Hyundai to produce 6 lakh cars in 2008

South Korean carmarker Hyundai Motor Company has scaled up its total investments in Indian operations to over Rs 7,000 crore (Rs 70 billion). Its phase-II investments amounted to Rs 4,000 crore (Rs 40 billion) at the second car plant at Irungattukottai, about 50 km west of Chennai.

The plant will double the company's production capacity to 6 lakh cars per annum and strengthen its Indian operations as a global manufacturing hub for Hyundai's small cars.

The second plant, which has been developed adjacent to the first plant, was inaugurated on Saturday by Tamil Nadu Chief Minister M Karunanidhi in the presence of Hyundai Motor Company Chairman and Chief Executive Officer Mong-Koo Chung and R C Panda, secretary, Union Ministry of Heavy Industries and Public Enterprises.

The capacity ramp-up by Hyundai from 1.3 lakh cars a year in 1998 to 6 lakh cars a year in 2008 is seen as a record growth for any carmaker in India.

The second plant has been built in 19 months. The phase-II expansion will also see Hyundai's vendors pumping in investments of about $ 562 million (about Rs 2,500 crore) to support Hyundai's capacity expansion. In phase-I, Hyundai had invested $733 million and vendors invested about $226 million.

Looking ahead, total cumulative investments in Phase-I & II would be to the tune of $2.5 billion.

Of the total committed investment of Rs 4,000 crore (Rs 40 billion) for phase-II, Rs 3,000 crore (Rs 30 billion) has been invested so far in the second car plant, which will produce the company's new offering 'i10' initially both for domestic and export markets, but can also roll out other models whenever required.

The new plant can produce four models simultaneously, Ashok Jha, president, Hyundai Motor India, said.

With the commissioning of the second plant, Hyundai has a set a target of 5.3 lakh cars for 2008. About 40-50 per cent of the total output will be exported. The  market is also expected to widen to 90 countries by the end of 2008 from 73 presently.

By next year total production capacity at both plants is expected to be 6-6.3 lakh cars a year, added Jha.

Hyundai sold 327,160 vehicles in 2007, up 9.2 per cent over 2006. Domestic market sales grew by 7.6 per cent at 200,412 units, while export sales were up 11.8 per cent with exports of 126,748 units.

Passenger car sales in India have grown at about 15 per cent CAGR over the last five years and small cars are expected to dominate the market. New car registrations have increased from 625,000 in 2001 to over 1.3 million in 2006.

The sub-1,500 cc or 'mini' and 'compact car' segments alone account for 66 per cent of new sales, according to KPMG's India Automotive Study 2007.