The Hindu Business Line : Hyundai’s next plant may be just a hop away

Chennai, Aug. 4 Going by the rate at which its sales are growing – 40 per cent in the first four months of the current financial year – it is reasonable to assume that Hyundai Motor India Ltd will have started examining the need for fresh capacity additions. Indeed, a senior official of the company told Business Line recently, “We are working on it.”

Hyundai’s Korean parent has decided that India would be the global hub for small cars. The two units at Sriperumbudur together have a capacity to manufacture 6,00,000 cars. This, however, can be stretched a bit, to 6,30,000, by working an extra shift, according to Mr H.S. Lheem, Hyundai India’s Managing Director.

There is some space behind the second unit, where according to Mr Lheem, a body shop and paint shop could be put up and linked to the assembly line at Unit-II. This will give Hyundai another 1,00,000 in capacity.

But beyond 7,30,000, there is no room in Sriperumbudur.

Hyundai India has ambitions to go up to 1 million cars. The question therefore is, where will the company go for capacity beyond 7,30,000.

The official line, in the words of Mr Rajiv Mitra, Head – Corporate Communications, is: “We do not have any plans for any other manufacturing unit at this point of time and if demand grows to the extent that we need another facility we will take a call when we get to that point.”

But even employees of the company are not convinced. They point out that at the current rate of growth, the capacity of 7,30,000 will be hit in 2-3 years.

When Business Line caught up with Mr Ashok Jha, President, Hyundai Motor, on the sidelines of the recent launch of the Kappa engine, he said that it would not make sense for the company to go to another geography, say, North India. He pointed out that most of Hyundai’s vendors were close-by and the company would need to look for a location not too far from Sriperumbudur.

While Hyundai is said to be extremely comfortable with the Tamil Nadu gGvernment, it is unhappy about the way some labour issues have cropped up at Sriperumbudur. The Tamil Nadu Government has said it could do nothing to stop unionisation of workers.

So, Andhra Pradesh? The State has made overtures to Hyundai. According to Mr Sam Bob, Principal Secretary, Department of Industries and Commerce, Andhra Pradesh, a formal letter was written to Mr Ashok Jha a few months ago, inviting Hyundai to set up shop in the State.

Mr Bob told Business Line today that Mr Jha had replied saying that Hyundai would examine the option. “We have enough lands at the border with Tamil Nadu. We will extend all assistance to them,” Mr Bob said.

From a location in Andhra Pradesh near the Tamil Nadu border, say Tada, it would be easy for Hyundai not only to have components delivered just-in-time, but also continue to use the Chennai port for exports. A Rs 45-crore Ro-Ro terminal plus a Rs 50-crore multi level car park is coming up at the port—infrastructure meant to make exports of passenger cars easy. Tada is also on the rail route, unlike Sriperumbudur.

Hyundai can be expected to weigh this option against what the Tamil Nadu Government may offer – locations such as Thiruvoykondigai and Soorapoondi villages in the Gummidipoondi taluk where the government has 971 acres and 506 acres respectively in its possession or Pillaipakkam near Irungattukottai, where the government is acquiring 1,000 acres.