Hyundai Motors India Ltd-the second largest car manufacturer in the country- is planning to shift the production of its premium hatchback i20 model for the export market from Chennai to Europe.
Hyundai has a plant in the Czech Republic( another one is coming up in Russia) and had earlier announced that India would become its export hub for small cars which is now in question.
The move comes close on the heels of a 17-day long labour strike at the factory which ended yesterday and has hampered production of cars which fell by 5 per cent.
However, the company has said that the car will be produced for the Indian market which is just a fraction of the original targeted production that included exports.
The company had planned to export 80 per cent (or 120,000 units per annum) of the 150,000 i20's produced in India. A balance of 30,000 cars was meant for the Indian market. The exports of i20 is targeted to constitute for 40 per cent of their total export target for the financial year 2009-10 which is pegged at 300,000 cars. The company has already fallen behind target in its export target in the first few months and has met only 80 per cent to 85 per cent of the numbers. But if i20 production is shifted it could adversely impact the company's exports as well as overall sales from India.
"We are contemplating of moving out the export production of the i20 completely from India. We will adress the European market from a local plant there", said the spokesperson of HMIL.
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The i20, which comes as a premium priced car in the Indian market (priced at Rs 4.8 lakh) is considered as entry level car in the Europe. Most European government's had only recently agreed to give special exchange bonus to buyers of new cars.
HMIL exports witnessed a growth of more than 75 per cent during last financial year. It exported a total of 253,354 units from India. About half of the company's monthly produce in India is exported
However auto experts say that the move by Hyundai is not economically viable and looks as a posturing to the Tamil Nadu Government so that it takes tougher meansures against labour unrest in the Hyundai factory.
Says a senior executive of a leading auto company which has delat with Koreans: "The labour cost in eastern Europe is 23 Euros compared to 3 euros in India per day, so there is no question that the company can shift its production and make the car at the same cost as India. The company is facing serious labour issues and I think is just posturing with the Government".