The Hindu Business Line : Hyundai starts planning for further expansion

Bangalore April 4 Hyundai has said a strong won and prolonged labour issues in South Korea will continue to push the car maker to expand its operations to countries such as China and India.

The South Korean car major also said that it will start planning for further expansion next year even as the existing capacity of its Indian plant is being doubled to 6 lakh units. "The existing land near Chennai is good enough for only 6 lakh car units. In case we decide to expand our capacities further, we will need to decide whether we should buy more land near the plant or go somewhere else," the Hyundai Motors Executive Director, Marketing and Sales, Mr W.S. Min, told Business Line. He, however, said further expansion will entirely depend on the market conditions. Hyundai currently has a market share of 17-18 per cent and it expects it to increase to 20-22 per cent by 2010.

To raise exports

The car maker is now planning to increase exports to at least 50 per cent of its total production in India in another 18-24 months. "Labour problems and strong won are the main reasons for us to expand our operations in low cost countries like China and India," Mr Min said. He said this would push exports from 35 per cent currently to around 50 per cent by the time the Hyundai plant's capacity is doubled to 6 lakh units per year.

Mr Min said its Indian operations have been running smoothly so far and the industrial climate was conducive enough for the car giant to make major investments in the country. Hyundai has made India its small car hub and exports these cars to various countries.

Another platform

Hyundai is also planning to add another platform as its expands its operations in the country. It currently has six platforms and Mr Min said that one of the reasons for the car maker to maintain quality was that very few parts are common among its various car models. "We have very few recalls. Common parts can lead to issues with the quality of a model," he pointed out.

The Hyundai Motor India Vice-President for Marketing & Sales, Mr Arvind Saxena, said with the company adding more capacity to its existing plant, 20 more vendors from South Korea are setting up their plants here. They are investing between $250 million and $300 million for this purpose.

Currently, Hyundai has around 17 South Korean vendors and 66 Indian vendors. "We expect indigenisation to increase further because of the increase in vendor base," Mr Saxena said.

Rising interest rates

A Hyundai official said that rising interest rates was a cause for worry. He said efforts were on to work out with finance companies to lessen the impact of the higher interest cost. With several banks set to increase interest rates after the central bank early this week took several steps to rein in inflation, car manufacturers fear that sales could slow down as low interest rates have been the major driver for growth in car sales.