US-based manufacturer of construction and mining equipment Caterpillar will invest $150 million on an engine manufacturing facility in India to produce the Perkins branded 4000 Series engines.
The company is also investing $62 million in its existing off-highway truck manufacturing facility in Thiruvallur (Chennai) on capacity expansion and technology advancement. This is in addition to the $108-million investment in Chennai announced in 2010.
The company is scouting for a location for the new Perkins facility. (Perkins is a wholly-owned subsidiary of Caterpillar.) An announcement is expected in a couple of months, said Mr Rich Lavin, Group President, Caterpillar. This will be Caterpillar's second engine facility globally, after the UK.
The engine facility will have an initial production of 3,000 units a year, which will be ramped up to 5,000 units in 12-18 months. The 750-2500 KVA engines will be sold for gensets and other power applications.
“Globally, there is a contraction in the electric power industry. But the industry in India is still massive. The short-term contraction will not affect our long-term decisions,” said Mr Lavin.
So far, Caterpillar has invested $1 billion in its India business. On the challenges in the Indian market, Mr Kevin Thieneman, Country Manager for India, China and Asean, said Caterpillar was concerned about power availability and environmental clearances.
Power woes
“Our suppliers in Tamil Nadu are operating at 50 per cent of their capacity due to power cuts. We can deal with it in the short-term… but it is not viable in the long-term, and can lead to relocating outside the State/India or buying components from outside the country,” said Mr Thieneman.
Added Mr Lavin, “If India has to be seen as an attractive investment destination, the Government has to solve the installed power capacity issue.”
Some “bad actors” in the mining sector can also give the industry a bad reputation, said Mr Thieneman.