Hyundai Motor, the world's sixth largest auto maker, is likely to start using India as a manufacturing hub to meet the demand for small cars in its home market in South Korea.
Hyundai may concentrate on manufacturing its top-end models, which yield better margins, in South Korea where the labour costs are high. The company may move production of small cars such as the Getz to cheaper markets such as India and China.
Hyundai Motor said it was considering the subject in a bid to raise its competitiveness, but it wouldn't involve shutting down production lines back home in South Korea, only adjusting production volumes. The clarification from Hyundai comes after a South Korean newspaper, the Chosun Ilbo, quoted a company official as saying that Hyundai is mulling a shift of its production line of the Getz, a compact car, to India by the end of '07. Hyundai produces over 2 lakh units of the Getz in South Korea at present.
Hyundai's statement comes on the back of rumours that the company's Q3 profit may have taken a hit - its third straight fall - following a workers' strike in South Korea and a resultant drop in domestic production. Also, a strong Won vis-à-vis the dollar has made Hyundai's cars more expensive in foreign markets as compared with that of Japanese rivals who have been benefiting from the Yen's weak position.
Meanwhile, Hyundai's Q3 results will be declared on October 26. At present, Hyundai's India arm, Hyundai Motors (HMIL), exports the Santro/Atos and Accent models to various European, Latin American and African markets. It is yet to enter the South Korean market.
In the past, HMIL has talked about starting exports of the Getz soon. However, when contacted for a comment on the likelihood of exporting to South Korea, a Hyundai spokesperson said: “Nothing has been decided yet on next year's export plans.”
Hyundai is in the process of setting up its second plant in India with a capacity of 300,000 units, which should become operational by January '07. The new plant is expected to ramp up to full capacity by '08, taking Hyundai's total domestic capacity to 600,000 cars. Of these, around 50% will be exported.
Hyundai is currently one of the biggest vehicle exporters from India, exporting over 1 lakh cars from its Chennai facility last year. Hyundai Motors India generates a third of its total turnover - about Rs 2,700 crore - from exports. The company exports the Santro/Atos and the Accent to nearly 60 countries.
It has expanded its export markets in Europe to include the UK, Malta, Serbia and Montenegro, in Africa and Middle East to Turkey, South Cyprus, Afghanistan, Qatar, Lebanon and Ceuta, besides to Panama and Bermuda in Latin America. It also plans to spread its wings to Argentina, North Cyprus, Libya, Vietnam and Mozambique.