The Hindu Business Line : Hyundai's second plant to be ready for new small car

HYUNDAI Motor India Ltd's (HMIL) second plant, work on which will begin in April, is expected to be ready in time for the launch of a new small car being developed by its parent, Hyundai Motor Company.

The second plant will build the successor to Santro, HMIL's highly successful mini-car. "HMIL is targeting an Indian market share of 20 per cent or more in 2007," says a press release on Hyundai Motor Company's Web site, announcing the investment in the second plant.

Largest investment: The company will invest about $500 million (Rs 2,185 crore) in the second plant, which will come up adjacent to the existing one at Irungattukottai, about 50 km west of Chennai, while another $100-150 million is expected to come in by way of investments by vendors. This will make Hyundai's investment the largest multinational automobile investment in the country.

From the time it started work on its plant here in 1996, Hyundai Motor Company has invested close to $1 billion (about Rs 4,370 crore now) in phases. With the second plant slated for completion in 2007, Hyundai Motor India's capacity will go up to 4,00,000 units a year from 2,50,000 units now.

The proposed investment in the second plant will come mostly from internal accruals with the parent pumping in some funds. Hyundai Motor India is still trying to figure out whether the second plant will have the flexibility to roll out multiple models or concentrate only on a few select ones.

Hyundai Motor Company announced its intention to invest in a second plant in India during the visit of its Chairman and CEO, Mr Chung Mong-Koo, in February 2005, who had said that India,Brazil, Russia and China showed the greatest growth potential and were the markets of the future.

For exports, too: Apart from serving the domestic market, the second plant will also cater to export markets like Europe, Latin America and West Asia. This reinforces Hyundai Motor Company's decision to make the Indian plant an export hub for small cars. As it is, Hyundai Motor India has been exporting the Santro to these markets.

Hyundai Motor Company estimates that the passenger car market will reach about 9,20,000 units and grow to 1.15 million units by 2007. Further, it will grow to 1.45 million by 2009 and 1.62 million by 2010.

Increased competition: The company's press release points out that the subcontinent has turned into a "competitive battleground for the world's leading automakers," and refers to the expansion plans of other manufacturers in the country.

For instance, Maruti Udyog, the number one car maker, plans to increase capacity to 6,00,000 by 2007 from 3,50,000 now and Tata Motors will hike capacity to 2,25,000 by the year-end from 1,50,000. Others like General Motors and Toyota Kirloskar Motor are also in the process of increasing capacities.

Higher targets: For 2005, Hyundai Motor India has set a target of 2,50,000 units to achieve 100 per cent capacity utilisation. It hopes to sell 3,10,000 cars by 2007 and 4,00,000 by 2010. Hyundai Motor India manufactures the Santro, Accent, Elantra, Sonata and the recently launched Getz at this plant. It also sells the Terracan sports utility vehicle in India.

Hyundai Motor India had expanded its capacity from 1,50,000 units to 2,50,000 in the second half of 2004 at an investment of about $250 million. For the calendar year 2004, Hyundai Motor India sold 2,15,630 cars, which is a 43 per cent jump over the previous year's sales.

For the financial year ended March 31, 2004, Hyundai Motor India reported a net profit of Rs 378 crore on sales of Rs 4,800.49 crore. Its equity capital is Rs 812.54 crore.

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