Booming auto market forces manufacturers to add capacity

Mumbai: With the economy and markets surging ahead, post a good monsoon, the auto market has hit boom time and manufacturers are quickly adding capacity to take advantage of the increasing demand. Leading the race are, of course, the biggies in the B segment: Hyundai Motor India and Maruti Suzuki.

Hyundai Motor India is facing serious supply shortages as both domestic and overseas demand has shot to unexpected levels. As the company's capacity expansion plan is set to be completed only by the second quarter of the next fiscal, the only solution in sight for the company is to begin a third shift at its Chennai facility which will enable it to roll out another 1,000-odd units per month. The company is also set to shortly begin hiring another 800 people to man the third shift which is set to commence from January, say sources.

Hyundai's Santro Xing variant introduced in May this year was an instant hit both domestically and in the expert market. While in India the car sold an average of 9,000 units per month from about 7,000 units earlier, its export demand has also shot up with the result that the company has had to revise its export forecast to the European countries.

It has already sold 3,000 units in Italy, Greece and the Netherlands and has an order backlog of another 3,000 units. The company has now set an export target of 30,000 units for the current year. Hyundai's facility has a capacity of 1, 50,000 units annually, which is being upgraded to 2, 50,000 units. The company employs 2,000 workers.

Other car manufacturers who find themselves unable to meet demand are Mahindra & Mahindra and Toyota Kirloskar. While M&M may outsource parts production to meet the increased demand, Toyota is considering adding a third shift to meet the increased demand for the Corolla and the Qualis. Although M&M has increased the output of the Scorpio from 2,600 units a month to 3,000 units, there continues to be a waiting period of two weeks for the vehicle depending on the region.

Toyota, on the other hand, is working its plant at "more than its optimum capacity of 45,000 units per year," say company officials. With a 1.5 month order-book position, the company currently has "no stocks at all" and is looking at the possibility of whether a third shift or fresh investment in capacity can be added.