NEW DELHI :
Kia Motors’s runaway success with the Seltos sport-utility vehicle (SUV) has prompted group company Hyundai Motor India Ltd to review its decision to shift production of its next generation Elite i20—a premium hatchback—to Kia’s Andhra Pradesh factory.
Hyundai, which had informed various stakeholders about its plan to move Elite i20 production to Andhra Pradesh, is now doing a feasibility study for retaining production at Chennai, two people aware of the matter said.
Newcomer Kia has sold 26,840 units of Seltos and has received more than 60,000 bookings in the two months since entering India.
On Tuesday, Kia announced that it has become the fifth largest vehicle manufacturer in India. For the festival month of October, the South Korean company reported wholesale despatches of 12,859 units, beating Ford, Volkswagen, Nissan and Renault. Robust bookings have also prompted it to start an extra shift at its Andhra Pradesh factory.
According to the people cited above who spoke on the condition of anonymity, increasing demand for the Seltos is one of the reasons for the rethink. The surging demand for Seltos comes at a time when car sales in India have declined in the past year amid an economic downturn.
According to the first of the two persons, Hyundai had decided to manufacture the Elite i20 at the Anantapur plant in Andhra Pradesh and had informed other stakeholders as well.
“Elite i20 is a mass product and a successful one, and the Anantapur plant has a capacity of 300,000 units. The demand for Seltos will only increase with the recovery in the economy. So, there won’t be enough capacity. Kia also has vehicles in the pipeline. Hence, Hyundai is re-evaluating the strategy, though nothing has been finalized as yet," said the person mentioned above.
Emails sent to Hyundai Motor India and Kia Motors India on 17 October, remained unanswered till press time.
Hyundai’s Chennai plant has been running at more than 95% of its installed capacity for some years now, but it was widely expected that the company might use the Kia plant. Last year, Hyundai said it raised capacity at its Chennai plant by 100,000 units.
According to the second person cited above, Hyundai may not produce the Elite i20 in Andhra Pradesh, or may manufacture another model there which is not expected to attract large volumes.
“There may be other operational reasons, but the overwhelming demand for Seltos is definitely one of the reasons which have led the company to think again on its plans. Otherwise, they wouldn’t have done a feasibility test of their production strategies. Also, the next product of Kia may not be a volume driver, but most manufacturers like to keep some buffer capacity in hand," said the second person mentioned above.
Kia, SAIC Motor-owned MG Motor and PSA are the three new automakers to enter the domestic market over this year and the next.
Of the three, Kia has outlined the most aggressive strategy for India as it will start its journey with an annual capacity of 300,000 vehicles and 265 touch points—a mix of dealerships and service centres—across 160 cities.
The company plans to launch four new models over the next two years.