Hyundai Motors India, the wholly owned subsidiary of South Korea's Hyundai Motors, has decided to set up a new plant in Tamil Nadu to manufacture engines and transmissions with an investment of $500 million.
The plant, which will include a foundry shop, will make aluminium cylinder blocks for the new small car, loosely referred to as the Santro's twin, that the company plans to roll out by the end of the next year or early 2008.
The new plant will have the capacity to churn out 350,000 systems a year, of which up to 80,000 will be exported to South Korea, Malaysia and, possibly, Russia. It will go on stream by 2007-end.
Some of the investment will be brought in by 20 of Hyundai's suppliers in South Korea. This is part of the company's expansion drive in the country. At present, 17 of Hyundai's suppliers from Korea are operating in India, having set up shop here along with the company in the late 1990s.
"Each manufacturer has its own strategy. We follow ours," HS Lheem, managing director of Hyundai Motors India, told Business Standard.
Hyundai will continue with the Santro even after the launch of its twin, with both models targeting more or less the same segment. This move is on the lines of Maruti Udyog's strategy with the Wagon R, the Zen and the Alto.
Similarly, said Lheem, the Accent, well over six years old, would continue to support the Verna, a roomier and more powerful sedan being launched on September 25.
While every other manufacturer is focusing on the domestic market, Hyundai has identified exports as the next big opportunity.
In two years, Hyundai Motors India hopes to export half of its production -- compared with 30-35 per cent now -- and earn 40 per cent of its turnover from overseas, as it becomes Hyundai's only global hub for manufacture and sale of small cars.
By that time, its car-making capacity in India will stand at 600,000 a year, as the second factory, with a capacity of 300,000 a year in three shifts, starts production in October 2007. It is absorbing $500 million in investments.