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Hyundai Motor India, the nation's second largest car maker, has set an internal target of producing more than 1 million vehicles a year by 2020-2021. That will be an over twofold jump in sales from now for the maker of the Creta SUV and i20 hatchback.
Encouraged by the success of the Indian subsidiary, Korean Hyundai Motor is close to announcing the India entry of another of its unit: the small car specialist Kia Motors. Post Kia's entry, the chaebol sees itself selling 1.1-1.2 million vehicles a year in India, a market that is expected to become the third largest by 2020-21. It sold 4.65 lakh vehicles in India in 2015. The company aims to have a total output of 1.1 million-1.2 million which includes local sales and exports.
Kia is expected to bring in additional sales of about two lakh cars for the company in India. The move comes close on the heels of Maruti SuzukiBSE -0.28 % announcing its vision of attaining annual sales of 2 million units target by the end of the decade.
According to one of four people who talked to ET on the company's plans, the strategy of Kia setting up a plant in India was the brainchild of Hyundai Group Chairman Chung Mong-koo.
"The new factory from Kia will offer Hyundai additional capacity at zero fixed cost, whereas for Kia itself, the break-even point will be reached faster due to combined capacity utilization ... plus it gets a ready vendor base and both companies gain from economies of scale," said the person, while requesting anonymity.
According to vehicle sales forecasting agency IHS Automotive, the India passenger vehicle market is set to become the third largest in 2020 with a production output of 5.75 million units.
YK Koo, managing director of Hyundai Motor India, said he would not like to comment on Kia's plans since it is a separate entity.
He refused to predict any sales numbers, but said there was significant growth potential in the market. "As one of the largest players in the market, we will continue to invest in new products and segments and deliver what our customer wants, underlining our intent of being modern premium," he added.
If the India market doubles, then Hyundai Motor India will have to grow at least at the same pace to maintain or grow its market share, an executive at the company said.
"The capacity for future is being very strategically decided so as to ensure the output is available when required and that too without significantly impacting the profitability. Hyundai instead will allocate resources into new products," said another person in the know of the company's plans.
Thanks to the strong demand for the Elite and Creta, not only in the local market but also abroad, Hyundai Motor India has already revised its production plans upwards by 10,000- 15,000 units to 6.65 lakh for 2016.
Hyundai is currently sitting on its highest domestic market share in the past five years at 17.21%. Its localsales are likely to cross the half million mark this year.
The company has already announced its plan to planch two products every year. Apart from launching the executive sedan Elantra this year and premium SUV Tucson, Hyundai will revamp its entire line up with new engines and transmission.
The company is also working actively on a sub-4 metre SUV, codenamed Qxi, and a new entry-level car, AH2 or the new Santro, which will be launched in the next couple of years.
Hyundai is moving from strength to strength, said Gaurav Vangaal, senior analyst for forecasting at IHS Automtoive. Apart from the incremental volumes, there is a strong cushion of exports as well for the South Korean car maker, he added.
With the expected growth in the market and new line of products in the pipeline, Hyundai-Kia's goal of attaining 1.1 to 1.2 million seems realistic, Vangaal said.
The company has done well to prove itself in the bigger car segment and SUVs. It needs to sort out the small car portfolio, which has faced challenges," he added.
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