Taking the competition to rival Maruti, Korean carmaker Hyundai is planning a major expansion in the diesel segment, including possibility of manufacturing diesel engines in India in another 2-3 years.

"In another two to three years if our overall diesel car sales volumes touches about 50,000 units then definitely we would make diesel engines in India," Hyundai Motor India Ltd Managing Director H S Lheem said on Friday in New Delhi.

Currently, the company sells about 2,500 units of diesel vehicles a month, he said at the launch of the diesel version of its top-end sedan Sonata Embera tagged at an introductory price of Rs 14.75 lakh (ex-showroom Delhi).

Lheem said the company's second engine and transmission facility in Chennai, which is expected to go on-stream by September 2008, has the option to make diesel engines as well.

With rivals Maruti expected to hit the market with diesel 'Swift' 'soon, Hyundai is also getting ready with a diesel 'Getz' to be launched in the second half of the year. Maruti, the country's largest carmaker has already set up a diesel engine manufacturing plant at Maneshar in Haryana.

"We are doing a feasibility study on 'Getz' with a diesel engine at the moment. If we do bring the car then we would probably look at either 1.2 litre or 1.3 litre option in order to avail of the excise benefits," Lheem said.

Hyundai is also preparing to launch a compact car, which will be positioned between its flagship model 'Santro' and premium hatchback 'Getz' and let the former take on Maruti's most popular model 'Alto'.

A company source said Hyundai is looking at the yet-to-be launched compact car code-named 'Pa' compete with the likes of 'Zen Estillo' and 'Wagon R', while Santro would be stripped down so that it can compete with Alto.

'Pa' is expected to be launched in the fourth quarter of this year or early next year, the source added.

Lheem said the company has set an internal overall sales target of 340,000 units this year.

Hyundai is also looking at selling about 100 units a month of the newly launched diesel Sonata Embera, company Vice-President Marketing and Sales Arvind Saxena said. The company expected 60-70 per cent of overall Sonata sales coming from the diesel variant over the next few months.

Hyundai would also starting operations of its new research and development centre at Hyderabad next month. "It will focus on CAD, analysis and software developments, while the Chennai R&D unit will continue to focus on testing and related activities," Lheem said.

H.S. Lheem, MD, Hyundai Motors at the launch of the new Sonata in Gurgaon.

Photograph: Raveendran/AFP/Getty Images