the growth of Industries in India which led to
the appointment of Indian Industrial Commission in 1916. In connection with
industrial development of Madras the Commission recorded the witness of Mr. H. T.
Walters, Chief Inspector of Factories, Madras Presidency, Mr. C. A. Innes, I.C. S.,
Director of Industries, Madras and Mr. C. S. Ramachandran, Supervisor, Department
of Industries, Madras. Following the recommendations of the Industrial Commission,
separate Department of Industries was established in all provinces. The Government
of India Act 1919 gave dyarchy to the provinces and industries were included in the
transferred list. K.V. Reddi Nadiu who was in charge of Industries in the First Justice
Ministry passed the State Aid to Industries Act of 1923, which is considered the
‘magnum opus of his life’.220 For the first time State Aid was provided for industrial
development. In 1935 the Government passed the Act of 1935 by which autonomy
was given to the Provinces. The industries department was reserved in the provincial
subject and people had high hopes on the newly formed Congress Ministries, in
developing and promoting new industries but the Finance of the Province was handled
by the Central Government, so the situation remained the same.

In 1939 there was discussion on the national industrial growth, Mr. L. B.

Green, the Director of Industries and Commerce, Madras wrote a note on the
“Economic Resources of the Province of Madras and the Possibilities of their
Development” and stressed that the resources of Madras be kept prominently in view
in drawing up schemes for the development of industries on an all India basis.221 He
also stressed the government should play an active role in promoting industries in
Madras. The Second World War has a lot to do with the industrial development of
Madras. Madras followed by Colombo was used by the English as the main base
camp to fight against the Japanese. By 1940's a large number of war equipments were

220
Rajaraman, P. Dr. (1988). The Justice Party A Historical Perspective 1916-37, Madras: Poompozhil
Publishers, p. 246.
221
Swaminathan, Padmini. (1991). Evolution of Industrial Policy in the Madras Presidency: 1900-
1947, Working Paper No: 105, MIDS, p. 71.
94
shipped to Madras in CKD condition. These equipments once arrived at Madras were
assembled and used in the warfare. Now the Colonial government hired the natives to
do this assembling of equipments. This resulted in the migration of natives from the
interiors to Madras. The assembly activity indirectly helped the natives to gain some
basic technical skill and knowledge.222

In 1946 the Madras Government constituted an Industrial and Planning

Commission headed by S. Parthasarathy to study and make recommendation for the
development of industries in the State, which submitted its report in 1947. The report
dealt on major question of industrial policy, it noted industries could not spring up
without the existence of cheap power, transport, raw materials, larger investments
than what was essential and Government to provide essential facilities for the
industries.”223 The report was taken as a blue print and worked out by the successive
governments in Tamil Nadu, which made Madras as a leading industrial centre in Post
Independent India.

3. 2. Entry of Automobiles to Chennai

It was at Chennai India's first motor transport factory was established,

Simpson & Co., in 1845 which built coaches and rickshaws. The record of first car in
Madras was at 1901 and its owner was Mr. A.J. Yorke, a Director of Parry & Co. The
first car registered was MC-1 by Sir Francis Spring, the first Chairman of the Madras
Port in 1903. Namberumal Chetty’s MC-3 was the first Indian-owned car.224 One of
the earliest cars in the mofussil*was Dr. Ida Scudder’s. She used the car as a mobile
dispensary and go round the villages. She later wrote, “The natives who never had
seen a motor car, seeing and hearing us coming rushed off into the fields, shouting,
‘Oh, the Devil is coming!’ We stopped the car and persuaded them to come and
see.”225 When the cars appeared in Madras there was proposal to establish a driving
school for teaching and training drivers by the Department of Public Instruction but it

222
Interview with S. Muthiah at his residence on 09.02.2018.
223
AnanthaKrishnan. S. (1990). Towards an industrial State: A Study of Industrial Development in
TamilNadu 1947-1954, M. Phil., thesis, Madras Christian College, Chennai, p. 23.
* The word mofussil comes from Urdu word Mofassil, which is used to refer to a region lying outside
an urban Centre. It was used during the time of British East India Company to refer to the areas outside
its 3 main Presidencies - Bombay Calcutta and Madras.
224
Muthiah, S. The First Cars in the South. The Hindu, 12 January 2015.
225
ibid.
95
was turned down on the ground that no Indian would ever have pluck enough to
drive.226 But the British idea was proved false in the later period.

The automobile industry of Chennai can be broadly studied in six phases. The
First Phase is the Forerunner Phase where companies acted as agents for imported
automobiles and later they started workshops for servicing & repairing, and slowly
they also made few spares. The Second Phase is United Action Phase, this phase is
unique since the Colonial authorities and the natives together demanded for the
establishment of automobile industry in Madras. The Third Phase is the Control Phase
where the Madras State controlled the auto sector. The Fourth Phase is the Factory
Phase; it saw the establishment of Ashok Leyland and Standard Motors and Enfield
Motors. The Fifth Phase is the Base Phase; this phase witnessed the recommendations
of Tariff Commission and the emergence of strong ancillary industry. The Sixth phase
is the Post-Globalization Phase where the GoTN with its policies attracted major auto-
players and the making of Chennai as Detroit of India.

3. 2. (a) I Phase: Forerunner Phase: (Imports, Sales and Service)

This phase saw the establishment of agency houses who imported automobiles
and after a period of time they established service stations and carried out small
repair work. All the agency houses were located along MoUnt Road for its visibility.
The Mount Road is the one which connects the Fort. St. George, the administrative
capital of the Madras Presidency with St. Thomas Mount a Christian pilgrim centre in
Madras and the Government Estate is also located along the road. So all the leading
people will pass by this road either for official or for personal purposes.

3. 2. a. (i) Addison & Co., Ltd.,:

It was founded in 1873 by Mr. Hawkin as a printing works. In 1886 Mr. Tom
Luker purchased it and by 1892 it was the pioneer in the cycle industry in Madras. In
1904 they became the first importers of petrol-driven motor cars and motor cycles in
Madras. In 1909 they built a two-storey showroom on Mount Road and next to it, in
1916, came up another showroom. A special feature of the company is making cutting
Gear-Wheels and of ordinary engineering work in fixing up or repairing motors. In
226
Salter, Gilbert. (1936). Southern India its Political and Economic problems. London: George Allen
& Unwin Ltd., p. 127.

96
1909 the firm installed the first complete Harvey Frost vulcanizing plant in Madras
for repairing motor tyres.227 In 1948 J.V.P. Rao joined as the General Manager of
Addison by then Addison were agents for Nuffield’s Morris, Wolseley and Riley cars
and Chrysler’s PlyMoUth, Dodge and De Soto cars and trucks. They were also
assembling Dodge Trucks in CKD condition. His predecessor had written to the
Secretary, Ministry of the Industries, GoI, that Addison’s was no longer interested in
assembly operations using CKD packs. Rao convinced both the Minister and the
Secretary of Industries they wanted to continue with the assembly activity. The
Ministry agreed but insisted all the equipment for assembly had to be locally made.
Rao accepted the condition and with the support of Harry Stanford, the Simpson's
engineer he went ahead.

On 15th November 1950 the first Morris Minor Car was rolled out of Addison,
driven by S. Anantharamakrishnan and was priced at Rs 5200. 228 Addison continued
its Morris Minor production but the Tariff Commission of 1953 gave the license of
manufacturing of Morris Minor to G. D. Birla's Hindustan Motors as the Hindustan
10. Hindustan Motors insisted Addison's to stop manufacturing any Nuffield vehicle
and issued a legal notice to them. Rao wanted to solve the issue and met G. D. Birla
and gave an offer of £ 10 royalty on each Minor sold. Birla was stubborn and
Addison's was forced to give up production of cars. If the project would have turned
successful, India would have got its small car even much before Maruti.229

3. 2. a. (ii) Madras Automobile Ltd.,:

Madras Automobile Ltd. was founded by Mr. F. Robinson Ward and Mr. T. R.
Frost. Their repair department is the largest of its kind in Southern India. It imported
various types of motor-cars. The company holds the sole agency of Austin and
Vauxhall English cars and the Overland American Cars, Premier cycle-cars and motor
cycles. The company also had tyre units and was the managing agent for the
celebrated Clincher Tyres. The company supplied cars to the State of Travancore,

227
Playne, Somerset. (2004). Southern India- Its History, People, Commerce and Industrial Resources.
New Delhi: Asian Educational Services, pp. 133-34.
228
Muthiah, S. (2014). "An Opportunity Missed." The Hindu, June 08, p. 13.
229
ibid.
97
The Madras and Southern Mahratta Railway, The Commissioner of Police, The Kala
Azar Commission, and to The Corporation of Madras.230

3. 2. a (iii). Simpson & Co.,:

A. M. Simpson of Scotland came down to Madras and established a factory in

1845 for Coach building, Saddle and Boot making. In addition to Coach making he
also branched into palanquins, howdahs, etc. From 1851 he regularly took part in the
Coach exhibitions held at London displaying his products which own him orders from
Indian Princess. Of these exhibits it was once said, "Madras boasts of at least one
Firm of Coach-builders who can hold a candle to Long Acre (the London area known
for coach-building)."231 When Railways was introduced in South India in 1856 they
built coaches for the first train. Their precision in making products bagged them the
order for making a special coach when the Prince of Wales visited India in 1876 and
later they made coaches when the Prince ascended the throne as Edward VII in
1901.232 In 1903 at Madras, Addison & Co., imported and sold cars. Simpson’s
decided to meet the demand for cars with steam-driven cars. Samuel John Green of
Simpson & Co., built India’s first steam car in 1903. This steam car was designed and
made in the Company’s workshop using local materials except for the ‘burner’ which
was imported. When the Steam Car went on road it for a test ride it caused a sensation
on the roads. The Madras Mail commenting editorially on this achievement stated,
“We believe it is the first motor car that has been built in India.” The editorial was
prophetically titled, ‘New Industry for Madras’.233 Two years later, Simpson’s built
the first steam bus. It ran between Bezwada (Vijayawada) and Masulipatam
(Machilipatnam) in what was possibly the first motor bus service in the country. In
1916 it opened a showroom at Mount Road for the display and sales of imported cars
and by 1933 they became the agents of Perkins engine, by 1952 they started
assembling the engines at Madras. This manufacturing operation, it has been said, was
to pioneer a revolution in momentum that got India moving on motorised wheels.234
The company reached greater heights under the leadership of S. Anatharamakrishnan
who joined Simpsons as its Secretary. Later Anantharamakrishnan established

230
Playne, Somerset. op. cit., p. 154.
231
The Hindu- Metro Plus, Chennai, 21st, May 2003.
232
ibid.
233
Muthiah, S. The First Cars in the South, op. cit.
234
ibid.
98
Amalgamations which took many companies under it, Simpsons was one of it. The
headquarters of Amalgamations is at Simpsons. The establishment of Simpsons laid
the foundation stone for the future automobile industries in Chennai.235

3.2. a. (iv). TVS Group

The automobile history of Chennai is incomplete without the mention of TVS

group. It was founded by T V Sundram Iyengar as a bus service in 1912. Their
service is known for punctuality and there was no breakdown of service and the three
letters of the company, TVS expanded as Talla Vendam Sir (Pushing Not
Required).236 In 1928 TVS became the dealers for GM vehicles in South India and the
company was called as T V Sundaram Iyengar & Sons. In 1936 the group acquired
the Madras Auto Service of A. K. Ramachandra Iyer and started service station. In
1945 he established Sundaram Motors as dealers for the sales of cars and commercial
vehicles. In 1948 they started an insurance company Madras Motor Insurance
company for vehicle insurance and in 1954 another company Sundaram Finance Ltd.,
was founded to finance purchase of vehicles. Wheels India Ltd., Sundaram Clyaton
Ltd., Brakes India Ltd., Lucas TVS Ltd., were some of the sister institutions of TVS
groups. In 1955 TV Sundaram Iyengar passed away and the group's work was carried
by four brothers TS Rajam, TS Santhanam, TS Srinivasan and TS Krishna each taking
care of one activity. It was TS Srinivasn who located the 265 acres of land at Padi,
Madras for all their units which later turned as the hub of TVS Groups Manufacturing
activity. In 1962 it bought Kasjax fasteners and renamed it as Sundaram Fastners
Private Limited. Sundaram Fastners was one of the first companies which didn't go
for joint venture with foreign companies.237 It was the first company in India to get
ISO 9000 certificate and the TPM Excellence Award.238 Sundaram Clayton the group
company of TVS came out with India's first moped the TVS 50 and when the
government allowed collaborations in two-wheelers. It also launched the first 100 cc
motorbike, TVS Suzuki with Suzuki Motors of Japan.239

235
Interview with S. Muthiah. op. cit.
236
Sriram, V. (2017). Nuts and Bolts of Excellence- Fifty Years of Sundaram Fasteners, Chennai:
Sundaram Fasteners Limited, p. 5.
237
Interview with the Chairman Padma Shri Mr. Suresh Krishna, Sundaram Fastners on 26th
November 2018.
238
Sriram V. (2017). op. cit.
239
Ravindranath, Sushila. (2016). Surge- Tamil Nadu's Growth Story. New Delhi: Westland Ltd., p. xii.
99
 In this phase, agency houses were established for the import and sale of cars,
later they also offered repair service. The companies formed during this phase played
a prominent role in attracting the leading Auto manufacturers to Chennai during the
later years.

3. 3 II Phase: United Action Phase: (Official and Native Demand for

Automobile industry)

The automobile had a warm welcome in India as well as in Madras. "As early
as 1908 Bombay city had 276 cars and 1,088 bicycles, Madras had 250 cars and 3,416
bicycles. By 1913 Madras had 482 cars and 433 motorcycles. Calcutta had 202 cars
increasing by 517 in 1914. By 1936 British India had around 124,315 registered
vehicles. In Madras Presidency alone there were 19,552 vehicles, including 13,254
cars, 3,621 buses, 964 trucks, 319 taxis and 1,364 motorcycles".240 After Second
World War there was a huge increase in Motor vehicles; in Madras City alone in 1946
there were 18,653 vehicles which increased to 41,128 two years later.241 The import
of automobiles was a huge drain to our foreign exchange, so Sir M. V. voiced for the
establishment of the industry. The efforts of Sir M. V. were welcomed by the natives
and the officials of Madras for the establishment of the automobile industry in
Madras. The officials of Madras Presidency played a key role and tried
wholeheartedly to establish the automobile industry in Madras.

V. V. Giri who assumed the portfolio of Minister for Industries under Rajaji’s
Ministry, 1937-39 in Madras wrote to the Minister for Industries of all the Congress
Governments and the Chief Ministers on 22 March 1938 as follows: 242 "While I was
in the Central Assembly I was agitating on the question of starting an automobile
industry in India, which in my view has great possibilities, not only as a large scale
industry on an All India basis, but in removing, to some extent, the demon of
unemployment. The Government of India were lukewarm for obvious reasons, I think
now that Congress Governments are in power in seven provinces, they should all

240
Arnold, David. (2012). "The Problem of Traffic: The Street-Life of Modernity in Late Colonial
India." Modern Asian Studies 46 (1): 119-141. doi:10.1017/ S0026749X1100059X.
241
Salter, Gilbert. op. cit., p. 127.
242
Giri. V. V. (1976). My Life and Times, Vol. I. Madras: The Macmillan Company of India Limited,
p. 161.
100
coordinate the efforts made by Sir M Visvesvaraya and I have learnt from him that he
is as enthusiastic as ever in this direction and is making efforts".

Giri also brought up the question at the Conference of Ministers of Industries

held in Delhi on 2nd October 1938 and said "....time has come when there should be
coordination of all provinces in the starting of this industry and even the Indian States,
I am certain, will cooperate in this great objective to establish a transport industry
which drains away from this country an aMoUnt to the tune of eight cores of rupees
every year by the importation of automobiles and their spares. This is so far as the
problem of the automobile industry is concerned and I think the Conference should
come to some practical decisions about it and give a lead to the country.243

Meanwhile Mr. Walchand had approached the Government for establishing

the automobile industry in India. The British Government refused permission and he
decided to move his project to the Mysore state. Mysore State was receptive to
Mr. Walchand's proposal but didn't take a final approval. The news reached the
authorities at Madras and the Madras Government felt it had already lost the aircraft
industry to be established at Bangalore. Now the Madras Government decided to
make use of the approval delay by the Mysore State. Mr. H.M. Hood Esq., C.S.I.,
C.I.E.,I.C.s., Second Adviser to the Governor of Madras wrote a letter on 23rd April
1941 to Mr. L.B. Green, Director of Industries and Commerce seeking information on
the following issues related to Automobile Industry: 244

1. Whether there is a proposal to start a motor car factory near Bangalore

financially supported by the Princely State of Mysore and the Government of
India?

2. The Government of Madras wanted to have the factory located in this

Province and it wanted information to address it to the Government of India
regarding this issue.

Mr. L.B. Green replied, "Mr. Walchand was in touch with American Chrysler
Company and also had discussions with British Manufacturers for the establishment
of automobile factory with a capital of Rs 225 lakh of which 150 lakh will be
243
ibid., p. 162.
244
TNA, G. O. No. 1312, Development Department, dated 22.07.1941.

101
sponsored by Mysore State and the rest to raised by the managing agents and through
public subscriptions. The project was initial accepted by the Congress Government at
Bombay once it resigned in 1939 he had shifted the venue to Bangalore. Mr. Green
concluded that he had telephoned Mr. Walchand for an appointment and once he gets
a positive reply from him he would proceed to Bangalore and explore the possibilities
of shifting the enterprise to Madras".245

On 26th April 1941 the magazine TaiNadu carried out an article in which the
Chamber of Commerce wanted the Government of Madras to invest some 25 lakhs in
the Motor Industry and to send Mr. Green to Bangalore to locate the prospects. When
Mr. Walchand agreed to meet Mr. Green, he rushed to Bangalore and found Mr.
Walchand in unreceptive mood. He tried to persuade Mr. Walchand and enquired
what facilities were offered by the Mysore Government and he also added the Madras
Government is ready to offer the same and whether the venue of the automobile
industry can be changed to Madras? Mr. Walchand refused his proposal.246

The meeting's failure spread to all parts of Madras Presidency and from all
quarters, there was pressure to the Government to owe and start the industry in
Madras. The Indian Chamber of Commerce, Tuticorin in its letter dated 7th May 1941
requested the Central and the Madras Governments to make arrangements for the
establishment of the automobile factory in Madras.247 Sir Ramaswamy Mudaliar,
Commerce Member, GoI wanted the industry in his own province whereas the
Finance Member of the Government of India wanted the industry to be located in
British India.248 Sir Rajah Muthiah Chettiar as the President of the Southern India
Chamber of Commerce and Industry was keen that the Madras Government should
start the automobile industry. He observed: 249 "This province is one of the foremost in
the whole of India in respect of development of its electrical resources and electrical
energy.....Similarly there is plentiful supply of technical labour, owing to the existence
of the Railway and other workshops.........A sea coast town like Madras has many
advantages for starting industries as the problem of transport in this vast continent,

245
ibid.
246
Papers relating to the proposed Automobile company in Mysore, 1940. op. cit., p. 63.
247
G. O. No. 1312. op. cit.
248
Papers relating to the proposed Automobile company in Mysore, op.cit., p. 66.
249
Nagarajan. K. (1989). Dr. Rajah Sir Muthiah Chettiar A Biography, Annamalai Nagar: Publications
Division, Annamalai University, pp. 88-89.
102
as well as for export to foreign countries, could be more easily tackled by alternative
means of transport at the ports......The proximity of rubber production which is so
much concentrated in South India is also a great factor making for minimum cost of
production and for the ultimate success of the factory.......This province has no mean
place in the matter of supply of industrial capital......the Chamber would like to bring
to the notice of the Government, with great force, that in Madras Presidency there are
thousands of middle class well-to-do people who are prepared to invest in industrial
concerns........ The Government of Madras has been in a position to lay by large sums
from the yearly revenue due to surplus of revenue over expenditure. Such saving has
been placed in a separate fund presumably for some future Ministry to use. It is only
proper for the Government of Madras to divert them towards the establishment of the
automobile industry which will be of lasting benefit to the people of this part of the
country in particular". Thus attempts were made by the officials and other prominent
natives from Madras for the establishment of the automobile industry but all their
efforts ended up unsuccessfully.

3. 4 III Phase: Control Phase: (State Control for Sale)

Chennai is one of the leading Automobile manufacturing hubs in the world.
Chennai has a capacity to produce 3 cars every minute and one Commercial vehicle
every 75 seconds. During 2008-09, Chennai produced 5.60 lakhs passenger cars
accounting for 30.6% of India's production.250 Now buying an automobile is an
individual's choice, whereas in 1946 by the Madras Essential Articles Control and
Requisitioning Act, 1946, the Government had the sole power to control the sale and
purchase of both new and used motor cars. The Madras Government instructed the
dealers to sell new motor cars for those who had obtained permit from Government
and for the sale of used vehicles it formulated rules, until then the public were
informed that they should not sell or purchase new or old cars without the permission
of the Provincial Government.251

In 1949 the total number of cars and commercial vehicles that were imported
are 611 and 1218 respectively for the entire Province. Of the 611 cars 20 % were
reserved and allotted to essential users by the Provincial Motor Transport Controller,

250
http://www.investingintamilnadu.com/tamilnadu/opportunities/automobiles.php accessed on
05/04/2017.
251
Madras Information. 19th, October, 1946, p. 4.
103
the remaining 80% being allowed to be sold in the open market by the dealers. The
prices of the cars were controlled. The control over the price and distribution of spare
parts were lifted with effect from 1st March 1948.252 Cars were a point of discussion
during the pre Independence period. On 5th March 1947 Kumararaja Sir Muthiah
Chettiyar raised a question regarding the removal of control of motor cars. The
Hon’ble Sri R. Raghava Menon the Minister for Motor Transport made a statement on
6th March "the other provinces had decontrolled the unused motor cars but in Madras
province we will continue with the permit system so that people who are not rich but
for whom cars are necessary would find it easy to buy". 253 Later the Government
removed the control over cars but it fixed and monitored the price of the cars.

"In January 1948 a company, Messrs. Lakshmana Prasad & Sons, Madras sold
their Hindustan 10 h.p. car for Rs 9650 and it was questioned in the Madras
Legislative. Sri M. Bapineedu asked whether the Minister for Prohibition is aware of
the selling when similar cars of the same horse power were sold between 7 and 8
thousand and whether the Government received any report about the black-market
business carried out by this company. The Hon. Mr. Daniel Thomas replied on
verification of the accounts of the company it was found the company had sold ten
cars in January 1948 at a price of Rs 9350 each. He also added by a memorandum of
the Government, dated 6th June 1947, the maximum retail price of the Hindustan -10
cars was notified as follows: Fixed Head Rs 8195 and sliding head Rs 8345 but the
company had sold it for higher price the government will take necessary action
against the company".254 Thus during this period the sale and resale of automobiles
was completely controlled and monitored by the state.

3. 5. IV Phase: Factory Phase (Establishment of Factories)

This phase saw the emergence of automobile industries in Chennai.

3. 5. (a). Ashok Motors Ltd.,:

Ashok Motors was the first automobile factory established in Madras. It was
founded by Mr. Raghunandan Saran, incorporated on 7th September, 1948 and

252
Madras Administration Report 1948-49, Part II. Madras: Government Press, 1951, p. 78.
253
Madras Legislative Assembly Debates (MLAD), 1st March, 1947, Madras: Government Press, 1947,
pp. 464-70.
254
MLAD, 13th March, 1948, Vol. XI., No.1, Madras: Government press, 1948, pp. 756-57.
104
commenced its business on 14th December 1948. Saran on the advice of Nehru to
start industries led the automobile delegation with A. R. Wadia of Marline Lines of
Bombay, Krishnan Narayan of Lucknow and Ram Gidwaney of Karachi to England
on 18th December 1946 and signed a MOU with Austin Motors Export Corporation
for the import of Austin cars in CKD condition and thereafter to be manufactured in
India. (See appendix for the MOU between Austin and Ashok Motors). The Indian
promoters agreed to start company under the name Ashok Motors, Ashok was the
name of Saran's son. They wanted to start the company at Bombay but since the
Premier Automobiles had their unit at Bombay they shifted their operations to
Madras. Saran acquired 124 acres of land from R. Narayanaswamy Pillai for Rs.
99,271-12-0 just north of Madras known as Ennore.255 The Company in its prospectus
stated the best method to develop the automobile industry is to start with assembly
activity and slowly moving towards indigenisation. In January 1949 Saran opened
negotiations with Leyland Motor Ltd., U.K. for distribution, assembly and progressive
manufacture of the Leyland range of commercial vehicles. 256 In September 1949
production of cars and commercial vehicles started in Ennore with the support of
Austin Motors.257

The Tariff Commission of 1953 approved only manufacturers and the

assemblers were asked to close their operations. The commission recommended
Ashok Motors Ltd., will concentrate on a heavy truck and a baby car if a suitable
scheme is put forward by them. Mr. Saran the Director-in-charge of Ashok Motors in
his letter dated 20th July 1953 to the Minister of Industries & Labour wanted the
Madras Government to represent the Central Government and reserve the
manufacture of Baby Cars only to Ashok Motors and not to others. He also insisted
that the programme will be economical only if the company produces 2000 to 2500
cars.258 Mr. Saran in his letter dated 28th September 1953 urged the GoI to permit
Ashok Motors to carry out two schemes, viz., Albion-Leyland Commercial Vehicles
and Austin A-30 Cars.259 On 22nd November 1953 the Directors of Ashok Motors

255
Muthiah, S. & Gopalan, K. N. (2008). Moving India on Wheels- The Story of Ashok Leyland.
Chennai: Ashok Leyland, p. 44.
256
ibid., p. 53.
257
ibid., p. 41.
258
TNA, G.O. No. 1841, Development Department, 20-04-1953.
259
TNA, G. O. No. 1743, I.L.C. Department, 29-06-1954.
105
met at Hyderabad and decided for a merger of Automobile Products of India with
Ashok Motors and they sent a representation to GoI not to permit any proposal by a
new concern for manufacture of heavy and light commercial vehicles. Meanwhile Mr.
Saran was killed on his way to Madras in a Plane crash at Nagpur on 12th December
1953.260 With the death of Saran the opening chapter of Ashok Motors came to an
end.

The Government accepted the scheme of Ashok Motors for the manufacture of
Heavy Duty Vehicles through its letter No. Eng. Ind.20 (22)/52 dated the 5th March
1954.261 The company decided to discontinue the assembly of Austin vehicles and
focused on Leyland Comet.262 The success of Comet production made the company to
apply for license for heavier Leyland Tiger/Titan vehicle under the PMP over a period
263
of six years. The Government accepted the proposal and gave them license. On
25th February 1955 Ashok Motors Board met at Hyderabad and decided to
voluntarily liquidate Ashok Motors and to form a new company Ashok Leyland
Limited with A. Ramaswami Mudaliar as the Chairman.264 Ashok Motors in its Letter
dated 4th July 1955 to the Secretary to Government, Department of Industries, Labour
and Commerce, Madras communicated the name change from Ashok Motors Limited
to Ashok Leyland Limited.265 (See appendix)

The collaboration with Leyland expired on 4th December 1975 and it was
decided not to renew since the British Government had taken 70% of share capital of
British Leyland but Leyland promised technical knowhow would be provided till
1981 on a need-based basis.266 The company felt the need for foundry for producing
high quality iron casting and erected the Ennore Foundries.267 The Ennore Foundries
is a sister company of Ashok Leyland and is supplying the entire casting needs of
Ashok Leyland and they also outsource their products.268 In 1979 Ashok Leyland

260
"This Day That Age." https://www.thehindu.com/2003/12/13/stories/2003121300410901.htm
accessed on 17.02.2017.
261
TNA, G.O. No. 1163, Industry Labour & Commerce (ILC). Department. dated 03-05-1954.
262
Madras Information, Vol. XIV No. 8, August 1960, p. 15.
263
ibid., p. 16.
264
Moving India on Wheels, op. cit., p. 67.
265
G.O. No. 1163, op. cit.
266
Moving India on Wheels, op. cit., p. 124.
267
Madras Information, Vol. XIV No. 8, August 1960, op. cit.
268
Rao, G. R. (ed.). (1967). Progressive Madras State: A Saga of Integrated Development. Madras:
Hindustan Chamber of Commerce, p. 61.
106
decided to start its second factory at Hosur in Tamil Nadu and the plant was
inaugurated by the Chief Minister of Tamil Nadu Dr. M. G. Ramachandran on 28th
September 1980. It also started factories at Alwar in Rajasthan and Bhandara in
Maharashtra in 1982. In order to increase its sales it promoted a hire purchasing
company called Ashok Leasing and Hire Purchasing Co. Ltd in 1982 and in the same
year Ashok Leyland acquired 56 acres in Vellivoyalchavadi village near Madras and
laid its testing track.269 As a part of its modernisation process it made an agreement
with Hino Motors of Japan to manufacture W-series engines from its Hosur plant in
1987.270 In 1987 the Leyland Motors decided to sell off its stake in AL and it was
bought by the Hindujas. Now Ashok Leyland is part of the Hinduja Group and is the
country's second-largest commercial vehicle maker.

3. 5. (b). Standard Motor Products of India Ltd., (SMPI)

The SMPI Ltd., is the first car manufacturer in Chennai started its operations
from 1948 with an authorised capital of Rupees One Crore with the joint venture with
Standard Motor Company of Coventry, United Kingdom. Standard Cars were built in
the Coventry, UK from 1903 to 1963, assembled in several overseas nations after
1945, and ended their days in India in 1987.271 Sir John Black, MD of the Standard
Motor Company of the UK remarked they would manufacture Standard Vanguard
models and also in agreement with Harry Ferguson Ltd., they will assemble Ferguson
tractors in India. The Ferguson Tractors division later emerged as TAFE, Tractors
and Farm Equipment Limited now a part of The Amalgamations Group. SMPI
became one of the important satellites in the Standard empire and was popularly
known as Stampro.272

The Standard Motors of England had close connection with Indian History,
when the Royal Durbar was held in India in 1911 to welcome the new king - King
George V. Standard Motors was in news. Sir Charles Friswell of Standard Cars
managed to strike a deal with the Royal Government and got the order for Standard
Motors. In April 1911, The Autocar remarked about the event as follows: "Sir

269
Moving India on Wheels, op. cit., p. 138.
270
ibid., p. 148.
271
Roboson, Graham. (2011), The Book of the Standard Motor Company, Dorset England: Veloce
Publishing Ltd., p. 4.
272
ibid., p. 189.
107
Charles has entered into a contract with the authorities concerned, to provide all the
cars necessary to the proper entertainment for the guests at the Durbar Coronation
ceremonies in December(1911) next. He also made a contract with the Vice-Regal
department for the provisions of Standard cars for the whole Royal Suite, and last, but
assuredly not least, Sir Charles is to provide two Standard cars for the personal use of
HM King George during the Durbar celebrations". 273 "Ten Standard lorries will be
supplied for the carriage of beaters in connection with the tiger hunting expeditions
which will, of course form part of the Royal programme, and two more for the
transportation of the general impedimenta. Adequately to carry out these
undertakings, Sir Charles contemplates the despatch of no less than 100 Standard cars
to India for this purpose".274 70 Cars were actually sent some week in advance and
they are of several different types. Once arrived and settled in India, they were
divided into four small fleets based in Delhi, Bombay, Calcutta and neighboring
Nepal. The actual Landaulette used by HM King George was a 20hp six-cylinder
model, decked out in Royal Blue, and trimmed in blue, while cars for use by the
Indian government were painted cream and upholstered in green.275

SMPI started working first in an Aero-hanger at Chrompet belonging to the

Government of Madras and the first 'Vanguard' came off the lines in July 1950.276 The
origin of Standard Motors can be traced from Union Company (Motors) Limited by
Shri K. Gopalakrishnan who were the distributors of Wolseley, Nash and later
Standard cars. Initially the Company asked the Government to allot lands at
Meenabakkam and later at Pallavaram but both the lands was denied since they were
under the Defence Department. On 12th July 1948 the company applied for 50 acres
of Vandalur Reserve Forest land bearing Survey No. 367 lying between east of Grant
Trunk road and West of the Hill for a period of 49 years lease. The Company agreed
to pay the assessment charges and were expecting the machinery to arrive within
September 1948.277 The Government accepted and assigned 58 acres of land for
Union Co., for the assembly of Cars.278

273
ibid., p. 17.
274
ibid.
275
ibid.
276
Madras Information, Vol. XV, No. 10, 1960, pp.29-30.
277
TNA, G. O. No. 1071, Revenue Department. dated 22-04-1949.
278
TNA, G. O. No. 3165, Revenue Department. dated 13-12-1949.
108
 The assignment will be subject to the usual conditions and the following
additional special conditions:279

1. The land shall not be used except for the purpose of setting up plant for the
assembly of motor cars, motor cycles, trucks, tractors and allied machines.

2. The company should pay market value for the land at Rs 500 per acre; it
should in addition pay Rs.144-8-0 being the value of the tree on the land; and

3. The company should get their lay out plans of buildings, waterways and
culverts and the location of drains and storm water courses approved by the
PWD before any construction is undertaken.

4. The Collector of Chingleput is required to take steps for the deforestation of

the site in consultation with the chief conservator of forest and to assign it to
the company.

The Company accepted and agreed to the conditions through its letter dated
4th May 1949. A new company was formed Standard Motor products of India Ltd., in
collaboration with Standard Motor Co., Ltd., Coventry, England, (See appendix for
the MOU between SMPI and Standard Motors, England) with the following members
as directors of the company:280 Sri K. Gopalakrishna, Madras, Sri C. S.
Rathnasabapathy Mudaliar, Coimbatore, Sri R. K. Venkatachalam, Coimbatore and
Sri V. S. Nataraja Mudaliar, Bangalore. The foundation stone for Standard Motors
was unveiled by the Union Minister of Industries and Commerce Sri Harekrishnan
Mahatab on 8th January 1951 and the production commenced in January1952.

The Tariff Commission of 1953 recommended Standard Motor products of

India Ltd., will manufacture a medium car only. In 1954 it started assembling and
progressive manufacture of Standard Ten Cars.281 In 1962 the company decided to
manufacture the Triumph Herald which was a successful car in the European and
American market to India with slight change from two-door to four-door but it was
called as Standard Herald. The Standard Motor Products moved into the manufacture
of light commercial vehicles in 1965.282

279
G. O. No. 1071, op. cit.
280
ibid.
281
MotorIndia, Golden Jubliee Issue, December 2006, p. 26.
282
Narayana. D, Eapen Mridul & Mukherjee Chandan Growth, Technical Dynamism and Policy
Change in the Indian Motor Vehicle Industry, in Indian Industrialization Structure and Policy Issues
by Arun Ghosh, K. K. Subramanian, Mridul Eapen, Haseeb A. Drabu, OUP, Delhi, 1992. p. 210.
109
 The Standard Motors of England became independent of British financial
capital in 1973. They focused on commercial vehicle and in India it was the Standard
20 van, developed to an enorMoUs degree from the original Atlas Major, which had
become the “Leyland 20 – variety” in the UK, but much changed to suit Indian
conditions and market standards carried on into 1980s283

Standard Motors decided to stop the production of its existing Herald model
and it would go for Austin Rover (of U.K) saloon cars at the Vandalur works. The car
will be powered by a locally designed and built diesel engine. The 2,000 cc engine of
the standard truck is to be modified for this purpose. The Central government has
approved the agreement between Standard Motors and the Austin Rover (a subsidiary
of Leyland).284 Mr. Karthik Narayanan the MD of Standard Motors made a visit to
UK to finalise the whole programme of phased manufacture. He said the indigenous
content will be very high, the major items coming from abroad being only the panels.
Apart from the engine which is under development several ancillaries will be
produced by the company in house.285 The company has got license for manufacturing
4000 vehicles a year and they felt there is good market for 2000 cc engine cars. The
Standard 2000 was the country's most expensive luxury car launched on 14th April
1985 by Vice President, R. Venkataraman at Madras. Standard 2000 was competing
with Maruti 800 and Hindustan Motor's Contessa Classic. The Central Government
and Birla teamed up and found Standard 2000 with poor fuel consumption about 6
kmpl. It was the time around 1990-91 that the Gulf War was in full swing and fuel
was rationed. M A Chidambaram (of SPIC Group) who bought the company from Mr.
Karthik Narayanan tried to demonstrate an improved version of the engine's fuel
economy but the Government decided to shut down the factory. At the same time
there was rise in Labour problem this made MAC's son, A C Muthiah to close the
company.286

283
Roboson, Graham. op. cit., p. 190.
284
The Hindu, Survey of Indian Industries, 1983, p. 170.
285
ibid.
286
http://rrajaram.blogspot.com/2005/11/standard-motor-products-of-india-ltd.html, accessed on
05.09.2017.
110
 The closure of Standard Motors became a matter of debate in the Tamil Nadu
Assembly and many times the issue was raised. In a special mention debate Mr. S.M.
Krishna MLA of Tambaram raised the issue of closure of Standard Motors. He
wanted why BIFR recommended the closure? Mr. M. Chinnaswamy, Minister for
Industries disclosed the recommendations of BIFR:287

BIFR on 09.12.1988 announced Standard Motors as a sick unit and in order to

revive the company the BIFR with the cooperation of the State Government
announced the restructuring. Accordingly the state government gave the following
concessions to Standard Motors: 1. Rs. 3 crores loan with 9% interest to be paid after
the restructuring period, 2. Deferral of Sales tax from 1.4.1992 to 1.4.1996 for a
period of five years, 3. The small vehicles manufactured by the company will be
brought by the government department under the purchase preference scheme, 4. The
Government sanctioned TPL Tamil Nadu Petro Products limited to invest its fund
6.03 crores to Standard Motors. Standard Motors started its operations from 3.2.1992
but in spite all the concessions and support it stopped its operations from 1.4.1994.
BIFR made further enquiries regarding the manufacturing problems of Standard
Motors and finally in its meeting held on 25.8.1994 decided to close the company due
to the following reasons:288 1. The present promoters were not in a position to invest a
huge capital to bring back the company and at the same time they were not able to
bring new investors to the company, 2. Bank and Financial institutions have already
gave a huge loans to the company and the company is not in a position to pay back the
loans so banks and financial institutions were not ready to in a position to bring new
investors to the company, 3. There is no possibility of restructuring the company
through Employee cooperatives.

In light of the above the BIFR decided to close the company and they gave
time for suggestion up to 7-11-94. The chief Minister wanted to revive the company
but all its efforts ended up in failure since nobody came forward to run the company.
In addition to it, old machinery, low productivity, huge financial debts and
competitive market had made the government not to support the company. So in the
meeting convened by BIFR on 7.11.1994 the government did not participate and it

287
Tamil Nadu Legislative Assembly (TNLA) Debates Vol. LXIII. Nov. 9, 1994
288
ibid.

111
left the decision to the BIFR and BIFR decided and passed orders for the closure of
the company on 7.11.1994. The closure was opposed by many and they filed a writ at
the Madras High Court but the writ petition was dismissed on 30-03-1995. The labour
unions filed case against the closure in the High Court. On 4-10-1996 the High Court
of Madras passed the final order for the closure of Standard Motors and appointed the
official liquidator.289 The Madras High Court on 30th November, 2005 concluded the
sale of the 57.94-acre land belonging to the under-liquidation Standard Motor
Products of India Limited to Sriram Properties who were as the highest bidder by
quoting Rs. 154.10 crores for the land, buildings, plant and machinery.290 Thus the
glorious chapter of Standard Motors came to an end.

3. 5. (c) The Royal Enfield Motor Cycles

Chennai has the distinction of making the one of the oldest continuously
motorcycle brand in the world., the Royal Enfield. The first Royal Enfield motorcycle
was produced in 1901, designed by R. W. Smith and Frenchman Jules Gotiet and the
production went on till up to 1971 in England. During World Wars the Enfield
motorcycles played a major role in allied war efforts in Europe. In 1949 K. R.
Sundaram Iyer established Madras Motors Private Limited to import British
motorcycles into India. During the second Five Year Plan a sum of Rs 1,100 Crores
has been allotted for the provision of better transport facilities. Since most of the cities
had grown and personal transport has became acute day by day. It was in these
circumstances that the Madras Motors Private Limited obtained a license for the
manufacture of Royal Enfield motor-cycles and three wheelers.291

The company was granted license since it was selling more motor-cycles in a
year than all the firms in India put together. It was also the only organization which
was solely involved in selling and servicing motor cycles. With their experience in
motor-cycle trade and servicing they entered into an agreement with Enfield Cycle
Company Limited in U.K. for technical collaboration there by laying the foundation
for the manufacture of Royal Enfield Motor Cycles in India.292

289
TNLAD, Vol. 59, No.1. May 30, 1998.
290
The Hindu, 1st, December, 2005.
291
Madras Information June 1960. p. 13.
292
ibid.
112
 Besides producing Motor-cycles they also undertake sheet metal fabrication,
support making frames for Integral Coach Factory (ICF) at Perambur, produce post
boxes for the Central Post and Telegraphs department, Bus body kits, petrol and water
tanks of huge capacity.293 In 1952 the company got an order from the Indian Army for
800 numbers of 350cc Bullet Enfield bikes. A condition was incorporated in the
order, to produce these locally in India and the Redditch Company formed a local JV
with Madras Motors, to make a factory in Thiruvattiyoor for building these bikes.294
Thus the Enfield India Limited was established in November 1955 at Thiruvottiyur
with an initial labour force of 250 men. The company assembled 350cc Bullets from
the kits sent from the Redditch Factory and were thoroughly tested by the Indian
Army and was inducted in the army. In 1971 Royal Enfield closed its unit in England
and its Indian manufacturing unit bought the brand rights and continues to produce. In
1994 the Eicher Group acquired Enfield India Ltd., and the company was renamed as
Royal Enfield Motors Limited. It started the second manufacturing unit near Jaipur in
Rajasthan. It acquired 50 acres of land at Oragadam near Chennai and commenced its
all new Thunderbird 500 and by 2013 it commenced production from its third
manufacturing facility at Vallam, near Chennai.295

In this phase, factories namely, Ashok Leyland, Standard Motors and Royal
Enfield were established. Of these SMPI was forced to shut down due to various
reasons and the other two companies have successfully expanded their operations
from Chennai to other places.

3. 6. V Phase: Base Phase: (Tariff Commission and Emergence of Ancillary

Industry)
The automobile industry got a major boost from the recommendation of the
Tariff Commission of 1953. The Secretary of the Tariff Commission through his letter
No. Ad/1(113) dated 27-12-1952 communicated to the Chief Secretary to the
Government of Madras regarding the visit of the commission to Madras in connection
with its enquiry into Automobile Industry.296 The Madras Government was very
positive in welcoming the commission. Mr. J. M. Lobo Prabhu, I.C.S., Secretary to

293
ibid., p. 15.
294
ibid.
295
https://www.royalenfield.com/in/en/home/since-1901/ accessed on 03.04.2018
296
G.O. No. 1841, Development Department, op. cit.
113
Government, Development Department wrote a letter dated 3rd January 1953 to the
Chairman of the Tariff Commission seeking an interview to understand the nature of
the commission and to explain the position of the Government. The Tariff
Commission visited all the automobile related units in Madras on January 1953.

When the commission visited Madras, Mr. P.C. Mathew, Transport

Commissioner, Government of Madras presented and submitted the memorandum on
the Automobile Industry. In his memorandum he was critical of the Government
Policy towards automobile industry on the following points:297the Government had
imposed a prohibitive duty on all motor vehicles parts including those which cannot
possibly be manufactured in India for a considerable time and there by crippled the
growth of motor transport, the persons consulted on technical and policy matters were
those in charge of sales of foreign automobiles in the country who are just the persons
whose interest require that an Indian automobile industry should not be set up. He list
out five reasons for Assembly firms not to purchase parts from the local sources:

a) The assemblers will suggest the Government that those who is not in a
position to manufacture his own component should be banished from the
country

b) Every assembler will follow their own standard and specification which the
local company will not be able to execute to their satisfaction

c) Even the local company delivers the product; the assembler could not expect
their specifications.

d) The Price of the original component is cheap due to the concessional one and
the producer cannot quote the same price.

e) The parts are obtained in sets and the addition or deletions should be in
complete sets which is a major expensive factor.

To overcome the above problems he suggested a factory manufacturing a

component should either completely dissociated from all assemblers or equally
associated with all of them and every assembler should come to an agreement that

297
ibid.

114
they will manufacture the component which is made by a factory with the
specifications and designs of each assembler. Any automobile firm which is unable to
conform to this overall policy has no place in India.

After the visit to all the provinces the Tariff Commission called for a public
enquiry at Bombay from 12th to 23rd January 1953 and had invited the views from all
those who are interested in the development of the industry. The Deputy Chairman of
Standard Motor Products of India Ltd., Mr. K. Gopalakrishnan send a letter to the
Tariff Commission dated December 31, 1952 briefing the origin, formation and the
arrangement with Standard Motor Co. Ltd., Coventry, U. K. He also briefed about the
scope of the company to the commission. The Chairman of the Amalgamations
Limited Mr. S. Anatharamakrishnan wrote a letter dated January 7, 1953 to the
Hon'ble Dr. U. Krishna Rao, Minister for Industries & Labour, Government of
Madras and urged him proper representation at the public enquiry at Bombay and
wanted him to send Mr. J. M. Lobo Prabhu, on behalf of the Madras Government to
protect the industry established in South India. Mr. Raghunandan Saran of Ashok
Motors sent a brief note on Ashok Motors in his letter dated 10th January 1953 to
Mr. J. M. Lobo Prabhu.

The Madras Government deputed Mr. J. M. Lobo Prabhu I.C.S., to represent

the Government of Madras at the Public Inquiry of the Tariff Commission held at
Bombay on 13-01-1953 and he made the following remarks:298 The presence of
assembly plants will be a big challenge for the manufacturing plants and it is not
possible for the assembler to manufacture all the necessary parts, the taxation over the
industry should be made in such a way that the industry will grow and the foreign
exchange available for import of whole or parts of automobile should be made open
so that the producers will have a blue print for their investment. Mr. Lobo Prabhu
also responded to the questions raised by the Chairman in the public inquiry. He
suggested all the assemblers should be given a specified time for importing the parts
and after which it should be banned so that it will encourage localisation and will also
bring down the price of automobiles. He concluded his representation and urged an
apex body to be established with powers to protect the growth of the industry. The
Tariff commission gave its recommendation by which Ashok Motors and Standard

298
ibid.

115
Motors Products of India which had manufacturing programmes were allowed to
carry their operation from Madras and the others were asked to close their units.

3. 6. (a). Emergence of the Ancillary Industries

The presence of ancillary industry is unique to Chennai which is a major pull

factor for the Global auto players to start their units in Chennai. Aya Okada and N.S.
Siddharthan had studied the Automobile Cluster of Chennai and the National Capital
Region (NCR) and found that the "Flowchart Model" presented by Kuchiki for NCR
differs from the cluster model of Chennai. In Chennai it was the component
manufactures who established first, targeted the all-India market. The presence of a
strong component manufactures made the assemblers to start their production in
Chennai. This trend started during the Second World War when there was a shortage
of petrol,vehicles were fitted with gas plants to propel them. Retrofitting vehicles with
gas plants became a major activity and companies based in Madras and Madurai,
particularly Simpsons and TVS were sought after by vehicle owners from all parts of
the country. The establishment of Ashok Leyland and Standard Motors and later
Royal Enfield Motors provided opportunity for the growth of ancillary industries. The
Amalgamations Group was the first to sense the opportunity for ancillary industry and
in 1949 it set up the first automotive ancillary of the country- India Pistons Limited
followed by MICO, Motor Industries Co Ltd in 1951 for the sale of Bosch injection
equipment.299The growth of the ancillary sector was supported with the establishment
of the MIT, Chrompet (Madras Institute of technology). This institute was started in
1949 and it offered non-conventional engineering courses such as Automobiles,
Aeronautics and Instrumentation Technology. In 1959 IIT Madras was established
which provided R & D assistance for the automobile sector. The ancillary industry got
a major boost from the L.K. Jha Committee which recommended for the development
of ancillary industry and the Government decided to encourage the small scale sector
in auto-component manufacturing and by 1965 some 60 to 80 components were
exclusively reserved for small scale units. On 12th February 1958 Dunlop a Calcutta
based tyre factory established its 2nd factory at Ambattur in Madras. The
establishment of Government sponsored Industrial Estates at Guindy in 1958,
following the GIE, the Ambattur Industrial Estate was launched by the GoTN in 1964

299
Sriram, V. (2017). Nuts and Bolts of Excellence- Fifty Years of Sundaram Fasteners, op. cit., p. 13.
116
at that time it was considered to be the largest in the whole of South East Asia300 and
the K. R. Sundaram Industrial Estate at Tiruvottiyur in 1962 housed many small scale
units specializing on motor cycle auto component manufacturing.

The political support also played a prominent role in the development of auto
sector of Tamil Nadu. R. Venkataraman the then President of India on the occasion of
Silver Jubilee celebrations of Ambattur Industrial Estate Manufacturers Association in
1988 remarked, " Tamil Nadu lacked natural resources like iron, coal, minerals and
the most important requirement water, so he decided to go into fields in which the use
of raw materials was the minimum. The engineering industry was best suited and
fortunately the GoI fixed a uniform price for steel. He also stressed the importance of
ITIs which he promoted for the industrial growth. He said when he was the Minister
for Industries under Kamaraj or at the Planning Commission, when entrepreneurs
from Madras state approached him for license to invest in the traditional industries
like textiles and sugar he refused to give them but instead he gave them license only
for engineering industries and thus people were forced to diversify. He also added in
his speech by saying it was this compulsion that Tamil Nadu took advantage of and
“went with great speed in starting engineering industries" and Madras had come to
known as the Detroit of India producing 80% of the components for the automobile
industry".301 The growth of ancillary sector indirectly acted as a pull factor for the
global auto manufacturers after liberalization. The uniqueness of Chennai ancillary
industries is their broad market share, they made components and targeted both the
domestic and all India market. Some of the components from Chennai region was also
exported. This export made them to understand the international market expectations
and demand. The export also gave them an address. When the Global OEM's decided
to start their operations in India naturally their first contact was the industries from
Chennai.

300
Dharmaraj, S. (1982). Migration and Development: A Case Study of Socio- Economic Conditions of
the Migrant Workers of Two Industrial Estates in Tamil Nadu. Unpublished Ph.D. Thesis of University
of Madras, pp. 107-08.
301
The Hindu, 12, May 1988.
117
3. 7. VI Phase : Globalization Phase

Responding to the economic liberalization policy announced by the GoI, the

GoTN announced its industrial policy on 20th January 1992. This policy focused on
infrastructure development, investment promotion, incentives, tax concessions and
thrust areas.302 The GoTN carried out institutional reforms such as the establishment
of Tamil Nadu Industrial Guidance and Export Promotion Bureau in July 1992 which
promoted single window clearance for investors. After 1993 the GoTN made
aggressive promotion of the state to the media and to private investors.. The industry
minister of TN put it thus: 'we are initiating far-reaching structural reforms to lead the
industry in the state away from a regulatory and protective regime to a free market-
oriented competitive and globalised environment '(Speech to the CII-Southern
Committee, meeting, August 27, 1996)303 The State of Tamil Nadu realised and
understood the potential of the automobile industry in improving the economy of the
state decided to make use of the liberalization policy. It accelerated administration
with industrial friendly policy in owing the automobile sector to the state.

3. 7. (a).Opening the doors to Ford

In 1995 Ford Motors was looking for an expansion in India and they decided
to collaborate with Mahindra's. It short listed three locations- Guragaon, Pune and
Chennai. Chennai was their last choice. Maharashtra and Tamil Nadu were trying to
get them. Manohar Joshi, Chief Minister of Maharashtra went and met the Ford-
Mahindra team and assured them all assistance for their plant. The Enron fiasco and
the exit of Dupont from Goa shifted the scales to Tamil Nadu.304

Now the GoTN and its Chief Minister Jayalalithaa made an all-out
arrangement to get Ford to the State. Mr. C. Ramachandran, the Industry Secretary of
GoTN got in touch with Suresh Krishna of TVS groups to talk to M&M Chairman
Keshab Mahindra and K V Shetty of India Pistons provided the GoTN with all
necessary inputs regarding the auto-component resources of the state. The state
launched an aggressive marketing effort. "We put together a highly professional

302
Thandavan. R. (1996). Dr.Jayalalitha- a phenomena. Madras: Anna Centre for Public policy
studies, p. 187.
303
Sinha, Assema. op. cit., p. 157.
304
Ravindranath, Sushila. op. cit., p. 143.
118
multi-media presentation on the state which left a very favorable initial impression,
said M Raman, Director of TN Export Promotion Guidance Bureau 305. The Ford sent
a 200-query questionnaire covering all aspects of Chennai like climatic conditions,
social conditions, etc., The Ford management wanted 40 parameters to be fulfilled by
the state for its choice of location. One of the parameter was they should be no other
industry which will create dust within twenty kilometers because of their ultra-
modern paint shop.306

John Parker the CEO of Ford India came to Chennai with his team to check
the infrastructure and the quality of life in the city. The US Consulate gave the
responsibility of orientation to the Ford team about Chennai to Global Placements
organisers, Ms. Ranjini Manian and Ms. Joanne Grandy Huskey, the wife of Jim
Huskey, the U.S. Foreign Service Officer at US Consulate in Chennai. Joanne
remarked, "We spent the entire day with the team, showing them hospitals, schools,
markets, housing options and cultural sites. After the tour, we had a meeting we all sat
down, and John asked me whether I, as an expatriate liked living in Madras and
would recommend it. I told the group that I had fallen in love with the place by that
time-emphasizing the friendliness of the local people, the community feeling, the
lovely housing available, and the added benefits of having house help available. He
turned to his team and said to them... "Look at her face, would she lie to us?" At that
moment, John said that he would relocate 50 families to Madras and open a factory
here."307

The GoTN assured the Mahindra-Ford team with all assistance but still the
team wanted sales tax exemption, deferral schemes and importantly interstate sales
tax should be reduced since the maximum sales would be outside Tamil Nadu.308 This
made the Government to announce tax concessions on 2nd January 1996.
Accordingly, New Mega Projects being set up in the state are eligible for longer
period of sales tax concession like waiver/ deferral. Super Mega Projects with an

305
ibid., pp. 143-44.
306
ibid., p. 144.
307
Email interview with Joanne Huskey on 22.10.2018.
308
Ravindranath, Sushila. op. cit., p. 144.
119
investment in fixed assets exceeding Rs 1500 crores and in case of automobile
projects Rs 1000 Crores are eligible for Sales Tax deferral Waiver for 14 Years.309

On 3rd January 1996 an MoU was signed between the GoTN and the Ford
Motor Company to be established at Keelakaranai village near the satellite township
Maraimalai Nagar 38 kms from Chennai. The GoTN has offered a package of
incentives in addition to providing about 350 acres of land, sales tax holiday/deferral
at the choice of the promoter for up to 14 years irrespective of the cumulative deferral
exceeding the investment in the project. Tax exemption has also been given to inputs
and on stamp duty for purchase of land.310 The MoU was signed by Mr. R.K.
Pitamber, Managing Director, Mahindra and Mahindra Ltd and Mr. John G. Parker,
President, Ford India Operations and Managing Director designate of Mahindra Ford
India Ltd, Mr. C. Ramachandran, Principal Secretary, Industries Department signed
the agreement on behalf of the Tamil Nadu Government. Mr. Wisner, US
Ambassador to India and Mr. Timothy Hauser, US Consul General in Madras were
present on the occasion. The Chief Minister Jayalalithaa after signing the agreement
said, ' I have no doubt that the arrival of the Ford Mahindra project will give Tamil
Nadu an international presence in the automobile sector'. Mr. Parker said the Madras
area offered an excellent infrastructure and a strong supply base to support Ford's
business and international operations and was chosen after a lengthy evaluation
process. Mr. Anand Mahindra, Deputy Manager Director, M&M said decisions to
locate manufacturing plants were not taken merely based on the extend of fiscal
subsidies but taking a comprehensive view of various factors such as access to labour,
infra structure and ports."311

By establishing the factory at Maraimalai Nagar Ford reentered India after

1954. "The most important factors in our location decision were the availability of a
supplier base, skilled labour and infrastructure," says Philip Spender, Ford India's
Managing Director.312 The Ford Chennai Plant is unique since 2008 the engine plant
of the Ford Chennai Plant has a single production line but can assemble petrol and
diesel engines at a time, the manufacturing line at the Chennai plant can handle six

309
Elumalai. G. (June 2008). Recent trends in Industrial Development of India with Special Reference
to Tamil Nadu. Unpublished Ph.D. Thesis, University of Madras, pp. 127-130.
310
The Hindu, 4th, January, 1996.
311
ibid.
312
India Today, 29th, May, 2000.
120
models at any given time and use of 3 Wt High Solid Paint Technology which
consumes less water while cleaning.

3. 7. (b).The Hyundai Story

In 1994 Sharad Pawar, the Chief Minister of Maharashtra, visited Seoul and
met Chung Se-yung, the Head of Hyundai Motors and invited him to invest in
Maharashtra. Chung Se-yung accepted the offer came to India in 1995. In 1995
Maharashtra went to polls, Pawar lost the elections and the Enron episode gave a
feeling of insecurity to Hyundai. Pawar suggested Chung Se-yung to visit Tamil Nadu
and introduced him to Chief Minister Jayalalithaa who rolled out the red carpet and an
array of incentives. Folklore has it that by day four Hyundai had an office to work out
of. However, a few months later, in May 1996 Tamil Nadu went to polls too.
AIADMK was trounced. DMK led by K Karunanidhi came to power. Regime change
though, did not result in reversal or change in policy.313 A MoU was signed between
Mr. Cyriac, Industry Secretary, GoTN and Mr. B.J. Park, President Hyundai Motor
Co.,(HMC) in the presence of Chief Minister Mr. Karunanidhi for the establishment
of Car Manufacturing at Irungattukottai, Sriperumbudur about 35 kms from Madras
on 18-07-1996.314 Mr. Y.S. Kim the HMC Executive Managing Director said they
selected Madras as "it is a beautiful city with nice port and supportive government.
Besides, Madras has a skilled work force".315 Hyundai Motors had already
incorporated a wholly-owned subsidiary Hyundai Motor India Ltd., with its registered
office in Madras. The company has obtained the approval of the Foreign Investment
Promotion Board for investment of up to $ 700 million (Rs. 2,450 crores) in the first
phase covering five years and $ 400 million (Rs. 1,400 crores) in the subsequent five
years. This project is estimated to generate direct employment for 2000 to 3000
people and indirect employment to 20000 people.316 The project is exempted from the
requirement of signing an MoU with the Director-General of Foreign Trade of the
Commerce Ministry since the Sriperumbudur plant will start with a high
indigenization level of 70% and by 2001 they will be reaching full indigenization. In
order to support its production about 10 major components suppliers of Hyundai

313
https://www.bloombergquint.com/opinion/lessons-in-progress-from-tamil-nadu-and-dravidian-
politics, accessed on 08.03.2017.
314
The Hindu, 19th, July, 1996.
315
MotorIndia, op. cit., p. 224.
316
ibid.
121
Motors Company established their units with an investment of $ 105 million (Rs 370
crores).317 The GoTN handed over 543 acres of land out of the 2000 acres acquired by
the company, 0.8 million gallons of water per day and 30MVA of power. The
Hyundai project was eligible for the Standard Package of Incentives available to
industries in Tamil Nadu including sale tax waiver/deferral, power tariff concessions
and capital subsidies.318 Shin a Korean entrepreneur from Chennai remarked, "When
Hyundai had to choose between Pune and Chennai, it decided on Chennai as the city
had a port, more than 100 engineering colleges and South Indians were also seen as
harder working than the North Indians".319 Hyundai Motor India is the second largest
manufacturing of Hyundai next to Korea.320The uniqueness of Hyundai Motor India
Ltd is it is the first international car manufacturers who decided to establish a
production in India without an Indian collaborator and thus it paved way for the other
major auto player to follow the same. On 13th March 2005 HMIL rolled out its
10,00,000th car from its manufacturing unit at Irrungattukottai. To cater to the rising
demand, HMIL commissioned its second plant in February 2008; this produces an
additional 300,000 cars a year, raising HMIL’s total production to 600,000 units
annually.321

3. 8. Base to Auto Growth in Chennai

The socio welfare policies of the GoTN provided the necessary base for the
industrial development of the State. Many scholars had studied and found the politics
and policies of the State of Tamil Nadu were the major pulling force for investors.
Economists Amartya Sen and Jean Dreze (2013) in their book An Uncertain Glory:
India and its Contradictions had explained how the universalistic social policies
adopted by the successive Governments in Tamil Nadu brought development with
social equality. Rob Jenkins edited(2004). Regional Reflections- Comparing Politics
Across India's States, Andrew Wyatt's (2010) Party System Change in South India:
Political Entrepreneurs, Patterns and Processes, Loraine Kennedy's (2014)The
Politics of Economic Restructuring in India: Economic Governance and State Spatial

317
ibid.
318
ibid.
319
Ravindranath, Sushila. op. cit., p. 142.
320
Industrial Economist, 30th July-14 August, 1996, p. 33.
321
https://www.thehindubusinessline.com/opinion/tamil-nadus-make-in-india-
model/article7689546.ece, accessed on 05.09.2017.
122
Rescaling, Sojin Shin's, (2018) The State, Society, and foreign Capital in India,
S.Vivek's (2015) Delivering Public Services Effectively: Tamil Nadu and Beyond,
Samuel Paul and Kala Seetharam Sridhar (2015) in their book, “The Paradox of
India’s North South Divide: Lessons from the States and Regions and Adam
Ziegfeld's (2016). Why Regional Parties?: Clientelism, Elites, and the Indian Party
System briefs on the political will, socio-welfare measures and, economic policies
implemented by the GoTN over the years.

A. Kalaiyarasan in his article Dravidian Populism and Social Protection for

the Magazine Seminar, August 2018 notes that Tamil Nadu had performed better on
most of the social indicators when compared to other states in India which leads to
growth and development. He list out the indicators: the Total Fertility Rate had
declined from 3.9 in 1971 to 1.7 in 2013, the Infant Mortality Ratio had declined from
121 in 1972 to 19 in 2015, the child immunization rate in Tamil Nadu was about 80%
while merely 43% for all-India in 2005-06, the rate of poverty reduction during 1993-
94 to 2011-12 was 35 percentage points for rural Tamil Nadu and 27 percentage
points for urban Tamil Nadu, The state has a higher PHC (Public Health Centres)
density than that of all-India and the number of PHCs (Public Health Centres) has
gone up from 400 in 1980s to 1747 in 2017, the percentage of pregnant women who
deliver their baby at a health facility is 99% in Tamil Nadu, the highest in the country,
the state has an effective PDS (Public Distribution System) and Tamil Nadu has a
diversion rate (the proportion of grain that does not reach beneficiary households) of
4.4% as against 44% of all-India, the assertive populism' by the DMK and the
paternalist populism by the AIADMK two major ruling parties of the state had given
a solid social foundation for the state of Tamil Nadu which is a major indicator for an
investor.

In addition to the above social indicators the presence of a large number of

engineering colleges in and around Chennai gives the necessary human resources,
Chennai Port and Kamarajar Port at Ennore with multi level parking for shipment,
India's first Railway Auto-Hub at Walajabad, strong presence of IT knowledge,
presence of NATRiP (National Automotive Testing and R&D Infrastructure Project )
at Oragadam, the passage of Land Acquisition Act, 1997 which enabled the
government to acquire private land for industrial use convince the investors. The

123
National Council of Applied Economic Research (NCAER) which compiles the State
Investment Potential Index based on six pillars under four broad categories: factor
driven( land and labour), efficiency driven(infrastructure), growth driven (economic
climate and political stability, governance), and perceptions driven (responses to the
surveys) has ranked Tamil Nadu at number 2 ( N-SIPI 2018)322 and importantly the
political stability and the no reversal policy of the previous government by the ruling
government in Tamil Nadu had acted as a major factor for the establishment of
industries in Tamil Nadu and the automobiles industries in and around Chennai.

The establishment of Ford and Hyundai in Chennai gave a green signal to all
other automobile manufacturers such as German premium automaker BMW and
Franco-Japan joint venture Renault-Nissan, Mitsubishi, Volkswagen, to manufacture
cars, Daimler in Commercial Vehicle sector, Japanese Yamaha for Motorcycles,
USA's Caterpillar, Japan's Komatsu and South Korean's Doosan to manufacture large
earth moving equipments all to have Chennai as one of their base operations. In
addition to it Chennai is the largest tyre manufacturing centre in the country and one
of the largest in World. Apollo Tyres, Bridgestone, JK Tyres, Michellin and MRF
have their manufacturing units in Chennai.

The views of leading auto manufacturers for their choice of location for their
units in Chennai attest the fact of Chennai's strength in the automobile industry: 323
Michael Boneham, the Ford India Managing Director, remarked, "Yes, we are
satisfied. You have a very stable government and legislative environment. There is a
transparent industrial policy no matter which political party is in power. You have
governments very supportive of the industry. The second thing is the availability of
labour. Educated reliable labour is the strength of Chennai. Overall, we are very
happy with our experience in Tamil Nadu". Kiminobu Tokuyama, Chief Executive
and Managing Director, Nissan Motor India Pvt. Ltd., who was able to complete the
project within 21 months remarked, "We had all the expertise but we would not have
been able to achieve this without the support of Tamil Nadu government and the
labour force." BMW, company's Senior Vice-President Klaus Berning said the group

322
The NCAER State Investment Potential Index N-SIPI 2018, Third Edition, New Delhi: NCAER,
August 2018, p. 87.
323
http://business.rediff.com/slide-show/2010/jun/30/slide-show-1-auto-is-chennai-the-detroit-of-
asia.htm#6 accessed on 03.04.2018.
124
had decided to establish its car assembly unit near Chennai due to the "favourable
investment climate" in the state. Abhay Dange, General Manager Press and Corporate
Affairs, BMW, remarked, "The first reason why BMW chose Chennai was because of
the infrastructure provided by Mahindra City and Chennai. Then, the logistics like the
facilities at the Chennai port. The single window clearance offered by the Tamil Nadu
government attracted us and supported us." Hiroyuki Suzuki, Chief Executive Officer
and Managing Director, India Yamaha Motor, said, “South has a good supplier base.
Besides, catering to the export markets from Tamil Nadu will be easy. These are the
two main reasons why we chose Tamil Nadu over other states.”

With the coming of auto majors in Chennai, the GoTN enacted the Ultra Mega
Integrated Automobile Projects Policy, 2007, to attract the industry. The policy
provided various incentives such as land allotment at concessional prices, 100 %
exemption from stamp duty, exemption from electricity tax for 10 years, exemption
from entry tax, VAT on capital goods, work contract tax, Octroi, other state levies,
etc. Additionally, 100.0% FDI is allowed in manufacturing industries based in SEZs.
The Ultra-Mega Policy provides special incentive to projects with investments in the
range of INR 1,500 to 4,000 Crores.324 Further to boost the development of the auto-
sector the GoTN enacted the Tamil Nadu Automobile and Auto Components Policy
2014 released on 21st February 2014 by the CM Jayalalithaa. The Policy was
launched with the theme ‘Tamil Nadu, the Partner in Automotive Sector
Investment'.325 According to the policy, the State Government would form an
Automotive Industrial Development Centre (AIDC) offering investment facilitation
services to companies willing to invest in the automotive industry and to set up an
Auto-City. The policy aims to make Chennai as one of the top five centres in the
world in the automobile and components industry.326

324
Vision Tamil Nadu- Building Sustainable Tomorrow- The Banking Perspective, ASSOCHAM
Special Souvenir, July 2012. p. 19.
325
Tamil Nadu Automobile and Auto Component Policy 2014, Industries Department, Government of
Tamil Nadu, p. 11.
326
ibid.

125
 Now the neighbouring state Andhra Pradesh is aggressive in its marketing for
industries and has throw out offers to attract automobile industries. Chennai had lost
Kia Motors of Korea, Japanese Isuzu Motors, Apollo tyres and Hero Motors to
Andhar Pradesh. It is high time GoTN should be vigil enough not only in attracting
but also in not losing out any automobile projects to other states. The state
administration has to gear its mechanism and bring back glory to the state and to
Chennai as the leading automobile hub.

126