Hyundai's focus on quality risks market share

Nov 12 2012, 14:33 IST
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Selling everything it can build, Hyundai Motor's Indian factory is bursting at the seams.   (Reuters) Selling everything it can build, Hyundai Motor's Indian factory is bursting at the seams. (Reuters)
SummarySelling everything it can build, Hyundai Motor's Indian factory is bursting at the seams.

low-cost Santro and i10 models.

Its 14 percent share of India's passenger vehicle market exceeds that of General Motors, Volkswagen, Ford and Nissan combined.

But as rivals scale up to meet a forecast doubling in Indian sales to 4.9 million by 2016, according to IHS Automotive, Hyundai will be stuck at its existing capacity for the foreseeable future.

Right now there are no plans, said R. Sethuraman, director of finance and corporate affairs at Hyundai India. A balancing act has to be done globally.

Hyundai's share of the passenger vehicle market has slipped from around 15.8 percent in 2008 to 14.4 percent in the six months through September this year, according to the Society of Indian Automobile Manufacturers, even as it cuts back on export volumes from a peak in 2009.

Meanwhile, Maruti is spending 40 billion rupees ($744 million) to increase capacity by 250,000 cars by 2016, while Ford - which has not yet fully utilised its existing Indian operations - is spending $1 billion on a 240,000 cars-a-year factory to serve the local and export markets.


Hyundai is earmarking up to 20 percent of its marketing expenses on brand investment, from almost none a few years ago, chief marketing officer Cho Won-hong told Reuters, as it aims to surpass Toyota and Volkswagen as the most favoured mainstream car maker.

Chung previously spearheaded Hyundai's rapid expansion, mainly targeting emerging markets and more than doubling global production between 2002 and last year to 4.07 million. Production outside South Korea accounted for 54 percent of total output, against just 6.5 percent in 2002.

The carmaker opened plants in China and Brazil this year, but it has not announced plans for new factories in the past couple of years, despite many of its factories running at full capacity, leaving it short of cars in a recovering U.S. market, where rivals have stolen market share.

I think the strategy not to expand aggressively is reasonable. The global auto market is in an oversupply situation, although emerging markets are growing, said Jeon Nam-joong, a fund manager at Consus Asset Management.

Hyundai is taking a breather after its rapid growth, and it's not that they gave up growth.

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