The Hindu Business Line : Capacity crunch hits Hyundai sales

Uphill drive
In the first five months, Hyundai recorded sales of 74,241 units, while Tata Motors volumes were higher by over 500 units.
Capacity crunch has been so significant that in spite of its employees working three shifts of eight hours each, they have been unable to meet demand.

Bangalore , June 22

Hyundai's constant struggle with limited capacity has finally hit the company ending its seven-year reign as the second largest carmaker in the country.

"Because of capacity crunch, we are unable to meet the demand," Hyundai India's Vice-President for sales and marketing, Mr Arvind Saxena told Business Line. Tata Motors has nosed ahead of Hyundai by taking advantage of the situation and shuffling the pecking order in the process.

The difference between Tata Motors and Hyundai in terms of sales is small but significant as the latter's sales will continue to suffer due to capacity constraints in the near-term. In the first five months, Hyundai recorded sales of 74,241 units while Tata Motors volumes were slightly higher. For Hyundai, which started its Indian operations in 1998, capacity crunch has been so significant that in spite of its employees working three shifts of eight hours each, they have been unable to meet the demand. "We obviously can't work beyond three shifts even though the demand has been very good," says Mr Saxena. He said the company has an outstanding export order of 25,000 units for Santro and Accent.

Hyundai is not sitting idle either. Its has already earmarked nearly $1 billion investment by 2007 for putting up its second car manufacturing plant, which will double its production capacity to 6 lakh units per year. The new small car, which it plans to launch, will be produced out of the second plant. Nearly one third of the cars, Hyundai India produces are exported to South Africa, Peru, Germany and other countries. "Our exports are growing nearly 15 per cent and we hope to export more," Mr Saxena said.

Hyundai has, fbeen struggling to keep pace with demand. Even last year, capacity crunch affected its sales but by reducing production of a few models and at the same time increasing the output of others, it managed to fulfil the demand. However, this year, the task has been harder for Hyundai as demand has been growing every month.