Hyundai's new plant in Chennai will support its entry into an even smaller range of small cars, reports Mohini Bhatnagar.
Chennai: With the unveiling of the Nano from Tata Motors at the Nitnth Auto Expo in New Delhi last month, a number of carmakers have jumped on to the small car trail including Bajaj Auto, Renault Nissan, Toyota Kirloskar, Hyundai Motor, ford Motor India and Maruti Suzuki. All in all the focus has shifted squarely to small, fuel-efficient, space saving cars.
Smaller, automakers now seem convinced, can be beautiful to their bottomlines as the existing small segment gets crowded.
Renault Nissan will launch its own small (Yeni?) car while Hyundai has announced the launch of its own new small car that will be priced lower than the 'Santro' and might be on the roads within three years.
Bajaj Auto's small car will be launched after four years while Toyota and Ford will launch their small cars without specifying the timeframe.
Away from the Nano and the spotlight, Hyundai has been quietly focusing on its future strategy and its second manufacturing plant coming up in Tamil Nadu where the i10, launched in November last year, is being produced (See: Hyundai adds style to the "A" segment with the i10)
"We are doing a feasibility study for our small car which will take another three years to make it a reality," Hyundai's senior vice president (marketing and sales) Arvind Saxena had announced at the inauguration of the plant. (See: Hyundai Motor India commissions its second Indian plant)
Saxena said that the car would be a little smaller in size but have more spacious interiors than its popular Santro and will be a market model, which achieves all global parameters. Following the opening of the plant the company also said that the small car would not compete with the Nano in price leading to conjectures that the new Hyundai car could be priced in the Rs1.5 to Rs2 lakh range.
Hyundai's i10 has been a remarkable success, exceeding the company's expectations. It managed to beat Suzuki's cars in performance in the first quarter of the launch itself. In January this year while Maruti Suzuki's entry level M800 suffered a 22 per cent drop in sales to 5,470 units (against 7,021 units last year), and sales of Alto, Swift, Wagon R and Zen Estilo grew by a just 3 per cent, to a total of 45,957 vehicles, Hyundai posted a robust growth of 39 per cent in sales in the Indian market mainly due to strong sales of the i10. The company claims to have already sold 25,000 units of the car since its launch in the last three months.
Hyundai has already made India the worldwide hub for its small car operations and is the biggest car exporter from India at present. Hyundai has also become the first foreign carmaker in India to develop and produce a model in India for global sales.
In fact Hyundai is following a well thought out strategy to capture a large chunk of the small car space not only in India and China but a number of markets globally. Towards this end, its second plant in Tamil Nadu will help it to double its production capacity to 600,000 units per annum.
Hyundai is looking at a golden opportunity as worldwide it has the brand image of a cheap but decent car maker and unlike Tata Motors' Nano, Hyundai's small cars including its proposed new small car would be able to meet the stringent safety and environmental requirements in Europe and other developed markets.
Hyundai aims to grab a large slice of the global car market by turning its operations in India and China into key design, manufacturing, and export hubs for its entire global operation apart from expanding its presence here as well.
In India Hyundai's main competitor is Maruti Suzuki, which controls about 50 per cent of the Indian market. Hyundai's share in the Indian market declined last year to 17 per cent from 18.2 per cent in 2006, while in China it fell to 4.6 per cent, down from 6.9 per cent a year earlier.
The Korean company is also planning to increase its share to 20 per cent in India on the back of increased capacity and new launches from its new plant. In the global market the company is targeting increasing market share in the markets of Russia, Eastern Europe, the Middle East, and Africa, which are forecast to be just under a quarter of Hyundai's global sales this year.
Hyundai is already India's largest exporter of passenger cars having shipped over 127,000 cars in 2007, accounting for about two-thirds of India's annual car exports units.
The company is also working on a plan to get rail connectivity to transport its cars from the factory to the Chennai port.
The company says it will invest over Rs4,000 crore in India by 2013 over the Rs3,372 crore it has already pumped in so far.
While Hyundai has started working on the smaller car at its R&D centre in Korea, the process will pick up pace only after October 2008, when the company rolls out the i20. After the global launch of the i10 in October 2007, Hyundai has begun aggressively working on the i20 at its new Chennai plant.
Developed under the code name PB, the new hatchback will also largely cater to the European market.
Passenger car sales in India have grown at about 15 per cent CAGR over the last five years and small cars are expected to dominate the market. New car registrations have increased from 625,000 in 2001 to over 1.3 million in 2006.
The sub-1,500cc or 'mini' and 'compact car' segments alone account for 66 per cent of new sales, according to KPMG's India Automotive Study 2007.
Carlos Ghosn-led global carmakers Renault of France and Japan's Nissan Motor are also studying the feasibility of a $3,000-car in alliance with two-wheeler maker Bajaj Auto while others including Toyota Motor and Volkswagen have also expressed interest in producing a 'cheap' car.
Annual passenger vehicle sales in India are estimated to nearly double to 20 lakh units by 2010 due to rising incomes.