The Hindu Business Line : `Our main concern this year is increasing supply'

I should concentrate on how to improve productivity. The only way is to improve efficiencies. — MR H. S. LHEEM, MANAGING DIRECTOR, HYUNDAI MOTOR INDIA

Mr H. S. Lheem, Managing Director, Hyundai Motor India, has a tough task on hand. "... our main concern is how we can supply more units to the domestic and export markets. Which means how can I improve productivity and efficiency. Maybe I should concentrate on select models," he says, hinting at a new strategy. Mr Lheem, an engineering graduate in metallurgy, has been with Hyundai Motor Company since 1973, and took over the present post in December 2005. In an interview with Business Line, he talked about the company's strategy, expansion plans and models. Excerpts from the interview:

You have just launched the Sonata diesel. Is diesel popular in this segment?

We were a bit disappointed after we launched the Sonata petrol model. In all the other countries, the Sonata petrol is well accepted. Maybe the demand in that segment here is limited. With the diesel we will try to improve our market penetration. We know that many of our customers are looking at diesel. I am sure that we can sell more than 100 units a month. In 2006, we sold about 510 units of the Sonata. This year our target is 1,000 units. I am sure we can exceed that target.

How about the Elantra? That has also not done as well as expected. Is there a new strategy? Will you withdraw it from the market?

We are now doing a feasibility study whether to introduce a new model of the Elantra. It should be over in the first quarter of this year. Last year, we sold 1,927 units of the Elantra. Maybe we cannot focus on all segments. We should select and concentrate. We have seven models. I should hope for success of all seven models, which maybe difficult.

This year our main concern is how we can supply more units, to both the domestic and export markets. Which means improving productivity and efficiency. Then maybe I should concentrate on some select models. Unfortunately, we had difficulty in supplying more units. We have limited capacity. I have 18,000 units of backorders for export. That is almost two months' volumes. I have only three days' supply of the Santro in our storage area. Around 600 units, that is. And even our dealers have less than one month's sales stock.

That is something you are worried about... To produce more Santros...

Because of demand I have two months' backorders, mainly for the Santro. I have backorders even for the Accent. I should concentrate on how to improve productivity. The only way is to improve efficiencies. This could mean selecting limited models. Then maybe I can increase efficiency.

What is the future of the Elantra? You said you are doing a feasibility study.

Not decided yet. Our marketing department is working on that. You know we have a successful model in other countries,.

What stage is your second plant in?

The construction work is almost finished. So is the installation of production equipment. We have begun a test-run. From April we will start test-production of some operations. We sent some 280 employees to Korea for training. Production in the second plant will start by October. We will have additional capacity of 300,000 by next year. Maybe we can produce around 250,000 cars next year, and thereafter to full capacity. Fifty per cent of the total production capacity of 600,000 would be earmarked for exports.

Aren't you ignoring the domestic market at the cost of exports?

That is another of my concern. My main focus has always been the domestic market. No question about that. I should give priority to domestic sales.

There have also been reports that Hyundai Motor Company would make Hyundai Motor India the hub for Getz exports as well...

We will start exporting the face-lifted Getz from March, mainly to Europe. This year we hope to export 40,000 Getzs. Our total exports this year — of the Santro, the Accent and the Getz — will be about 130,000 units.

When will the face-lifted Getz be launched in India?

Not decided yet. We will produce the export version first.

Why? What is the strategy for the Getz?

We want to concentrate on our existing design first. Maybe for the new Getz we should focus on exports first. We are now looking at whether the new Getz should have more variants — a diesel version, different engine, power train, etc.

Are you looking at a smaller capacity engine?

We have so many possibilities.The Getz is well accepted by European customers. I hope the Indian customers' pattern would be similar to that of the European customers.

Maruti has introduced a Swift diesel. What is Hyundai going to do?

While launching the face-lifted Getz we will be working towards introducing a diesel version too because our export package has diesel. Barring the Santro, almost all of our models have diesel versions.

When do we see the Getz diesel?

We haven't decided.Maybe after the introduction of the face-lifted Getz.

You have talked of a successor to the Santro coming out of the second plant.

Not a successor, a twin model.

The Santro would continue to be produced...

Absolutely. There is no reason to stop the production of the Santro.

The twin model should be positioned between the Santro and the Getz. I have no plans to have an 800cc model (to take on the Maruti Alto). The twin model should be launched when the second plant becomes operational, that is, some time towards the end of this year or early part of the next. With that, we will have three models in the compact car segment. Maybe even this segment will see a million units by 2010-12.

Going by Hyundai's record, the Santro is also due for a facelift... .

When I took charge, I promised our dealers that I will introduce a minimum of two new models, including the facelift, every year. I will keep my promise. We are working on an upgraded Santro.

Will you continue with the Accent?

We have no intention of phasing out the Accent. The medium segment is growing. There is huge demand for the Accent from the overseas market. I have 600 units of backorders of the Accent. Last year I exported 13,600 units. However, Accent sales have been hit after the launch of the Verna. We had difficulty supplying the Accent as our focus was on the Verna. We use the same production line.

What do you expect from the Budget?

For the long-term, all policies — be it classification (of a small car) or export support — should be consistent. The automotive industry needs long-term investment. We need manufacturers not assemblers. Every year the Government changes policies. That is not good.

The Government says it wants to develop India as a small-car export hub. But what has been the policy support to achieve this? It had, for instance, retracted an existing policy after we had spent money based on it. The Budget should be fair and consistent.