Car wars

Venkatachari Jagannathan
16 October 2001

A look at small- and mid-size segments reveals that car wars are little more-than-pitched battles between variants alone. For carmakers, the introduction of variant is a cost-effective strategy, as it calls for just incremental investments to be made compared to what it takes to roll out a totally new model.

Hyundai Motor India Ltd (HMIL) president A P Gandhi is, however, satisfied with the performance of Sonata, which has a market price of Rs 13 lakh. In August 2001, HMIL sold 150 Sonatas and it plans to double that figure in September. This fiscal the target is to sell 3,000 Sonatas, which is nearly 3 per cent of the companys overall projections. This premium model is marketed only in select cities, as the production capacity is currently low.

In addition, HMIL plans to sell 78, 000 Santros and 20, 000 Accents (including exports: 7,000 Santro/Accent) to take the total volume to just over 1 lakh vehicles. In terms of value, this would translate into Rs 3, 600 crore as against Rs 3, 060 crore last year.

The company has also prudently managed its finances to lower interest payouts. HMIL has not availed of working capital loans and has prepaid its domestic loans to the tune of Rs 100 crore. This is possible by managing the receivables efficiently and leveraging the companys market position.

The ongoing war could make a dent in HMILs export earnings. If the war continues for a long period, and if the rupee depreciates much beyond the expected levels, HMIL will take a relook at its pricing. But this logic applies to other players as well.

HMIL is currently exporting Santro/Accent to Algeria and Bangladesh, among other countries. It also ships out components like body panels to Korea. But the export of components has slowed down.

Though the company is not obligated under the MoU route to export, HMIL has to fulfill export stipulations under the EPCG scheme to the tune of around $800 million. Gandhi says HMIL has got an extension to fulfill its obligations.