Arvind Saxena, Senior Vice President, Hyundai Motor India Ltd.

Hyundai Motor broke into the Indian market in the early 1990s and has since established itself as one of the country's most competitive brands. Arvind Saxena, senior vice president, marketing and sales, Hyundai Motor India Limited, answered these questions exclusively for Donald Kirk, long-time correspondent in Seoul and author of "Korean Dynasty: Hyundai and Chung Ju Yung" and numerous articles on the Hyundai empire:

Question: What is the size and scope of HMC's Indian operation, how long has it been in operation and what are its future plans.

Answer: Hyundai Motor India Ltd (HMIL) was set up in 1996 when the factory construction started and the first car (Santro/Atoz) rolled out in September 1998. Today, HMIL has a capacity of producing 600,000 units per year and it operates two plants within the same premises situated in Sriperumbudur, approximately 35 km from the southern city of Chennai.

HMIL enjoys a market share of around 21 percent today and it hopes to grow this to around 23 percent over the next year or so. It exports about 50 percent of the production to over 100 countries from India. The models exported are Atoz, i10, i20 and the Accent. HMIL has been designated as the small car production hub, which means all cars below the i20 will be produced only in India. This year, HMIL expects to sell around 560,000 units overall (both exports and domestic sales combined).

Q: What are some of the difficulties encountered in setting up such an enormous operation in India and have your projections been fulfilled?

A: There haven't been too many difficulties. The state government has been very co-operative in terms of granting permits, etc., but there are some infrastructural shortcomings like the lack of good road connectivity to the port and a railroad connection from the factory to the port, which has still not come up. But, otherwise, we do not have any major problems.

Chennai is conveniently located with access to the port, which helps us export our cars, and also the national highway, which again facilitates domestic distribution.

Q: What are the advantages of operating in India, and what is the response in the vast Indian market to Hyundai cars?

A: India is a huge market for small cars and this helps us achieve economies of scale as we produce a large number of compact cars both for domestic and overseas markets. India also has a vast and skilled manpower pool, which helps us keep our production levels high as well as maintain quality.

Within six months of starting our operation we became the No. 2 car manufacturer and the largest car exporter - a position we still hold today. Hyundai products are very popular in the Indian market and the i10 is one of the largest selling cars here in India.

Q: What type of cars are most competitive in the Indian market -- and do you plan to diversify with other types of vehicles, including the large limousines and upscale models that do well elsewhere?

A: India is primarily a small car market but HMIL is the only manufacturer that offers a full model range staring from the compact Santro to the premium Sonata and the SUV Tucson. Since compact cars account for over 75 percent of the market, HMIL will continue to focus on this segment while maintaining its presence in other segments as well.

Q: What advice would you have for others considering going into business in India?

A: India is a price sensitive market and at the same time it values quality, reliability and performance. If you do not have capable products that meet the aspirations of the people, then chances are they will not succeed. As for HMIL, we have always offered the latest in technology and the best in design products, which are contemporary. At the same time we offer our customers a great value for money proposition and this we feel is the main reason for our phenomenal success.

Q: What type of bureaucratic issues does one encounter, and what does a prospective manufacturer have to do to get into business in India?

A: Numerous licenses and permits that were once required earlier for doing business in India have mostly been done away with. There is a fair and transparent procedure in place and it is not that difficult to meet the rules and regulations here. Once one fulfills the eligibility requirements there isn't much that gets in the way of doing business here. The state government in Tamil Nadu where we are located have been very helpful and provided us with all the assistance that we required.

Q: How does the Indian market differ from other large markets, including South Korea, the United States and Europe? What distinctive features does one find in the Indian market?

A: As we said earlier it is primarily a small car market, which is growing in double digits every year, so there is vast potential. However, it is a value-conscious market and only the latest in terms of technology and design can hope to succeed. It is a very competitive market and it is increasingly becoming so.

Q: What manufacturing problems are distinct in India due to weather, transportation?

A: Transportation or distribution at times takes a longer time because of weather conditions like heavy rains, which happen during the monsoon season, but normally it is well organized and we do not face any continuous problems.

Q: How about the Indian work force - how well trained and qualified are Indian citizens to work at skilled, high-level jobs, and what about assembly line workers? Do you face union problems? How do wages there compare with elsewhere in the world or with other manufacturers in India?

A: There is no dearth of skilled manpower and most Indians are computer savvy and technically trained and speak English. But on the shop floor we have recently started facing some union related problems, which again are politically motivated and encouraged by outside unions. Wages as compared to developed nations are less, but within the Indian automobile industry HMIL workers are the highest paid.

Q: Who is your main competitor in India? What competition do you anticipate in the near or long-term future?

A: The main competition comes from Maruti Suzuki and Tata Motors. The Indian automotive industry is growing fast and, consequently, it has attracted all the major automobile manufacturers. Most of them are already present and companies like Nissan and Volkswagen are just setting up their operations. All producers of compact cars will be in direct competition with HMIL and with more companies coming in competition will only get tougher.

Q: How would you compare India with other large markets? Is it an advanced country or a developing country? Are Indians taking to the roads in ever-increasing numbers, and where is the market going from here?

A: India is a developing market, and when we started out it had a very low car ownership base. Even today it is one of the lowest with eight out of every 1,000 Indians owning a car. So potential for growth is tremendous and in the coming years we see the market expanding considerably, as with growing incomes more and more Indians take to the roads.

Q: Are you manufacturing vehicles or models that are unique to India and not sold elsewhere? Do they have different names from models seen in Korea, North America and elsewhere? How can HMC compete with that new extremely small Indian car we've been hearing about?

A: India is a compact car market, so most of the production is skewed towards small cars, but most of the compact cars we manufacture here are sold in many markets, so in that sense there is no product differentiation in terms of technology or design. Yes, sometimes they are named differently as in the case of Santro, which is called Atoz in many markets, but the i10 and the i20 are named the same. HMIL will not compete with the ultra low-cost cars that have been made or will be made, because HMIL does not believe in competition at price points. It will continue to build quality compact cars that can meet the safety and emissions requirements in any part of the world.

Q: How do HMC people like living and working in Chennai? Do you have plants and operations elsewhere in India? Is there any particular region of India where you do better than elsewhere? Why Chennai - why not Mumbai or Delhi or Kolkata or some other huge urban center?

A: We have the manufacturing operations only in Chennai, but we have regional offices across the country and the marketing and sales office in New Delhi. Hyundai is represented through a 274-strong dealer network covering almost the entire country and Hyundai cars sell well across the nation

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