Hyundai Motor India, the country’s largest exporter of cars, is considering creation of fresh capacity to meet demand upsurge.
It is not clear yet whether Hyundai will put up a new line at its existing plant in Chennai or look for an alternative site for a greenfield facility.
Typically, any new line would mean a capacity to produce one lakh more cars. Ballpark estimates show that would involve an investment of Rs1,500 crore.
Brisk sales of cars and long waiting periods on some models are forcing not just Hyundai but many other large manufacturers also to think in terms of capacity expansions.
But since robust sales have come after long period of uncertainty, car makers remain cautious on expansion.
In the case of Hyundai, installed capacity at the Chennai facility is already about 6 lakh units per year.
Not only will Hyundai need to beef up its domestic supplies if Indian car market growth rates remain at current levels, it may also look to increase exports from the country.
Three different industry experts confirmed Hyundai’s intent to expand capacity sometime in the near future.
One of them said the company may already be operating at 110% capacity.
Hyundai is looking to increase its domestic market share significantly —- from about 20.4% now to 25% —— in the next two years besides also enhancing exports from India. So capex would be an imperative, said experts.
Hyundai has spare land at the Chennai complex if it were to add a new line there and one of the experts pointed out that India already accounts for 20% of Hyundai’s global production so that any saturation in any of the key Hyundai Motor Co plants across the world may also push the Indian subsidiary to increase capacity.
A company spokesperson was non-commital. “Hyundai Motor India does not have any plans to increase its capacity immediately. However, in the future if the situation so demands then we will look in to it,” the spokesperson said.
On a three-shift basis, the Korean car maker can manufacture about 6.2 lakh cars every year but only about 5.4-5.5 lakh are being made now on an annual basis, another Hyundai official said.
So “there is still a margin of about 80,000-90,000 cars in case demand perks up.
Besides, we have already decided to shift the production of i20 out of India and our export orders are dwindling. I am not saying there won’t be any capacity expansion but it is unlikely to happen anytime soon. We could look at a timeframe of 2011 and beyond”, the official said.
Meanwhile, a major development currently underway in India is the Hyundai mini car, which has been codenamed ‘RB’.
Industry experts said the product could be a three-cylinder petrol and two-cylinder diesel car strapped with an 800 cc engine. It should be in the market by the second half of next year or early 2011. But Hyundai officials said that this car would be out only late 2011 since “even the prototype” is not ready as of now. Hyundai sells the Santro, i10, i20, Getz, Accent, Verna and Sonata brands in India. It exports almost 50%of its production to various countries.
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