Chennai may become Hyundai’s sole small car hub

CHENNAI/SEOUL: Hyundai Motor said on Wednesday that it will stop producing small cars in South Korea by 2012 due to low profit margins. This may be good news for India, as the move will make Hyundai’s Chennai plant the sole hub for A and B segment cars.

“Sales of vehicles with one-litre engines and smaller in Korea do not make high profits,'' Hyundai Motor spokesman Jake Jang said. He said the small car models will continue to be produced in Hyundai Motor’s Chennai plant, which has an annual capacity of 600,000 vehicles, he said.

Hyundai Motor India managing director HS Lheem told ET that Hyundai’s Chennai facility will be the global manufacturing hub for exporting small cars, particularly the ‘A’ and ‘B’ segment models. “However, there is a possibility that a brand new car, touted as the new ‘public car’, which Hyundai is planning to develop over the next two years, may also be manufactured in China as well as some other Asian manufacturing unit of Hyundai, besides India,” Mr Lheem added. But, the plans for it are yet to be firmed up.

Referring to the Korean parent’s move to stop production of small cars in Korea by 2012, Mr Lheem said the Indian company is confident of handling any additional increase in the numbers on the production front. “The Chennai facility is being equipped to produce 0.6 million cars per annum and we can handle the global market requirement at this time,” he added.

In Korea, Hyundai will have to focus on mid-size vehicles, said Hahn Kum-hee, an analyst at Samsung Securities Co. Mid-size and large-size cars are usually preferred to mini cars in Korea. Despite high oil prices, Korean demand for mini cars has remained flat, she said. Hyundai Motor sold 240,953 vehicles in October, up 15% from 209,047 vehicles a year ago. Strong sales of the Santa Fe and Veracruz SUVs in the United States and the i30 hatchback in Europe boosted the month’s numbers.

Local sales rose 8.9% from last year to 55,224 vehicles. Exports were up 17% to 185,729 vehicles. For the 10 months through October, the automaker sold 511,825 vehicles in Korea, up 9.6% from the same period last year while exports rose 4.2% to 1,627,345 vehicles.

Hyundai Motor, which owns 38.6% of Kia Motors, was the top automaker in South Korea last year, according to the Korea Automobile Manufacturers Association. Kia Motors was the next largest.