Hyundai Motor Opens 2nd Plant in India

Hyundai Motor India inaugurated its second Indian plant Sunday, doubling its production capacity in the country.

Each of the two plants will make 300,000 cars a year, which will establish India as Hyundai’s global hub for small car production.

Attending the opening ceremony in Chennai were Hyundai Automotive Group Chairman Chung Mong-koo and Tamil Nadu’s Chief Minister Kalaignar M. Karunanidhi.

○ $1 billion investment in fast-growing Indian market

Hyundai has invested one billion dollars to build the new factory over an area of 177,000 square meters. Construction started in November 2005 and the manufacturing facilities were finished after 13 months. Production tests took one year.

The second plant will exclusively assemble the “i10” hatchback, a strategic light vehicle for export.

Hyundai Motor India sold 200,150 vehicles last year thanks to an aggressive marketing strategy, becoming the second largest automaker in India in sales of passenger vehicles.

Hyundai’s focus on the Indian car market is not surprising given the explosive growth of auto sales there. Last year, Indians bought 1.2 million cars and this year’s forecast is 1.5 million for an impressive growth of 18 percent. The estimated average growth of the global car market over the same period was just 3.7 percent.

“The size of the Indian market is not as big as those in other industrialized countries, but it won’t be too long before India will witness the advent of ‘motorization (a state when people consider cars a commodity)’” said Choi Jae-guk, Hyundai president for overseas sales.

Chairman Chung said at the opening ceremony, “The production capacity of the new Indian plant is comparable to that of any other major carmaker in the world. I am confident it will serve as the advance base for Hyundai small cars.”

At the photo session, Chung grabbed his two hands tight and raised them above his head, facing Hyundai’s Indian dealers.

A Hyundai source said, “(Chung) showed the same gesture when Yeosu won the 2012 World Expo bid. It seems to represent his sense of confidence.”

○ Global hub for small car production

Hyundai will make the second Indian plant its production base for the global small car market, thanks to low labor costs and India’s proximity to Europe, Africa and Middle East, where demand for light vehicles is strong.

Small cars also control more than 77 percent of the fast-growing Indian market. The i10, which is not available in Korea, strategically targets Indian customers. Unlike big names from Europe, Japan or the United States who sell only existing models, Hyundai wants to appeal to Indian consumers with the i10, one of its newest cars.

The Korean carmaker will also introduce its new Santro model with an LPG engine in the second half of this year. The model will save drivers 30 percent in fuel costs.

Hyundai’s prospects this year have also gotten off to a fast start, with sales rising 41.4 percent to 37,701 last month.

○ Price war and labor relations pose new challenge

Tata Nano, dubbed “the people’s car” at just 2,500 dollars, is posing a challenge to Hyundai Motor India. The Korean company is worried that the car’s maker Tata Motors of India could trigger a price war in the global auto industry. Renault-Nissan and Volkswagen have also announced plans to develop similarly priced models.

The dilemma is whether to develop a model that will mostly likely be unprofitable, or not develop one and risk losing market share.

Labor-management relations are another challenge. Prior to the inauguration ceremony, some 100 Hyundai Motor India unionists were arrested for trying to stage a protest rally nearby the plant without police permission, the English newspaper News Today reported.

The daily also said about 100 Indian workers expressed discontent toward management during the ceremony, saying it does not recognize the union.

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