Boeing signalled on Monday it would need more orders from India before it considers setting up a final civil aircraft assembly line in the country, potentially throwing cold water on the government’s hopes of the U.S. planemaker assembling commercial jets in the country.
“The business case in order to have final assembly in any region has to be far larger than what the Indian market is. It requires many more airplanes than are being bought in India today,” Boeing India and South Asia president Salil Gupte.
“We’ll have to see how it evolves as the markets in India and around India go. In the meantime, it is all about building step wise capability to get up to that point,” Gupte said in an interview on the sidelines of the Aero India show in the city of Bengaluru.
Early last year, Prime Minister Narendra Modi said India will not have to wait too long for a Boeing that is designed and manufactured in the subcontinent.
Indian airlines, including Tata’s Air India and IndiGo, have about 1,800 aircraft on order with global planemakers and are scheduled to take delivery of 130 jets this year, according to data from UK-based Cirium Ascend.
Last week, Boeing said it expects Indian and South Asian airlines will add 2,835 commercial aircraft to their fleet over the next 20 years, a four-fold increase over current levels.
Gupte said final assembly was less than 10% of the value proposition of an airplane, adding that the “real money” is in everything else that is being done to get up to that stage.
Boeing sources products and services worth $1.25 billion from India annually from a network of more than 300 suppliers, according to its website. The company employs about 7,000 people in the country.
The company’s joint venture with India’s Tata Group produces AH-64 Apache helicopter fuselages and 737 aircraft vertical fin structures for customers worldwide.
When asked about the challenges the supply chain faces, Gupte said the Indian government needs to provide incentives to suppliers to bring down the cost of capital in India to help expand the aerospace supply chain.
“We had very candid conversations (with the civil aviation ministry) and they are willing to take those conversations forward” with other departments, he said.
