YK Koo, the managing director of Hyundai Motor India, expects the country’s passenger vehicle sales to miss the estimate of 5 million units by 2020, but still overtake Japan to be the third largest market. In an interview to Nabeel A Khan, he says the market growth will slow to 7-9% in fiscal 2018 as a result of the initial impact of GST, which though will be beneficial to the industry in the long term. Edited excerpts
In the last few months we have seen Hyundai facing pressure in terms of sales. What is the reason for this?
Hyundai Motor India has grown strong in the last 20 years. Everybody knows about our market share and percentage growth. We have made 4.47% growth at the time when the industry grew by 9%. …we launched Creta in July 2015 in the SUV segment. In last two years, we don’t have a full-model-change product and also we did not enter in new segments like other strong players.
This is the main reason (for the slower growth). Apart from this, we phased out the i10, in January 2017, which was contributing 3,000 units per month. We introduced facelifts of the Grandi10 and Xcent. In the last two years, we didn’t have full-model-change and new segment products.
For the current Verna, we are selling 700 units. We are aiming at to sell 4,000-5,000 units of the new Verna. This will give us further growth. This will be extra growth for us. We will come back.
What about exports that are also declining?
The domestic market is moving faster than exports. We compensated with domestic market for exports. There is a slowdown in the Middle East and the Latin America market. Every month we export more than 10,000 of the Creta, i20 and Grand i10.
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What is your plan for capacity expansion?
We are satisfied with the current production capacity, 7 lakhs, any change I don’t know. There is no production constraint for us. We have a flexi production system.
How do you look at the progress of the Indian market? What are the key changes that you notice?
In the Indian market, the compact segment is still strong at 51-55%. The mini segment will come down. The premium compact segment will also grow. The SUV segment is a very high growth segment.
We see the demand for SUVs also increasing. Currently, SUVs contribute about 19-20% to total passenger vehicles and we expect this to be 25% by 2019. For SUV, it’s always the new product that creates new volume. So, I think they will grow further — the SUV segment and the compact and mini segments. For Hyundai also, the contribution of SUVs will rise to 25% by 2019.
When are you bringing your sub-four-metre SUV?
We are targeting the first half of 2019.
How do you look at the policies that have been implemented in India, especially GST impacting the automobile industry?
I think the Indian market, on the compact segment, tax is less — 28% tax, there is (also) a 1% cess. So, I think they are trying to motivate, encourage and push the compact segment. Demand for SUVs is very high and it will continue to grow, especially small, sub-four-metre, SUVs. So, we see the mid and compact segments to grow fastest in the coming days.
Transactions will become more transparent (under the GST regime) and it will make the tax same across states as well, which will help improve the market. It will create a good environment for business. We have to see what is the definition of the luxury segment on which an additional cess is going to be implemented.
Is there a possibility for Hyundai to utilise the capacity being created by your sister brand Kia?
Kia is a separate company, so we will continue to have a different strategy, different R&D and different products.
How do you see the Indian passenger vehicle market this financial year?
We expect the Indian passenger vehicle segment to grow 7-9% in financial year 2018. The market was growing at 9% but after the goods & service tax implementation, there has been a correction as the small businesses who are buyers of cars have seen pressure.
The market is still worried about the impact of GST. However, in the long-term, GST will certainly support the automobile industry. But in July, August — after the roll out of GST — the market has been a little slow.
Do you think India will be able to achieve the 5 million PV sales expectation by 2020?
I think that is too far, but we will cross 4 million passenger vehicles soon. And by then we (India) will beat Japan to be the third largest passenger vehicle seller.