Swaraj Baggonkar Moneycontrol News
The country’s second largest car maker Hyundai Motor India will sweat its existing production lines that are already operating at full capacity before lining up investments for further capacity addition after 2020.
At a time when market leader Maruti Suzuki is expediting work on opening the second and third lines at Gujarat with an investment of Rs 10,000 crore for adding 500,000 units new capacity, Hyundai has decided to push back discussions of a new plant until the onset of Bharat Stage VI (BS-VI) due in 2020.
Through a process of value engineering, the Korean brand will be able to stretch its production capability by 15 percent to 750,000 units per annum by end of 2019. Hyundai would have added 100,000 units to its tally in the last two years through value engineering.
Prices of passenger vehicles (cars, SUVs, and Vans) are expected to mark a significant jump after the implementation of BS-VI norms especially diesel-powered vehicles, which will most likely lead to a correction in demand in the short term.
“The growth in volumes may be modest post implementation of Euro VI (BS-VI) norms”, said Y K Koo, MD, and CEO, Hyundai Motor India.
This is the reason why some automobile manufacturers such as Honda Motorcycle & Scooter India and Tata Motors (commercial vehicle business unit) are reluctant to invest in a new facility despite operating at nearly full production capacity for fear of being stuck with excess capacity post-2020.
“We are planning to launch 8 new products till 2020 and out of this two are totally new products and five are a full model change of existing products and one electric vehicle. We can manage our production till 2020 with the addition of 50,000 new capacity. And beyond 2020 depending on the market situation maybe we can review for another factory”, added Koo.
To make sure domestic supplies are not impacted Hyundai is even ready to cut down on exports and route the volumes to the Indian market. “We have started CKD shipments instead of CBUs because of tax issues in those countries. We can use the freed up capacity for the domestic market. We will have more space for production for domestic volumes with CKD operations for those countries,” added Koo.
The Hyundai plant located near Chennai is split into two plants. The first part was set up in 1998 followed by the second plant in 2008. It is operating in three shifts and produces one new car every 33 seconds.
A senior executive from Hyundai said, “Hyundai India contributes 14 percent to the global sales of the company. There is no more land available here to expand. We will be using the existing production lines until 2020. It does not take as much time as it used to set up a new facility”.
Hyundai Motor Company, Korea decided to give India its own regional headquarters a few months ago for which a new office building is being set up at Gurgaon at the cost of Rs 690 crore. The regional headquarters is only one of three in the world and would be operational in January 2020.
Koo said the company is on track to launch new models in India which includes a ‘family’ hatchback (codename AH2) in October this year followed by a compact sports utility vehicle (codename QXI) in April next year that will be positioned below the Creta and an all-electric SUV in the second half of next year.
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