Hyundai India Puts Breaks On Export To Europe

NEW DELHI: Are escalating manufacturing costs and uncertain labour relations taking a toll on Hyundai's plans to make India a global hub for small cars? The Korean car major has decided to discontinue small car exports to the coveted European region, opting to source from factories in Turkey and the Czech Republic, even if Indian operations contribute to 15% of its global sales volumes.

Hyundai, which is the biggest car exporter from India and accounts for nearly 45% of total shipments, will stop the sale of India-made i10 and the newly-launched Elite i20 to the European countries, a move that will have an immediate impact on the company's exports this year.

The company, which exported 2.5 lakh units from India last year, expects this year's shipments at 1.9 lakh units, a decline of 24%. Rakesh Srivastava, senior VP (sales & marketing), said the lower overseas shipments will help free production capacity for the domestic market, which is crucial as the company is launching newer models.

"We have already launched four new models over the last one year, and more are coming. While India still remains a strong export base, the first priority is the domestic market." However, Hyundai India's plans for this year show that the company will be saddled with excess production volumes as the company hopes to sell 6 lakh units this year (domestic and exports) even as it has a production capacity for 6.8 lakh units.

Company officials admitted that sourcing the models from Turkey and the Czech Republic is more cost-efficient than exporting from India. Higher wage bills and logistics have increased manufacturing costs in India, prompting many companies to have a re-look at the global sourcing plans. Hyundai has long been seeking a rail link from its factory near Chennai to the port, but not much headway has been made here.

Labour relations have also not been very comfortable. While things have been quite on this front for sometime now, the company's plant has seen major tensions in the past, which had also disrupted production. The volatile history may have also prompted the company to opt for other locations as the European markets are among the key export regions and Hyundai would like to avoid any reasons that may lead to delays. Srivastava said Hyundai is focusing on markets like Latin America, Middle-East, Asia, Australia and New Zealand for export.