Technical Efficiency of Automotive Industry Cluster in Chennai

Abstract

Chennai is also called as Detroit of India due to its automotive industry presence producing over 40 % of the India’s vehicle and components. During 2001–2002, diagnostic study was conducted on the Automotive Component Industries (ACI) in Ambattur Industrial Estate, Chennai and in SWOT analysis it was found that it had faced problems on infrastructure, technology, procurement, production and marketing. In the year 2004–2005 under the cluster development approach (CDA), they formed Chennai auto cluster, under public private partnership concept, received grant from Government of India, Government of Tamil Nadu, Ambattur Municipality, bank loans and stake holders. This results development in infrastructure, technology, procurement, production and marketing interrelationships among ACI. The objective is to determine the correlation coefficient, regression equation, technical efficiency, peer weights, slack variables and return to scale of cluster before and after the CDA. The methodology adopted is collection of primary data from ACI and analyzing using data envelopment analysis (DEA) of input oriented Banker–Charnes–Cooper model. There is significant increase in correlation coefficient and the regression analysis reveals that for one percent increase in employment and net worth, the gross output increases significantly after the CDA. The DEA solver gives the technical efficiency of ACI by taking shift, employment, net worth as input data and quality, gross output and export ratio as output data. From the technical score and ranking of ACI, it is found that there is significant increase in technical efficiency of ACI when compared to CDA. The slack variables obtained clearly reveals the excess employment and net worth and no shortage of gross output. To conclude there is increase in technical efficiency of not only Chennai auto cluster in general but also Chennai auto components industries in particular.