Private production line for LCA manufacturing: Hindustan Aeronautics

[Indian Jatt]

is it so hard for a country like India to have 60 squadrons?
342-Su-30 mki
300+tejas(all versions)
126 rafales(optimistic)
150+Amca
144+FGFA.....
1062 fighters
can we have it please....

 

[AMCA]

It would make no economic sense for a pvt company to invest in a production facility for a fighter with meager orders in hand.

 

[Hassan Guy]

Maybe they will increase the capacity from 1 plane a decade to 2.

 

[NKVD]

Maybe they will increase the capacity from 1 plane a decade to 2.

They have Capacity Produce 14-16 State of the Art Sukhoi-30 MKI Per year Noob Research Before Ranting

 

[Dash]

Bro, dont go by what HAL says in public. For them its a pure turf war.

If and if MOD approves a 300 jet order with 160 for L&T and 140 for HAL, you will see that surely with some mutual number finally acceptable to HAL and L&T.

But as of now HAL will never say that bcz the execution of first 100 odd jets order itself is a big challenge for them. In fact the ecosystem supporting LCA project has done a fabulous job over last 8-9 months, You will hear it from DM MP himself soon. Indian MIC and MSMEs have actually delivered things in a good time bound manner and has invested enough to increase the productivity as per the planned schedule. Thats why there is a growing resentment reaching MOD's ears and eyes.

The present orders even though L&T is roped in , we all know repeat orders will be there but L&T wont get in without assurance. Thats basic for any company.. and HAL cant share from existing orders bcz its their basic needs..MOD cant order more unless some are delivered and good words spread post DACT and IAF pilots approval..

So you understand the dilemma..all are interconnected.. but in media all will say with smiling face only

Let me share my interpretation here.

1. There is a confirmed order for 200 planes at the minimum.
2. Now the question is how it will be shared between L&T and HAL.

scenario 1. HAL bags all 100 first and in first two years HAL delivers 16 planes (knowing them it will be 10). And GOI asks L&T to set up a second assembly line. Knowing L&T they set up the assembly line in 1 year or so. Having bagged the order for another 100 plane (I assume it will be in batches like 50 first and 50 later, knowing GOI).

So from the third year we have total of 32 planes. 24 from HAL and 8 from L&T. That's 15 years to deliver total 200 planes.

That's a decent timeline.

Scenario 2-

HAL completely bags 100. Delivers 100 in 15 years and L&T sits idle with an order and not even an assembly line. Now that is 27-28 years in total for 200 planes.

The second scenario is scary. I'm sure there is someone doing some math.

IMHO, both will get committed orders in a gap of few years. My assumption will be 2 yrs to be realistic.

And if my memory serves me right, then I remember HAL has been allocated money for a second production line for them selves and the talk was for a third production line from a private player.

The HAL person has got me confused now. Or I might be wrong about the third assembly line.

@Abingdonboy @hellfire and others.

 

[Avaraniya]

Let me share my interpretation here.

1. There is a confirmed order for 200 planes at the minimum.
2. Now the question is how it will be shared between L&T and HAL.

scenario 1. HAL bags all 100 first and in first two years HAL delivers 16 planes (knowing them it will be 10). And GOI asks L&T to set up a second assembly line. Knowing L&T they set up the assembly line in 1 year or so. Having bagged the order for another 100 plane (I assume it will be in batches like 50 first and 50 later, knowing GOI).

So from the third year we have total of 32 planes. 24 from HAL and 8 from L&T. That's 15 years to deliver total 200 planes.

That's a decent timeline.

Scenario 2-

HAL completely bags 100. Delivers 100 in 15 years and L&T sits idle with an order and not even an assembly line. Now that is 27-28 years in total for 200 planes.

The second scenario is scary. I'm sure there is someone doing some math.

IMHO, both will get committed orders in a gap of few years. My assumption will be 2 yrs to be realistic.

And if my memory serves me right, then I remember HAL has been allocated money for a second production line for them selves and the talk was for a third production line from a private player.

The HAL person has got me confused now. Or I might be wrong about the third assembly line.

@Abingdonboy @hellfire and others.

Now here is the fun part,

What do you think will be the Capital expenditure by L&T to create a whole new manufacturing unit that builds LCA's ?

Tata Nano had to spend 1,500 Crore just to set up a factory in Guajrat. This is AFTER Modi got them the land cheap AND provide them with a 30,000 crores subsidy over a period of 20 years.

How much will it cost to set up a new Aircraft Factor ?

Now What should be the cost of the LCA if the company has to recover that cost AND make a profit ?

Now tell me, who can produce the LCA cheaper ? HAL or L&T ? Will the IAF be willing to pay a Premium for getting more LCA faster ? How of of a premium is the IAF willing to pay for L&T Manufactured LCA ?

What will the CAG audit report say when it sees that the L&T is supplying the same LCA for a higher cost to the IAF ?


The real world is a lot more complex than excel sheet calculations.

 

[AMCA]

Now here is the fun part,

What do you think will be the Capital expenditure by L&T to create a whole new manufacturing unit that builds LCA's ?

Tata Nano had to spend 1,500 Crore just to set up a factory in Guajrat. This is AFTER Modi got them the land cheap AND provide them with a 30,000 crores subsidy over a period of 20 years.

How much will it cost to set up a new Aircraft Factor ?

Now What should be the cost of the LCA if the company has to recover that cost AND make a profit ?

Now tell me, who can produce the LCA cheaper ? HAL or L&T ? Will the IAF be willing to pay a Premium for getting more LCA faster ? How of of a premium is the IAF willing to pay for L&T Manufactured LCA ?

What will the CAG audit report say when it sees that the L&T is supplying the same LCA for a higher cost to the IAF ?


The real world is a lot more complex than excel sheet calculations.

There would be no premium. Initial investments are upto the company to decide, if not L&T then TATA, Mahindra or Even Reliance will take up the opportunity. Not all business deals are profit oriented and certainly a company of class like L&T will make it for its engineering benifts and future orders.

No company would want to incur loss and hence huge orders are required to have the private company keep the production house running.

 

[Avaraniya]

There would be no premium. Initial investments are upto the company to decide, if not L&T then TATA, Mahindra or Even Reliance will take up the opportunity. Not all business deals are profit oriented and certainly a company of class like L&T will make it for its engineering benifts and future orders.

No company would want to incur loss and hence huge orders are required to have the private company keep the production house running.

That would have been true if this was a Telecom company with a potential Billion customers. or maybe e-Retail etc.

But this is a fighter Aircraft factor with only ONE reluctant customer and a bleak future that will demand they pour Billions of $ more in R&D every year for the rest of their lives.

Frankly only a moron wold take such a horrendous deal.

Even if the LCA is sold for a profit of 10 core per aircraft and the factory requires 5,000 crore as capital cost and another 2,000 crores as operational expense, do the math and tell me how many LCA it has to sell to just break even.

Around 700 LCA ...... Even if we Assuming such a large order is given, and the factory can churn out 25 aircrafts per year, it will take 28 Years JUST TO BREAK EVEN.

 

[kaykay]

DRDO should better focus on its own production lines and meeting the timelines....Even if they start rolling out 16 Tejas a year..I am more than happy.

 

[AMCA]

That would have been true if this was a Telecom company with a potential Billion customers. or maybe e-Retail etc.

But this is a fighter Aircraft factor with only ONE reluctant customer and a bleak future that will demand they pour Billions of $ more in R&D every year for the rest of their lives.

Frankly only a moron wold take such a horrendous deal.

Even if the LCA is sold for a profit of 10 core per aircraft and the factory requires 5,000 crore as capital cost and another 2,000 crores as operational expense, do the math and tell me how many LCA it has to sell to just break even.

Around 700 LCA ...... Even if we Assuming such a large order is given, and the factory can churn out 25 aircrafts per year, it will take 28 Years JUST TO BREAK EVEN.

I hope you do understand the difference between selling Pizzas and Planes. An Open production line add more capability and an invitation for other projects to flow in. Its never a loss, its an opportunity to grow.

 

[Adhiri]

I hope you do understand the difference between selling Pizzas and Planes. An Open production line add more capability and an invitation for other projects to flow in. Its never a loss, its an opportunity to grow.

Well for one, selling Pizzas is far more profitable than selling planes, employees more people and makes better profit.

Last year Pizza hut made 16 Billion $ in turnover with 1,60,000 employees. They made more than a Billion $ in profit. While HAL had a turn over of 2 billion $ and employed 32,000 people.

Adding more capability requires MORE Capital investment. Do you really think companies will get more funding to expand its operations when even its initial operation cannot break even in 20+ years ?

More capital would mean that break even point moves further away. So what you are suggesting is that they keep pouring Billions of $ in funding into the LCA plant so that it can keep your fantasy alive.

You are right, it sound like a tremendous 'opportunity'. I am surprised that millions of companies are not queuing up to invest that money. Any idea why ? Maybe they are queuing up to sell pizzas.

 

[Blue Marlin]

i dont get it........
why open up another (private) production line when the current one [hal] is not even producing them at a high rate . and i assume not at a consistant rate.
also why would a private company would be willing to risk opening up a production line with the risk of low orders.

also note here hal has been building planes for a very long time, ok not as successfully as anticipated but there are doing a good job i would say. imagine what it would be like for a company that has had no experiance at all. its like getting a baby straight from the womb and throwing it in the deep end in the hopes it would swim like tom daley.
i feel its too early to consider such a thing

 

[Adhiri]

i dont get it........
why open up another (private) production line when the current one [hal] is not even producing them at a high rate . and i assume not at a consistant rate.
also why would a private company would be willing to risk opening up a production line with the risk of low orders.

also note here hal has been building planes for a very long time, ok not as successfully as anticipated but there are doing a good job i would say. imagine what it would be like for a company that has had no experiance at all. its like getting a baby straight from the womb and throwing it in the deep end in the hopes it would swim like tom daley.
i feel its too early to consider such a thing

These kind of fantastic theories are born from the fertile imagination of IAF chiefs who have no idea how the real world operate outside their cocoon filled with salaried defence professionals and bureaucrats .

They are then spread around by fan boys who are ardent worshippers of men in uniform and think that they can do no wrong and know everything.

You find most of such lots in defence forums. Common sense goes right out of the window.

 

[AMCA]

Well for one, selling Pizzas is far more profitable than selling planes, employees more people and makes better profit.

Last year Pizza hut made 16 Billion $ in turnover with 1,60,000 employees. They made more than a Billion $ in profit. While HAL had a turn over of 2 billion $ and employed 32,000 people.

Adding more capability requires MORE Capital investment. Do you really think companies will get more funding to expand its operations when even its initial operation cannot break even in 20+ years ?

More capital would mean that break even point moves further away. So what you are suggesting is that they keep pouring Billions of $ in funding into the LCA plant so that it can keep your fantasy alive.

You are right, it sound like a tremendous 'opportunity'. I am surprised that millions of companies are not queuing up to invest that money. Any idea why ? Maybe they are queuing up to sell pizzas.

Nobody is fantasizing here, all I am saying is that it is a great opportunity for the private sector to get involved in. There is no end to end research , its pure assembly. Investing in assembly lines with a tie up with HAL assures future orders, your production line never goes dormant, there is Sitara coming up, FGFA right around the corner and AMCA to name a few.

Pizza hut has made billions by using the franchise model.

 

[Adhiri]

Nobody is fantasizing here, all I am saying is that it is a great opportunity for the private sector to get involved in. There is no end to end research , its pure assembly. Investing in assembly lines with a tie up with HAL assures future orders, your production line never goes dormant, there is Sitara coming up, FGFA right around the corner and AMCA to name a few.

Pizza hut has made billions by using the franchise model.

ok.