Hyundai India stops exports to euro zone

Tags: News

To focus on domestic market and Latin America, West Asia

In a change in strategy, Hyundai Motor India (HMIL), the country’s second largest automobile manufacturer and largest exporter of cars from India, stopped catering to the European markets from its plant near Chennai a month ago. The cars meant for the European markets are now being produced from the Korean chaebol Hyundai Motor Corporation’s (HMC) plants in the Czech Republic and Turkey.

HMIL will focus more on catering to the demand from the Indian domestic market, where it has been launching newer models at regular intervals, with Elite i20 being the latest to be launched in New Delhi on Monday. While automobile sales in India had taken a dip in the last couple of years, HMIL hopes the expected revival in automobile sales in the country, especially with the new government at the Centre focusing on reviving the overall economy, to give its domestic sales a fillip in the coming months, backed by recent launches like the Xcent and the latest Elite i20.

On the export front, HMIL, which so far was exporting to nearly 120 countries across the world, including the European countries, will focus more on countries outside the euro zone. The main exports to Europe were its popular hatchbacks i10 and the i20 as well as the recently launched compact sedan, Xcent.

According to data compiled by the society of Indian automobile manufacturers (SIAM), the country's largest exporter Hyundai India produced 6,19,164 cars during 2013-14 at its Irrungattu-

kottai plant, when compared to 6,38,231 units in 2012-13.

Out of this, it exported 2,33,260 cars, as against 2,59,811 cars in the previous year. In that year, the total car exports from India were 5,50,466 units in 2013-14. In the current fiscal, HMIL had exported 47,491 units in Q1 of FY15, as against 73,361 units in the corresponding quarter of last year.

HMIL’s plant at Irungattukotai near Chennai that has a capacity to roll out up to 6.8 lakh cars per annum across three shifts was maintaining a domestic-export market ratio of 60:40, which at times was even skewed towards the export market, depending on increase or decrease in demand in these respective markets. While exports used to account for 50-55 per cent of its overall production about 4-5 years ago, the numbers gradually dropped to about 45 per cent now, even as the company launched several models like the Fluidic Verna, Eon, Grand i10, Xcent and now the Elite i20, over the past three to four years.

The move to cater to European markets from its European plants is also in tune with HMC's long-term plan for the European market, where it has a 3.5 per cent market share, with an increasing presence of Hyundai cars, especially the hatchbacks, on the European roads. “The made in India cars were received well in the European market. But, there was a 10-15 per cent increase in cost from the time of exports from India and to the point of the cars reaching the European shores, due to logistics/transportation and others. Hence, HMC was planning to shift the production of these cars closer to the European region to not only speed up delivery but also be competitive,” an industry person privy to the development said, but did not want to be quoted.

Hyundai now has two plants in Turkey and Czech Republic. While the former has a capacity to manufacture two lakh cars per annum, the latter has a capacity to roll out three lakh cars a year. The move is also said to be in line with the trend among global automobile majors to tap the comparatively low cost East European region for manufacturing, even while taking advantage of its closeness to the European market.

In fact, Allan Rushforth, COO of Hyundai Motor’s European division had told the media in Frankfurt in December last year that the company sees a “number of new opportunities” for its business in the European region. His statement stemmed from the confidence that Hyundai and its associate brand Kia Motors were just two mass-market brands to have posted growth in sales numbers in Europe last year, while the region reported lower automobile sales for the fifth consecutive year. “By next year, 90 per cent of Hyundai vehicles sold in Europe will be made in the region,” Rushforth had then said.

“Hyundai is buoyant on the slew of new products being launched here in India and on the increase in domestic demand. We are generating good numbers with every new launch. Hence, the plan to shift some of the production to the Czech Republic and Turkey,” HMIL senior vice president, marketing & sales, Rakesh Srivastava, told FC on Monday evening.

HMIL accounted for about 45 per cent of total car exports from India on an average over the past few years. Its decision to shift the production of i20 and i20 to plants located in Czech Republic and Turkey is expected to dent the car export numbers by at least one-fourth of what was so far exported. “There are enough markets overseas to grow our exports and HMIL will remain a global hub for car exports for Hyundai,” Srivastava asserted, indicating the company would be focusing more on Latin American markets, besides the West Asia, Australia and other Asian countries to grow its export basket.

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