"We bring relevant products to the market"

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: In just ten years, Hyundai Motor India Ltd, (HMIL) a wholly owned subsidiary of Hyundai Motor Company, S Korea has metamorphed into the country’s fastest growing auto maker, having rolled-out some 7,00,000 units in just 75 months and is the largest exporter of passenger cars. HMIL is also the country’s second largest car manufacturer that markets over 34 variants in six segments: Santro in B segment, Getz and (i10) in B+, Accent and Verna in C; Elantra in D, Sonata in E and the Tucson in the SUV segment. Hyundai has achieved many significant milestones during this one decade. Arvind Saxena, senior vice-president, marketing and sales of the company explained the nuts and bolts of the automotive business to FE’s Radhika Sachdev.

What’s this year’s budget impact on auto sales?

There’s been a price correction which we have passed on to the customers, but the impact is slow. The price cut is approximately Rs 8000-13,000 on Santro and approximately 19,000 on Getz diesel model but the sales response is not immediate, perhaps because we started from a higher base of growth, yet, its reasonable. One reason for the slow impact could be that March is not the best month for auto financing. People have other things on mind.

About the budget, we are a little disappointed that the big car segment has been left untouched. Exports also didn’t benefit, which hits us hard as we export nearly 50% of our produce to overseas markets, namely EU, Africa, Middle East and Latin America. In today’s time, with the rupee strengthening, we were hoping to get some sops there, but we were disappointed.

From your long experience with the Indian auto market, first with Maruti and now with Hyundai, do you think we as customers have matured in any significant way?

There is certainly a heightened consumption trend. Cars have now acquired a lifestyle value. There is a faster transition from two to four wheels. There are no statistics available on the used car segment—its still a manufacturer-led business—has also grown, and the ownership pattern has significantly come down from five years for one model, four years ago; to the present three and a half years. Smaller cars still have a better retentive value, but that’s because they are financed less (65 to 70%) compared to 75 to 80% in big car segment.

At the time when the market is crowed with newer models, it’s raining awards for i10. What do you attribute this to?

Elementary—I’d attribute it to consistent feedback. Three and a half year is what it normally takes to freeze specs on a new model, but with i10, the R&D took a little longer. If you’ve seen the car, it packs in a host of value-added features; beige interiors, in-dash music system, sun roof, two air bags, IABS safety, a choice of five variants (three basic, two optional)—it’s a fully-loaded car very attractively priced for the Indian market at Rs 4.79 lakh.

Lets forget the judges. If you were asked to rate i10, how would you score it on a five point scale in terms of quality, ride, handling, driveability, comfort and safety?

Six out of five on all parameters and that won’t be an exaggeration. Consult any auto expert. Or quiz a customer. He’s generally the most discerning. They tell us that it surpasses their expectations. I’ve been told that on the highway, i10 performs as good as a big car. Believe me, on this price band, you can’t beat this kind of value in any car.

Do awards really change perceptions?

To an extent. Awards give recognition to a good product. It validates your product and reinforces its image, even though there may not be any direct co-relation between the awards and product sales. But it does create interest in the mind.

You’ve succeeded very well with hatchbacks (Santro, Getz) but your sedans (Accent, Elantra, Verna) haven’t cut much ice, why? A few years ago, you even tried price reduction with Accent GVS—did that help?

I do not agree with you that Accent or Verna have not cut much ice with the Indian consumer. If the difference in sales is just 300 to 400 units in a month between the segment lead and the Verna—would you call that a big difference? The diesel version of Verna, let me tell you is among the biggest selling, although you cannot of course compare it to Indigo or Logan because its not in the same price bandwidth.

Price reduction, if you ask me is not a good strategy, because you cannot go beyond a point. But yes, the government can make cars more affordable by cutting down on the excise duty. The total tax liability on a car buyer remains one of the highest in the world, almost 40%-45% on big cars. Even the 12% excise on small cars is on the higher side compared to some of the ASEAN countries.

Two of your models, Getz and i10 were first launched in India and then introduced in the over seas markets. Why? Is India a good test market for auto manufacturers just as it is for pharmaceutical companies?

That’s not true. India is a very important market for us and not as a test market. You launch products where you have volumes. It’s our commitment to the Indian consumers that we get them the best products ahead of anywhere else. You cannot dub it a “test market” phenomenon, because its impossible to change specs for other markets in a short span. In fact we are trying to do what Apple did with iPhone, give Indian consumers access to global products.

What plans of enhancing your production capacity?

We already have a state-of-the-art plant at Sriperumbudur in Tamil Nadu, which has a capacity to produce 3,00,000 units per annum. And the second plant which has started functioning has doubled the production capacity to 6,00,000 units.

When you first contracted Shahrukh Khan for Santro, we saw a close fit. Today, when both the brand and the star endorser are established players in their own right, haven't you two outlived utility for each other?

Not necessarily. In fact, we saw a lot of potential in taking this association beyond Santro, which is why we have now moved him to i10. I think, we continue to benefit from this relationship.

What’s your reaction to Tata’s Nano?

What can I say? It is an interesting proposition. Nice design. Nice price. Now lets see how it performs on the road.

Hybrid cars are a rage these days. Do you see a future in them?

Honestly no. I have my doubts about the relevance of the technology and whether the customer will pay for it. We have the technology, can even go beyond it, but will people pay a premium for it? You have to bring relevant products to a market. I am not so sure it’s a viable technology for a price-sensitive market like India. Even in the US, the penetration of hybrid models is less than 1%.

Any plans for upcountry market?

We have a dealer network of 230, which we plan to increase to 300 by the end of this year. Assuming that the top ten cities account for 50% of the market, by that yardstick we already cover 95% of it. That said, the up country market also has good potential, especially with the financial sector getting more active there, but there is a minimum unit investment that we have to consider.

Cars are a very macho category. Increasingly however, we also have women drives. How do you pander to their interests?

Please check the vanity mirror in i10. We are the first to have it on the driver’s side.

Any plans of entering the pre-owned car segment?