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N. Ramakrishnan

Chennai, Oct. 5 Hyundai Motor India plans to reduce the dollar-denominated exports of its cars to counter the appreciation of the rupee against dollar.

A little over half its exports is to Europe, which will not see any change. However, it exports cars to South Africa, north African countries such as Algeria, Morocco and Egypt, and Latin American countries such as Mexico, Colombia and Guatemala, which it will cut back.

Mr H.S. Lheem, Managing Director, Hyundai Motor India, told Business Line that at a meeting of top executives of the company on Friday, it decided to reduce exports and concentrate more on the domestic market.

The company’s target for 2007 is to export 1.15 lakh cars against 1.13 lakh cars exported in 2006, a 1.5 per cent increase. However, this plan itself will have to be re-worked in the light of appreciation of rupee. In 2008, when the company’s second plant will be in production, Hyundai’s preliminary plans are to export 2.5 lakh cars.

“Our business plan for 2007 is (based) on (an exchange rate of) Rs 45 to a dollar. But the dollar is now less than Rs 40, which means more than 10 per cent depreciation. That is a huge amount for us,” he said.

He said a maximum of 5 per cent of this depreciation could possibly be absorbed through a price increase. He said that there were limitations in foreign currency hedging to make up for such a huge depreciation of the dollar. Exports accounted for about a third of the company’s turnover, which in 2006 was $2 billion (about Rs 9,000 crore). This year, the company hoped to achieve a turnover of $2.3 billion and $3.5 billion in 2008.

According to Mr Lheem, the Santro accounts for nearly 85 per cent of exports, Getz 12 per cent and Accent 3 per cent. He strongly argued for the Centre to offer fiscal incentives for exports, especially if it were really serious about making the country a hub for small car manufacturing.

Mr Lheem said the Government announced in July 2006 withdrawal of the target plus scheme for exports, retrospectively from April 2006. This was a major blow to exporters, especially Hyundai, which was the largest passenger car exporter in the country.

Mr Arvind Saxena, Vice-President (Marketing and Sales), said under the target plus scheme graded incentives were given based on the volume of exports. This helped the company competitively price its cars in the export markets.

The company got a “few hundred dollars” a car as incentive under this scheme. It also pushed the company to export more. The focussed market scheme, which replaced the target plus scheme, was meant more for opening up new export markets.

Mr Lheem said the company would concentrate more on the domestic market, to make up for the cut in exports. For instance, it announced a limited offer for an Accent variant in September, which saw sales of the car more than doubling to 948 units in September. However, he ruled out any such scheme for the Santro, the company’s top-selling hatchback.

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