Hyundai Motor Cruises Across Indian Market
South Korean Automaker Comes Up With Popular Models
By Kim Tae-gyu
Staff Reporter
Hyundai-Kia Automotive Group has been one of the major beneficiaries of the global financial crisis as the world's fourth-largest automaker chalked up fast growth last year despite the economic turmoil.
In particular, the Seoul-headquartered outfit racked up outstanding growth in India ― its sales in the world's second-most populous country rocketed 18.1 percent in 2009 from a year ago.
The strong sales are boosted by the group's subsidiary there ― Hyundai Motor India ― which boasts of state-of-the-art plants near Chennai with an annual capacity of more than half a million vehicles.
Company officials said the notable success of Hyundai in India is attributable to the firm's strategy of being woven into the fabric culture of the country. In other words, it cranks out models best serving local tastes.
``Hyundai Motor has put the local relevance as its top priority ever since we made inroads into the Indian markets in order to win the hearts and minds of end customers,'' said Director Arvind Saxena at Sales & Marketing Division of Hyundai Motor India.
``In my view, such an approach has worked. We will continue to stick to the strategy so as to serve the Indian customers best. Toward that end, we will put forth efforts in various areas including research and development,'' he said.
As an example of customization, Hyundai equipped its products with stronger horns and durable air conditioners as some Indians tend to compete to honk horns to each other in the midst of sultry weather.
Plus, Hyundai models typically have high roofs and crucial engine control units are designed to be resistant to water because cars have the possibility of being waterlogged in flood-prone areas of the country.
Market experts concur.
``Over the past few years, Hyundai Automotive Group has increased its edge in customizing their automobiles to end customers worldwide,'' Mirae Asset Securities analyst Lee Sok-je said.
``In comparison, its international rivals seemingly lag behind in the customization competition. That explains why an increasing number of Hyundai cars cut a dash on the streets of Indian towns,'' he said.
Upside Momentum
Currently, Hyundai Motor India is the second-largest automobile manufacturer in the southern Asian country ― carving out 20 percent of the market ― behind just Maruti Suzuki, a joint venture established three decades ago.
In comparison, Hyundai tapped into the Indian market in a full-fledged manner only a decade ago when the company set up Hyundai Motor India in 1998 with a yearly capacity of 300,000 units.
Although a latecomer, Hyundai clocked fast expansion over the past 10 years to become a major player. Today, it offers a total of 54 variants of passenger cars, and retains a 272-strong dealer network across the country.
Its most famous brand in the Indian market is the Santro Xing, a premium hatchback launched in 2003, which gained wide-ranging recognition ― it sold upside of 80,000 last year alone.
Hyundai Motor India is by no means attempting to rest on its past laurels ― it continues to try to strengthen its footing there as amply demonstrated by its second plant near Chennai.
It was commissioned in early 2008 with a capacity of 300,000 vehicles per annum, doubling the company's capacity to 600,000.
Even Hyundai Automotive Group Chairman Chung Mong-koo has casually stressed the significance of the new facilities in the global strategy of Asia's second-largest carmaker.
``Hyundai Motor further strengthened its presence as a global automaker by creating a second generation of manufacturing plants in China and India, thereby increasing its production capacity,'' Chung said on the Hyundai Web site.
The second-generation plant enabled Hyundai Motor India to jack up sales not only on the Indian market but also in Europe. Presently, the firm is the country's foremost passenger car exporter.
``The new plant beefed up the momentum of Hyundai Motor India. If it can keep offering attractive models such as the i20, the firm will see further growth,'' Mirae Asset analyst Lee said.
The Hyundai i20 is a super-mini, sub-compact car, which made its debut at the Paris Motor Show in October 2008. The model was unleashed in India two months later and hit a chord with customers.
The i20, which brags smooth lines and neat exterior detailing in addition to wide spacing unprecedented in a super-mini, saw sales of more than 30,000 last year and the tally is projected to jump in the future.
It is armed with various advanced features such as electric front windows, remote central locking, six airbags, active front head restraints and the highly-touted stacked rear light clusters.
Exponential Potential
The Indian auto market is already big as a total of 1.4 million passenger cars were traded last year, according to the Society of Indian Automobile Manufacturers. However, the size is expected to expand at an exponential pace.
The association's President Pawan Goenka told the press of late that the automotive manufacturing industry contributed $34 billion to the national output of India in 2007 and the figure would skyrocket to $145 billion in 2016.
``The Indian market is sure to expand at fast paces and this would prompt fiercer competition due to incoming foreign brands. Yet, Hyundai would savor the first-comer advantage together with Maruti,'' Daewoo Securities analyst Park Young-ho said.
``The production facilities of Hyundai are better than those of its competitors in terms of productivity. This would also offer competitive advantages to the firm in churning out new models,'' he said.
Daishin Securities researcher Kim Byung-kuk expects the Comprehensive Economic Partnership Agreement (CEPA) would positively affect the bottom line of Hyundai Motor India.
The bilateral agreement between Korea and India, which is by and large similar to a free trade agreement, took effect starting this year.
``The CEPA is good news to Hyundai although we have yet to learn how good it will be. Hyundai will be able to reduce costs as prices of imported auto components from Korea are cheaper now,'' Kim said.
Prudential Securities analyst Kong Jeong-ho predicts that Hyundai Motor India might need its third-generation factory to evolve into Hyundai's global exports base of small-sized passenger cars.
``I do not know whether Hyundai has a specific plan to build its third-generation plant in India. However, the market consensus is that the outfit will need one in the not-so-distant future if it continues to grow this fast,'' Kong said.
Global Powerhouse
India is not the only place where Hyundai-Kia Automotive Group cruises. The conglomerate also aims to outgrow its competitors this year in other markets such as the United States, Japan and Europe.
Hyundai Motor and Kia Motors, the two flagship units of the group, combined to sell 4.6 million cars in 2009, up 11 percent from the previous year and is jockeying to crank up the number to 5.4 million in 2010.
``We turned the crisis into an opportunity in 2009 thanks to the collaboration of our workers. We laid the groundwork on which Hyundai Automotive Group can advance into the global top tier,'' Hyundai Chairman Chung said in a new-year message early this month.
``Based on the performance, we will strive to create history this year via selling a total of 5.4 million cars to become the primary player in the world markets,'' he said.
Chung expected, however, a flurry of hardship could lie ahead of the corporation in achieving this grandiose target.
``The global auto market is forecasted to face a wide-ranging overhaul throughout 2010, which would bring about abrupt changes in the industry scene as well as by far stiffer competition,'' Chung said.
``If we take the challenges heads-on with a strong will and confidence, we would be able to leap into international leadership this year,'' he said.
In addition, the 71-year-old tycoon iterated the importance of eco-friendly initiatives in time with the rising cost of energy.
``To attain environmentally-friendly green growth, we need to forge ahead. Plus, the development of low-carbon, highly-efficient engines is imperative,'' Chung said.
``On the occasion of mass-manufacturing of hybrid cars, we need to expand the market for eco-friendly automobiles as well as obtaining core technology in the fuel cell sector,'' he said.