Twitter
Advertisement

Now, contract manufacturing in auto sector

Till now, contract manufacturing has largely been associated with either the fast moving consumer goods industry or some other small daily use items.

Latest News
article-main
FacebookTwitterWhatsappLinkedin

NEW DELHI: Till now, contract manufacturing has largely been associated with either the fast moving consumer goods industry or some other small daily use items.

But for the first time, such a facility is being readied for automobiles in India.

Argentum Motors, co-promoted by Spice Jet’s Ajay Singh, Hyundai Motor’ former president B V R Subbu and Ashish Deora, plans to get into the contract manufacturing business soon.

Argentum has taken possession of the erstwhile Daewoo Motors plant at Surajpur (Haryana) and plans to assemble cars, LCVs and other vehicles some months down the line.

This facility was acquired for about Rs 850 crore and the company now plans to invest another Rs 500 crore in upgrade facilities.

“OEMs are looking at low-cost manufacturing options and many of them are hesitant to set up full-scale manufacturing facilities in India,” Singh said.  

“So, offering them a third-party manufacturing option is a good way of attracting them here,” he told DNA Money.

While Singh declined to name which global OEMs were in discussions with Argentum, he said the contract manufacturing route could be used for all kinds of vehicles, not just cars.

The facility, before being used by Daewoo for small cars, was manufacturing trucks for the DCM-Toyota combine, so the possibility of Surajpur churning out commercial vehicles with global brands cannot be ruled out. As of now, the facility houses a 4 lakh unit engine and transmission capacity and a 2 lakh unit press facility. Daewoo used this facility to produce its Matiz, Cielo and Nexia models.

Singh said Argentum would also be looking to become a component, engine and transmission systems supplier to domestic as well as foreign companies.

He said private equity funds have already picked up 10% of the company and their share would increase to 12% over time. But the Rs 500 crore required for long-term investment would have to be mopped up through a mixture of debt and equity.

Asked about Hyderabad-based MLR Motors, which was earlier supposed to source engines and transmissions from the Surajpur facility, Singh said there was no connection between Argentum and MLR as of now.

Subbu, who was earlier the chairman of MLR Motors, is believed to have severed connections with that company now.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement