Hyundai Motor India Ltd, which entered the Indian market in the late 1990s, is the country’s largest car exporter today. The company changed the dynamics of the small car market, challenging the dominance of Maruti Suzuki. In an interview with Business Line , Bo Shin Seo, Managing Director and Chief Executive Officer of HMIL, shared some insights on the company’s history and future plans. Edited excerpts:
How has been the experience in India been so far?
Hyundai Motor India Ltd. has had a strong run in India with a strong portfolio from compact to premium cars with a wide dealership network across the country. Our success story began way back in 1998, with the immensely popular ‘Santro’. Even after 15 years, the Santro continues to be extremely popular. Since then HMIL has launched the Eon, i10, i20, Accent, Verna, Elantra, Sonata and the Santa Fe. We plan to launching new cars every year for the next five years. Our current passenger car market share is 20.3 per cent and we are confident of steadily increasing that share. HMIL is the country’s largest exporter and the second largest car manufacturer in India.
India is an extremely important market for Hyundai. The Indian automobile sector is poised for steady and strong growth in the future and has a robust young population with a strong aspiration to own a car. This provides a growth opportunity for the passenger vehicle industry. The Indian automobile industry holds good growth potential for the mid-term and long term horizon.
Do you think the Indian Government is doing enough for the industry? What demands do you have?
The Indian government has always extended its support to the automobile industry to create future growth. India is at the core of Hyundai Motor Company’s overall business plan and is an extremely important market for the parent company.
The Government has supported us through the duration of our operations due to which we were able to set up a plant in a record 17 months! We believe that the Indian automobile industry holds good growth potential, the current economic scenario notwithstanding. With measures to improve infrastructure, such as better connectivity to ports, improved port infrastructure, improved rail and road connectivity, stability in fuel prices and lower interest rates, the market should see a turnaround.
Are there any expansion plans in terms of the facilities?
The new investments in a flexible engine plant and a new press shop will help create a direct employment opportunity for 500 persons apart from significant indirect employment opportunities.
As the largest car exporter, how confident are you about retaining this position in the future, especially with the rupee dollar fluctuation and high import cost of critical components?
While exports are an integral part of our business strategy, we are always focussed on the domestic market. But, I am confident that we will continue to maintain leadership in exports without compromising our focus on the domestic market. The depreciating rupee will have an adverse impact on the input costs and fuel prices. This may lead to a further drop in already stagnating demand and margins will be squeezed further. However, exports help us get much better realisations and ring-fence the risk a depreciating rupee presents.
How much have you invested in India until now? And do you have new investment plans?
To date, HMIL has invested $2 billion in two state-of-the-art passenger car manufacturing facilities. Recently, we announced a further investment of $300 million for a world-class flexible engine plant that will come up in the existing factory premises at Sriperumbudur in Chennai. The new flexible engine plant is expected to be operational in the latter half of this year. Through this investment we will be able service Indian customer requirements much faster.
Is India a worker-friendly country? There were many issues regarding labour perks and salaries…
The Indian workforce is highly skilled, disciplined, committed and well educated. They are familiar with modern technology and work practices and are as good as their counterparts in other parts of the world. Auto industry workers are among the highest paid in the country and enjoy best-in-class benefits compared to other industries.
How often do you check if workers are happy in terms of wages and workload?
Hyundai Motor India ranks among one of the best paying companies in the car manufacturing sector and our welfare measures are one of the best in the Industry. However, these are reviewed once in three years when we hold discussions with the recognised union. Apart from that, we engage in constant dialogue with workers to resolve their issues, if any, amicably. We also have the “My Voice Box” policy wherein employees can directly get in touch with the management and expect redressal within seven working days. My Voice Box is an employee feedback forum that helps in understanding employees’ concerns, grievances and suggestions. The confidentiality of the process has made it extremely successful. Boxes are placed on all shop floors, work areas and other areas frequented by employees along with a hard copy of the forms. The suggestions received are collected daily and forwarded to the concerned department for redressal. The whole process is monitored by an Apex Committee comprising the top management and is reviewed every week. Employees have also given various suggestions for improvisation over the years.
How much royalty goes from the Indian subsidiary to the Hyundai Motor Company?
We do not divulge standalone financials, but as a company, we contributed approximately 25 per cent to our parent’s global sales.
How many new models are you launching this year? What are your expectations of the new SUV and compact car?
We already have plans to launch new cars every year for the next five years. We are now a full line-up company, offering compact to premium cars and SUVs. Currently, we have more than 60 variants for eight models. The large number of variants ensures that customer needs are met in all the segments.
We are the only manufacturer that has continuously grown in the last 15 years. Our strategy to maintain market share would be to launch new products in volume segments and continuously improve the price value equations by refreshing existing models. This year, we will introduce a new product, code named BA, a premium hatchback positioned between i10 and i20 to cater to a wide base of customers.
We understand customer aspirations and needs in different segments and we study the same through market research. In future we will be launching cars in emerging segments, including compact SUVs and MPVs, to meet customer aspirations.
There is strong competition in each segment. How does Hyundai plan to maintain its position as the second-largest car manufacturer in India?
HMIL’s focus will continue to be on the domestic market and to maintain our dominant position. We will periodically introduce new products that will meet the requirements of our customers and provide them with the very best of technology and design.
In India, our sales numbers are growing every year. In passenger cars, our market share is 20.3 per cent but in passenger vehicles it is 15.3 per cent. The high level of localisation, our dealership network, logistical advantages in having vendors situated around the plant, coupled with valued engineering, has helped us grow in India. The quality, customer satisfaction and investment in the brand are the main focus areas for us.
Rural markets are growing very fast. Being a mass brand, what is your rural sales strategy?
Rural is the key part of our car sales strategy. We have increased the focus on setting up rural sales outlets. Hyundai is focusing on the rural market (beyond the top 110 cities) to increase sales.
In the last two years there has been a noticeable upward sales trend. The rural markets are growing on account of growing income and changes in lifestyle. In 2011, around 15 per cent of sales came from the rural and semi-urban markets. In 2012, it grew to 16.9 per cent and we expect it will increase to over 20 per cent by 2014. Our compact cars, especially Santro, Eon and i10, are highly accepted and appreciated in the rural and semi-urban markets.
We are continuously working to penetrate the rural markets. Various activities are being conducted for brand building and sales. Special customised schemes for farmers, traders and Panchayat members are offered. We have tied up with grameen banks to facilitate easier finance options. We are increasing our sales network in the rural markets from 250 to 350 outlets by end of 2013, supported by a strong service network.