Hyundai Motor India Ltd, the country’s second largest car maker, though has come out in tops with its models such as Eon, i10, Santro,i20 and Verna, it yet to make a dent in the luxury car market in India.
The reasons are plenty, but the Indian unit of the South Korean car maker has now come out with a plan to manufacture some of its top-end models, including the Santa Fe sports utility vehicle and a new version of its Sonata sedan, locally to save on import taxes and as the depreciation of the rupee against the South Korean currency has made imports expensive. It should be noted that all Hyundai luxury cars were being imported or assembled in India for quite some time now in its plant in Sriperumbudur, Tamil Nadu.
Arvind Saxena, director (marketing and sales), Hyundai Motor India says, “We have already started complete manufacturing of the Santa Fe in India from August this year. As a result, we have been averaging 225-250 units of the Santa Fe every month. This will be the company’s focus area in the future, too.”
Even if this is the case, Hyundai Motors India still imports some components for the Santa Fe model from South Korea. The pinch here is that the appreciation of the Korean won against the Indian currency has made imports more expensive. In addition, higher custom duties on completely built cars discourage foreign manufacturers from importing cars.
Manufacturing the cars in India will allow auto makers to pass on the savings on taxes to customers, boosting demand for the cars produced in India. The recent trends in the automobile markets indicate that the demand for the premium cars has been growing and in order to bring in more volumes of the these cars, the manufacturer will have to cut costs, which could only be done by doing more local production. This will also help them in generating more margins on such cars as they will no longer be paying duties.
Imports of cars into Asia’s second fastest growing car market attract a 60% tax, making it cheaper to manufacture the vehicles in India. Cars that are imported in the completely knocked-down format, or with a pre-assembled engine, gearbox or transmission mechanism, have to pay a 30% duty. If the components of the car are further knocked down, the import duty is reduced to 10%.
Apart from Santa Fe, Hyundai Motor India also plans to manufacture the new version of the Sonata model in India and selling it here from next year. By manufacturing the New Sonata model here in India, the prices will drastically decrease on the car and it could bring in cheers to the customers and a competitive edge for the manufacturer.
The New Hyundai Sonata will mark the company’s second outing in the premium sedan segment, which had seen sales of 15,000 in 2010. The new Sonata will raise the bar and will compete against the Toyota Camry, Honda Accord, Volkswagen Passat, Skoda Superb and others in that segment. Hyundai Motor India still sells its older version of the Sonata and in the first eight months of 2011, Hyundai sold just 95 units of the car when compared with 181 units in the same time last year.
Mr. Arvind Saxena maintains that though the premium sedan segment is very small at the moment, it will grow in the coming years with more and more consumers looking to graduate from mid-size sedans to larger ones. He also states that Hyundai wants to launch the new Sonata in 2012 as the auto giant wants to have a complete line-up of cars in its portfolio.
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