Automobz.com Unofficial Blog

The economic slowdown has made companies re-think their strategies keeping long term targets in mind. An organization such as Hyundai, the country's largest exporter of passenger cars, has decided to export vehicle kits in the completely knocked down (CKD) condition. This usually means that the final assembly of the car will take place in the country it is exported to either via a local vendor or their own facility (most organisations preferring the former) and then the distribution chain will be carried on. By doing so, high import taxes are avoided and may also be liable for tax preferences since they are providing local employment. This is a common practice among most European nations since they would like to encourage the sale of home grown produce and also to balance out local employment but then the importers find a way by bringing in their products as completely or semi knocked down units. This does help in reducing costs but also requires an initial investment but does benefit the exporter in the long run. Thus, Hyundai is investing Rs 200 crore for the creation of a new press shop at Sriperumbudur. The exports in the form of kits could start by July next year. Last year, Hyundai exported 1.27 lakh cars, and 30,000 kits would be the initial target.

Hyundai has set itself a production and sales target of 5.3 lakh vehicles this year which would increase to 6 lakh the following year. Currently, Hyundai can produce 6 lakh engines in a year which has to increase by next year as there is a demand for the engines from Kia Motors, its sister concern. This would be possible as its second unit will join the first unit for a third shift from October 1st this year. Hyundai plans to export 25,000 engines to Korea this year which will increase to 70.000 next year. They would be relying completely on their exports to achieve the set targets as the domestic market seems to have hit a roadblock. The initiation of the kits for exports as come at the ideal time as the expected launch of the i20 and its successive exports could also play a huge part in the decision. Hyundai also said that they would launch the LPG fitted Santro in the next month and the LPG Accent in October. HMIL is currently sourcing the CNG and LPG kits from two Korean based companies – CEV and Motonic. These companies have been asked to set up manufacturing facilities in Chennai with an initial number of 2000 a month.