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Wednesday, July 8, 2009

Hyundai to shift part of i20 production out of Chennai next year

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NEW DELHI: Hyundai Motor India (HMIL) has decided to shift part of the production of its popular i20 hatchback for the export market from Chennai
to save on logistics costs and import duties in Europe.

By December 2010, India’s largest car exporter will shift part of the production of the model to one of its facilities in Turkey, the Czech Republic or Slovakia to take production closer to its large overseas markets such as Germany, France, Italy and the UK.

“We are looking at competitive pricing for the i20 and will shift some portion of its production next year. While India will remain as the main production hub for the car, the European orders will be met from the new production facility,” HMIL CEO & MD HS Lheem told ET. Logistics costs and import taxes add 10-15% to the price of cars exported from India.

A nearly three-week-long strike by workers at its plant near Chennai in April and May hit output, leading the company to shift production of some models to other manufacturing sites. The strike led to a 5% drop in production, forcing the company to re-think on its export target.

The company on Tuesday launched two new variants of the i20 for the domestic market. The 1.4-litre CRDi diesel variant comes at a price of Rs 6.2 lakh-Rs 7.2 lakh (ex-showroom Delhi). The automatic variant of 1.4 litre petrol starts at Rs 7.31 lakh and the top-end variant will cost Rs 7.72 lakh in Delhi.

It has already sold 12,000 units of the 1.2-litre petrol i20, whose starting price is Rs 4.8 lakh onwards in the domestic market.

The i20, Hyundai’s latest hatchback, has been a success in overseas markets, with the company selling around 72,000 units since the car’s launch in December last year. Some 60,000 of these were exported.

“We have resumed normal production now and will be starting our third shift in the second plant, where newer models are produced, from July 10,” Mr Lheem said.

The Chennai facility is a major global manufacturing hub for Hyundai’s small cars and has the capacity to produce 6 lakh units a year. Exports accounted for about half of the company’s sales of nearly 5 lakh units in 2008.

The wholly-owned Indian arm of the South Korean company exported 1.35 lakh cars in the first six months of 2009, a 22% increase over the year-ago period. The i20 is expected to account for over 40% of exports for 2009-10.

Hyundai is banking heavily on the stimulus packages being rolled out by various European nations, where cash incentives the equivalent of up to Rs 3 lakh are being provided to buy fuel-efficient cars such as the i20.