Embraer’s decision to sign a memorandum of understanding (MoU) with Indian conglomerate Adani to develop a final assembly line in the country for Embraer regional jets is a very shrewd move.

India’s politicians, media and general public are fixated on the ‘Make in India’ national program that the current prime minister, Narendra Modi, launched in September 2014, to try and transform India into a global manufacturing hub.

Embraer now has credible answer to ‘Make in India’, putting it in a better position to win aircraft orders from India’s commercial and defence sector.

It is a shrewd move because the MOU signing helps to put Embraer in a good position locally without having to make any firm commitments – MOUs are non-legally binding.

The MOU is scant on details. There is no time-frame for when the final assembly line will be established, where it will be located and what specific aircraft type Embraer is willing to manufacture in India.

Embraer’s newest regional jet is the Pratt & Whitney GTF-powered Embraer E2, but it still manufactures the older model GE CF34-powered Embraer E1. It is not uncommon for western aircraft manufacturers to transfer production of older generation aircraft overseas when it sees the aircraft model is nearing the end of its time.

The aircraft-maker can generate additional sales in the new country of manufacture, that it may not have got otherwise, while avoiding having to transfer its latest technology overseas. Final assembly also represents a very small percentage of the aircraft’s total value – only about five percent – because the value in the aircraft is largely in the manufacture of the sub-assemblies , such as the wings, and the aircraft systems: engines, avionics, landing gears, etc. Final assembling of an aircraft is an achievement – no doubt about it – but is not necessarily the most high-tech of tasks.

Embraer has done this before. It transferred manufacture of the 50-seat Embraer ERJ-145 to Harbin, China in 2003, resulting in a flurry of aircraft orders from state-owned Chinese carriers. The ERJ-145 at that time was nearing the end of its time.

The ERJ-145 production line in China closed down after about seven years, because it soon became apparent there was no international market for the outdated ERJ-145.

But all this does not matter to Embraer in its hunt for sales in India. The other reason the MOU is a shrewd move is because Embraer can – rightly – argue that it is unable to invest in a final assembly line in India unless it has a substantial order pipeline there. What the magic number is, that Embraer has in mind, is anyone’s guess, but it is safe to assume the aircraft-maker would be looking for firm orders for more than 100 aircraft. This would be quite a good outcome for a commercial aircraft maker that had total deliveries last year of 78 of which 34 were E1s.