Financial Daily from THE HINDU group of publications
Sunday, Dec 15, 2002
Industry & Economy - Cars
Corporate - Interview
`Growth may be flat this fiscal' Interview with Hyundai Motor India president, Mr B. V. R. Subbu
Hyundai Motor India (HMI), the wholly-owned subsidiary of the Korean automobile giant, is India's second largest passenger car manufacturer. Unlike the other overseas automobile companies which entered the country during the late 1990s and launched mid-size cars, after the sector was thrown open for competition, Hyundai forayed into the small-car segment first.
This proved to be a successful strategy. The timing for the Indian subsidiary was also fortuitous, as its parent was busy designing and productionising a new small car for the Korean and the global market. HMI's efforts at redesigning and localising the Santro from the original Hyundai Atos was aided by the parent's work on the latter model.
With the Santro, Hyundai had a winning product. Further, right pricing and an efficient service network has enabled HMI emerge as strong competition in the volumes driven small-car market. Its other products, the Accent (in the mid-size segment) and the Sonata (in the luxury segment), have also emerged as leaders in their respective sub-segments.
HMI's manufacturing facility in Irungattokottai, near Chennai, manufactures all three models. The company plans to add the Terracan, a high-end multi-utility vehicle, to its list of offerings. More models may be in the offing in the second half of 2003-04, including one in the small-car segment. HMI president, Mr B. V. R. Subbu, spoke to Business Line about the company's performance, prospects and some of the issues faced by the industry.
Excerpts from the interview:
How has Hyundai fared during the last one year in terms of market share?
We achieved the one-lakh mark in sales in November , a month ahead of target. We will probably close the year with a 15-20 per cent growth over 2001. In terms of market share, we have grown overall from around 17 per cent last year to about 20 per cent now and all our products lead their respective segments.
Is the company still suffering from production constraints vis-à-vis demand for its cars? Any new measures to tackle the issue?
I wouldn't say we have had production constraints, it was more like making some realignments in our production cycle to cater to a demand spurt. We have had some overwhelming successes with the new launches we did this year. Earlier this year, we extended both our production shifts by an hour each to meet the increased demand for the Santro Zip Plus (the new version with a 1.1 litre engine) and we have a waiting period on the delivery of both the Accent Viva and the Accent CRDi (the new diesel version with the Detroit Diesel, Common Rail Direct injection engine). We are in the midst of an assembly line extension and we do hope to have the required flexibility soon to meet our future growth plans.
After dropping plans for HMIL's initial public offering, has the company tied up the required funds which would otherwise have come from the IPO?
A major part of the funds we are investing for the current phase of extension is from internal accruals. These funds would make up for the funds which would have otherwise come from the earlier proposed IPO.
In the light of the fact that there will soon be competition in the small-car segment from players who are not currently in the segment, what are HMIL's plans to tackle such competition? Are more upgrades and/or design changes planned to keep the Santro's appeal fresh?
We have managed to retain our leadership in both the highly competitive B and C segments through continuous product and technology upgrades, beginning with the Santro Zip Plus to the recently launched Accent Viva and CRDi. We have also put in place an extensive sales and service network, unmatched by almost all our peers in the industry. In the longer run, we believe that leadership will be a combination of the quality of product that you bring to the customer, as well as the comfort or the 'peace-of-mind factor' that the customer anticipates or experiences with your brand and service.
Is Hyundai planning to actively deploy manufacturing alliances in the country?
We have independently created a strong equity around the Hyundai brand and put in place the required infrastructure for growth, it therefore may not be an appropriate strategy for us to leverage on manufacturing alliances at this given point of time.
How is Hyundai Finance faring? What is its share in the financing business for Hyundai cars?
Hyundai Finance is not a finance institution; it is a branding of financial services available with our dealers as the front end and a number of banks at the back end. Hyundai Finance is today an established brand in the business and a preferred partner for all the leading automobile financiers.
What are HMIL's export plans? How and when will Santro be exclusively manufactured in India for the world market?
India will be an exclusive global production and export base for Santro and/or the Atos (the original design on which the Santro and the Kia Visto were based) by 2005. Exports are likely to go up from around 6,000 units a year at present to 40,000 units a year once the plan is completed.
What are your projections for the current fiscal? Will there be any new launches before the end of this fiscal? How do you think the industry will do this fiscal?
We have already sold 1,04,283 cars during the first eight months of this fiscal (between April and November 2002). During the same period last year we had sold 86,640 cars. We expect to close this year with a volumes growth of about 15-20 per cent.
We have announced our intent to enter the sports utility vehicle (SUV) segment during the next quarter and hope to sustain the growth we have achieved over the current year into the next fiscal year. As far as the industry is concerned, in the absence of any significant growth triggers between now and March, I expect this fiscal to be largely flat or at best marginally better than the previous fiscal.
What are your expectations from the forthcoming Union Budget relating to the automobile industry?
The auto industry's growth is dependent on overall economic growth. All I, therefore, hope is that the Budget helps revive economic growth.
What about the company's plans for entering the light commercial vehicle and passenger commercial vehicle segments?
Our plans for the Indian commercial vehicles segment are for the medium to long term and, therefore, we do not foresee any immediate developments in this area.
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