Hyundai rides on Pa as Santro slows down

For any car maker, the launch of a new model is an important milestone. For Hyundai Motor India, which is gearing up to launch a new compact car by the end of this year, it will be critical.

The new model is widely expected to fill a void that will be created when nine-year-old Santro, the company's first and the largest-selling car in the country, gets ready to take its final bow.

Market sources say the new model will be called Atos, the name under which Santro was sold in some parts of Europe. Codenamed Pa, it has been tested by the company on the Chennai-Bangalore route. The company said the new car may be priced between Santro, which costs Rs 2.70-4.74 lakh (ex-showroom, New Delhi) and Getz (Rs 4.90-5.25 lakh).

Whether the new model replaces Santro or not, its success or failure will influence the company's future in India. For, Hyundai""it has been lying uncharacteristically low for a year or so""needs a blockbuster. None of its recent launches has exactly been a runaway success.

Santro, which has sold over 1.2 million units since its launch in September 1998, has been a true success. The follow-up model, Accent, did well enough to sell over 200,000 units since its launch in October 1999.

However, the rest of the brood has failed to finish on the podium. Luxury sedan Sonata lost steam after an enthusiastic start. Terracan, the sports utility vehicle, has been phased out. And reports say the smaller SUV, Tucson, is going the same way.

Getz was an early entrant into the premium hatchback segment, but has since been overshadowed by Maruti Suzuki's Swift. Its new avatar, the 1.1-litre Getz Prime, has sold 26,000 units both in the domestic and export market since its launch in April this year.

Swift, on the other hand, continues its strong showing, selling about 7,000 units a month. Swift's diesel version is one of the few models in the country for which the buyers have to wait for weeks.

Accent is no longer a young buck. Among its contemporaries, Ford Ikon is fast vanishing from limelight while Opel Corsa is history.

Verna was expected to replace Accent, but instead supplemented it in the sedan market. Verna has sold 30,381 units since its launch in September 2006""about 2,500 a month.

In the same period, older rival Honda City has sold 3,000 units a month and the newest one, Maruti's SX4, launched on May 7 this year, has quickly emerged as the challenger to Honda City.

Hyundai's rivals are quick to point out that if, due to capacity constraints, it is not able to produce enough to meet the demand, its products should not be sold at a discount.

Market sources also say the stock with Hyundai's dealers has been climbing steadily and could be worth 30-40 days at critical sales points.

Arvind Saxena, Hyundai's head of sales and marketing, says this is a concern for all manufacturers and cites capacity constraint, accentuated by export commitments, at the Chennai plant.

"We can either sell more in the domestic market or export. Since last year, we have been working three shifts. With the same capacity, how do you improve?"

In 2006-07, the company sold 195,000 cars in the domestic market and exported 116,000, making it the largest Indian car exporter. In the same year, Maruti exported 39,294, Tata Motors 53,231, Honda 43 and Ford 22,988.

Capacity, though, may not remain a constraint for long. Hyundai is investing Rs 4,200 crore in doubling its capacity in Chennai and beefing up research and development.

It is also setting up a new plant that will churn out another 300,000 cars by the start of 2008. Thus, from early next year, Hyundai will have the capacity to produce 600,000 cars a year. And then, the focus will shift to selling them.