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Daewoo rethinks luxury car launches

BS Corporate Bureau

Daewoo Motor India Ltd, a subsidiary of the troubled Korean vehicle-manufacturer Daewoo Motor Company, is reviewing an earlier announced plan to launch three new luxury cars in Indian market this year.

The three new cars -- Magnus, Nubira II and Lanos II -- were planned for import and sale in the domestic market. However, DMIL's newly appointed managing director and CEO, Young-Tae Cho, now says that import duties are still very high and it may not be ideal to launch the cars at higher costs.

"The cost of the imported cars will be too high if we go through the CBU route. We are now studying the market to identify the segment in which to launch our new car. We will have firmed up our plans in the next couple of months," Cho said.

Sales of DMIL's flagship vehicle in India, the small 800cc Matiz, has been declining over the past few months, one of the primary reasons being consumer apathy leading from financial health of the company's parent back in Korea.

Not long back, in March this year, DMIL's then MD and CEO, Y C Kim had unveiled plans to launch the three new vehicles. He said the company was planning to focus its energies on the mid-sized car segment, which is expected to grow at 21-22 per cent and is poised to be a front-runner in the growth of the Indian car industry.

The company had indicated a price tag of Rs 1.3-1.5 million for Magnus, a luxury segment car with a 2 litre engine. Nubira II, which belongs to the upper mid-sized segment and was supposed to be launched in 1.6 SX and 2 litre CDX variants, was being priced Rs 900,000-1 million. The 1.5 litre engine fitted Lanos II, was proposed to be priced between Rs 700,000 and Rs 800,000.

Daewoo had firmed up plans to invest Rs 45 million on roadshows to promote the new launches, the first phase targeting 19 cities costing Rs 15 million.

These plans were firmed up and announced prior to the announcement of the Union Budget. Post-budget, the scenario vis-a-vis imported cars changed drastically.

While Daewoo may have been expecting a reduction in import duties, the duties on completely built units went up to 120 per cent. According to company executives, since margins in these cars are not very high, the Daewoo brass is not willing to take the risk of launching new models without the promise of high volumes.

Cho, however, says that other proposals mooted by his predecessor, Y C Kim, will be implemented. Plans regarding the hiving of DMIL's engine and gear box divisions into separate subsidiaries and the subsequent plan to off-load equity or outright sale of these companies to other car manufacturers are also on track.

Discussions are continuing with the employees' union to arrive at a settlement over retrenchments, though at the moment they are on hold due to negotiations between Daewoo and General Motors.

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