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Hyundai early leader in the race for Indian roads

Sitaraman Shankar

Ignoring potholes and ambling cows, global carmakers are jostling for space on Indian roads.

The scramble for a potentially huge market has thrown up an unlikely early winner: not Ford Motor Co or General Motors, but Korea's Hyundai Motor.

For years India's roads were ruled by locally made cars like the Ambassador, a sturdy but drab vehicle that looks much like it did some 50 years ago.

Now, a decade after India's economic liberalisation began, models from majors like Ford, Fiat Auto, GM and Honda Motor Co Ltd speed past their Indian competitors, tempting price-conscious Indians.

But Hyundai looks to be in pole position.

Korea's largest carmaker has tripled its market share in the last three years to 15 per cent on the back of its small car, the Santro.

"Hyundai has done fabulously well with a good quality car, aggressive marketing and the right price," said Murali Gopalan, editor of Auto Monitor magazine.

Hyundai's gains have come largely at the expense of the formidable Maruti Udyog, a joint venture between the Indian government and Japan's Suzuki Motor, whose market share has dipped nearly 20 percentage points from 78 per cent in March 1999.

Besides the Santro, the Korean firm sells the mid-size Accent, and plans to launch the luxury Sonata.

"Hyundai has a model for every important segment and has caught Maruti off guard," said Gopalan.

HYUNDAI'S SANTRO

With its high roof, the Santro -- sold as the Amica in the United Kingdom and the Kia Visto in Korea -- had its share of problems when many Indians found its "tall boy" appearance ugly.

The company overcame this by hiring popular Bollywood filmstar Shah Rukh Khan to endorse the car on TV ads.

"Here was a celebrity pushing a car for the first time, and it worked like magic on Indians who were tired of Maruti's boxy models and wanted a car they could show off," said Sunidhi Consultancy auto analyst Richard D'Souza.

"Creating acceptance of a Korean brand is not as easy as it would have been for a western brand," says Hyundai India marketing director B V R Subbu. "But after the Shah Rukh ads people sat up and noticed us."

"We sell more cars in India than Ford, General Motors, Honda and Toyota (Motor Corp) put together," he boasted.

This month Hyundai expects its cumulative sales in the Indian market to top 200,000. It sold nearly 81,000 cars in the year to March in a market of over 567,000 in total.

The firm has invested $650 million in India so far and plans another $400 million over the next three years to expand capacity at its plant near the southern city of Madras.

"We expect Hyundai to grow to about 20-22 per cent of the overall market in three years," says an analyst.

"Very few other international carmakers can compete so strongly in the fast-growing Indian premium small car segment, where prices range from Rs 300,000-500,000," said D'Souza.

The segment accounts for nearly half of Indian car sales.

SBI Capital Markets analyst Manindra Gupta says he sees the premium small car segment growing at 13 per cent annually over five years from 282,000 units a year.

Maruti, which has dominated the Indian market for 15 years by producing small, inexpensive cars, is putting on a brave face.

"As the only company with a range of products, we're in a position to move towards common platforms and components, and this will deliver greater value," said a spokesman.

STRONG CONTENDERS

The outcome of India's car wars, however, is by no means a foregone conclusion: a clutch of global automakers are snapping at Hyundai's heels.

Analysts say Ford and Honda are the most likely to give Hyundai a run for its money while another Korean firm Daewoo Motor dropped away after a strong start.

Ford has invested Rs 17 billion in a facility near Madras, and plans to sell 20,000 of its mid-sized Ikon cars this year.

"It's been a tough market to learn," said Ford India managing director Phil Spender. "The consumer here is very demanding and has high aspirations, but still does not understand what a true value proposition is."

"Never discount Ford: it's ready to play the waiting game, and needless to say, its pockets are deep," said Auto Monitor's Gopalan.

Honda too is no pushover -- the Japanese firm's Indian joint venture had sales of about $160 million in 2000, and it hopes to break even this year.

And the world's largest automaker could yet steal the show.

General Motors has just a modest presence in India, but analysts say it will likely acquire a sizeable stake in Maruti, as part of the government's privatisation.

The Detroit-based firm already has a global strategic pact with Italy's Fiat and owns 20 per cent of Suzuki.

GM expects to sell just 10,500-10,700 cars in 2001, mainly the Astra and Corsa, while Fiat hopes to sell 50,000 cars of the Palio model, which it plans to launch later this year.

"In three years, I see the GM-Suzuki-Fiat group in top position, followed by us, then Toyota," said Hyundai's Subbu.

Toyota, the world's third-largest carmaker, recently said it would invest $400 million over five to 10 years to expand production in India.

There is speculation it plans to bring the Yaris world car to India, which could threaten Maruti, Hyundai and the Indica, a car made by one of India's largest conglomerates, the Tata group.

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