India May Become Asian Production Base For Hyundai "World Car"

Autoparts Report, June 2, 2000

Hyundai Motor Corp. is now proposing a world car project using India as a base, which may have DaimlerChrysler and Mitsubishi on board too. India was once mentioned as an Asian production base for a much-touted small car project, by Suzuki Motor Corp. and General Motors Corp.

"Having already established a strong brand in the country, Hyundai could make India the production base for (its) world car," said an official of Hyundai Motor India, a fully owned subsidiary of South Korea's largest carmaker.

The project, however, is not without controversy. German-U.S. car giant DaimlerChrysler and Japanese group Mitsubishi have denied Hyundai's claim that the three companies have reached agreement on developing the world car. But Hyundai Motor Corp., the world's ninth largest carmaker, maintains that it has reached an agreement with the other two for the project.

Hyundai Motor says the three carmakers have agreed to jointly develop a new car with a 1.0-1.5 liter engine, based on a model being developed by Hyundai.

Hyundai Motor India already sells a 1-liter small car in the country, called Santro, which is a revised version of the Atoz small car in South Korea. "We have already established a strong presence in India with the Santro. Any development of the world car cannot ignore the Indian market and we could emerge as the production base," the official said.

Hyundai Motor India marketing director B.V.R. Subbu had said that by 2003, the company would have launched five cars (including the two already launched) on four different platforms in India.

"One of this could be the world car," said the official, adding the Indian subsidiary has been kept informed about the possibility by the company's headquarters.

Media reports had earlier said that Suzuki-India's largest carmaker through a 50:50 joint venture with the Indian government, called Maruti Udyog Ltd.-and GM were considering India as a production base for their joint offering, the Asia car. Suzuki is yet to make any announcement regarding progress on the Asia car.

The bulk of India's annual passenger car market of around 650,000 cars is made up of small cars with an engine capacity of 1 liter or even lower. The car market has been growing at a fast pace since 1993, when the government removed restrictions on local car production, prompting global car majors like GM, Ford Motor Co., Mercedes Benz, Honda Motor Co., Daewoo Motor Corp. and Toyota Motor Corp. to set up facilities there.

"The geographical location of India is what makes it very attractive. A production base in India could cater to the entire South Asian region, which does not provide infrastructure facility like India. Also, the Middle East and Africa are also relatively closer," said the Hyundai official.