In a pioneering initiative, the Chennai-based Sundram Fasteners of the TVS group is to set up fully owned $5 million manufacturing subsidiary in South China which is scheduled to go on stream in the first half of next year.
Claiming this as the first project to be set up by Indian engineering industry in China, Suresh Krishna, managing director of the company, told reporters on Thursday that the Chinese subsidiary would have an installed capacity of 6,000 tonne per annum.
The idea was to 'crack the Chinese market first' and later meet the import requirements of neighbouring Taiwan and Korea from the Chinese manufacturing base in which the company proposed to further invest another $12.5 million, subject to market response and conditions, Krishna said
The Chinese subsidiary would be manufacturing and marketing high tensile fasteners to the Chinese automobile industry which was poised for a 20 to 40 per cent growth in the coming years.
Sundram Fasteners Zhejiang Ltd would set up 100 km from Shanghai to manufacture and sell high tensile fasteners to the Chinese automobile industry, the company informed the Bombay Stock Exchange on Thursday.
The factory to be located at Haiyan Economic Development Zone, Haiyan county, Zhejiang province in South China would be manned by almost 100 per cent Chinese employees within four to five years of operation, he said, adding that initially Indians would be deployed for running the factory.
Suresh Krishna said that dealing with Chinese bureaucracy was an encouraging experience, adding that the new venture was given a variety of incentives -- including 'encourage sector' classification -- for concessions like 100 per cent tax holiday for two years, 70 per cent for third year and 50 per cent for the fourth year.
He said the land for the project was procured by the Chinese government paying 100 per cent compensation to the local farmers and handed over to the company half the cost on a 50 year lease.
In a major incentive, the company's effluent treatment was offered to be handled by the province, he said, adding that infrastructure in China was 'far, far ahead' of India, resulting in FDI inflow to the tune of $40 billion as against just $4 billion in the case of India.
He said initially the company would be procuring raw materials locally and if need arose the same would be imported from nearby Korea and Taiwan.
He said the Chinese facility would be catering to the commercial vehicles segment in China initially and later meet the requirements of the passenger car market.
Many of the leading global automobile manufacturers had their presence in China, he said adding that commercial vehicles production in China was to the tune of 1.7 million units and passenger cars one million units a year.