More vendor investment to take place; parent co to set up 4th worldwide R&D unit here

Mayur N. Shah

Vendors' entry is most likely to happen between March and December 2007.

Mumbai, Nov. 4

Hyundai Motor India's expansion plans together with investments by Korean ancillary units could well translate into foreign direct investment of $1.4 billion (rs 6,277.56 crore) in the country.

Hyundai's additional investment is likely to be in the region of $831 million (Rs 3,726.18 crore) comprising outlays on second manufacturing plant, R&D facility and engine and transmission facility.

This would be supplemented by $562 million (Rs 2,520 crore) in investments that is being committed by Korean vendors to back up the car maker's expansion plans.

Its second manufacturing plant and the engine and transmission plant will absorb $528 million (Rs 2,371 crore) and $263 million (Rs 1,181 crore), respectively.

The company has an existing chain of 80 vendors of which 17 are from Korea who have mushroomed around the Hyundai factory premises since 1996.

These vendors, who then invested $262 million (Rs 1,176 crore), are now about to invest an extra $340 million (Rs 1,527 crore), said the company spokesperson.

Besides the existing chain of 17 Korean vendors, 20 additional vendors are to invest $222 million (Rs 997 crore) to meet the requirement of the automobile major.

According to the company senior officials, the vendors' entry is most likely to happen between March and December, 2007.

The vendors will locate their facilities within a range of 20 km of Hyundai's automobile plant.

Their close proximity will reduce inventory stocking with production of components linked to demand.

Hyundai has announced plans to raise its production capacity from 3 lakh units to 6 lakh units a year. With the second plant, 70 per cent of the total 535 acres allotted to the company by the Tamil Nadu Government will stand utilised.

Also, the Korean auto conglomerate (Hyundai Motor Company) has decided to set up its fourth worldwide R&D facility in India; it has R&D facilities in Germany, Korea and China.

It will invest $40 million (Rs 179 crore) in the facility, which may be located either in Chennai or Hyderabad.

(This article was published in the Business Line print edition dated November 5, 2006)
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