HYUNDAI - EYEING THE INDIAN MARKET INNOVATION - R&D VISION AND STRATEGY Under the philosophy of putting quality

first, over 5% of our revenues are invested into R&D to secure world-leading quality, marketability and technology. Through our global R&D network that spans the US, Europe, Japan and India, we are concentrating on developing key technologies and vehicles ideal for local markets. Global resources are employed to enhance quality and technology while furthering our internationally competitive R&D capabilities. The vision of HyundaiKia Motors R&D Center is to secure world-best innovations and raise our profile as a premium automaker. Our quest also includes making this world a better place for all by popularizing next generation eco-friendly technologies and creating a new auto-culture through people centered technologies that move customers'hearts. Environmental issues have emerged at the core of a common paradigm for the future global village, and we have already taken bold steps towards environmentally-friendly investments and research that have resulted in a range of innovative breakthroughs from fuel-saving technology to new materials and responsible treatment of end-of-life vehicles. With an R&D network that brings the world closer together and the most advanced design and testing facilities, HyundaiKia Motors R&D Center will continue to embrace challenges and realize innovation to leap forward as a global best automaker in 2010. FOCUS ON INDIA & CHINA With the U.S. facing a credit crunch and worries of a recession, it seems like a bad time for South Korea's Hyundai Motor to be pursuing a policy of global expansion. After all, winning over car buyers in the world's biggest market is crucial to the company's hopes of building a globally recognized brand. But the U.S. isn't all that counts, Hyundai executives say. In fact, their strategy for breaking into the industry's top five by 2011 (counting subsidiary Kia Motors' sales) relies on a rapid buildup in two of the world's fast-growing markets: China and India. "The company's resources will be focused on expanding our presence in emerging markets this year," says Hyundai Motor Vice-Chairman Kim Dong Jin. China and India made up just over a fifth of Hyundai's global sales last year. Hyundai execs want to boost that figure and raise their market share in both countries. The company expects to raise production there by more than 60% this year, and by 2010 it hopes to make 600,000 cars in each country, compared with 327,000 units in India and 232,000 in China last year. But the linchpin of Hyundai's strategy will be the transformation of its modest presence in both countries into a key design, manufacturing, and export hub for the entire global operation. BUCKING A DROP IN SALES

It will be a huge challenge for the Korean company. Hyundai's share of the Indian market fell to 17% last year from 18.2% in 2006, and in China it had just 4.6%, down from 6.9%. Try telling that to Hyundai's gung-ho executives. They have spent some $2 billion on two new plants, in Chennai and Beijing. The plants could determine whether Hyundai meets its own market share targets of 20% of India and 6.1% of China this year. Analysts think Hyundai's success in those markets could set the tone for its push into other markets, such as Russia, the Middle East, and Africa, which are forecast to be just under a quarter of Hyundai's global sales this year. In India Hyundai is already the second-biggest car brand. It's also the country's largest exporter of passenger cars. In 2007 the company shipped 127,000 cars from India, accounting for about two-thirds of the country's annual car exports tally. That doesn't mean Hyundai has done everything right. Until the new Chennai plant went online Hyundai's production capacity in India was just 300,000 cars. While Hyundai was ramping up its capacity, Maruti Suzuki India, a subsidiary of Japan's Suzuki Motor, added two more percentage points to grab 52.4% of the market last year. INDIA: HUB FOR SMALL CAR EXPORTS With a population of one billion, India is one of the most attractive future markets for the auto industry. Nevertheless, due to the very low incomes of the population, the number of passenger cars sold in the country is only 600,000 units a year. Moreover, new vehicle sales in India are unlikely to exceed 2 million units a year by 2010, meaning that the market will be smaller than in France or the UK nowadays. The Indian market is also very protected from foreign participation. Like most Asian countries, the government has considered the automotive industry a key sector for the development of the country. Therefore, it enacted industrial policies that include high tariffs, severe restrictions to vehicle and components imports, as well as limits to foreign investment. Small size and strong protection have kept foreign OEMs at large, which have overlooked investment in the region. In the absence of strong foreign competitors, the local car manufacturer Maruti Udyog has dominated the Indian market in all segments. Sales in 1999 achieved the record level of 385,000, corresponding almost to a 60 percent market share. At the very bottom end of the market, there is little alternative to Maruti, and the low cost Maruti 800 is ubiquitous on Indias roads. However, in higher segments of the market, Maruti is now facing some competition from foreign carmakers. Some interest in the local market, more possibilities for the participation of foreigners in the economy, but the same restrictions to car imports, is summoning the world players into India. Hyundai execs stress the Chennai plant's importance in their global plans. The company expects to export half the 530,000 cars it will build in India this year. With the plant's rollout in November of a new small car, called the i10, Hyundai became the first foreign carmaker to

develop and produce a model in India for sale around the world. "The new plant cements India as our export hub for small cars," says H.S. Lheem, managing director of Hyundai Motor India. Unlike the $ 2,500 Nano unveiled earlier this month by Tata Motor, Hyundai's i10 meets stringent safety and environmental requirements in Europe and other developed markets. Being a rapidly growing car manufacturer, HMIL aims at a 22% market share in domestic car sales. The continuous demand for Hyundai cars has made the firm to look forward to a major growth in the next financial year. In recent times, HMIL has introduced its most expected car Santa Fe SUV in our country. This high-end car is designed with all the safety engineering technologies like advanced braking systems, best vehicle control systems, supportive airbag systems, etc and definitely, this will be a safe car to the driver and the passengers. This company expects that a considerable numbers of their new car will be sold in the end of 2010. Though this company is successful with the sales of cars like Santro and i10 series, it faced a failure in the sales of models like Terracan, Sonata, Elantra and Tuscon. Now, Hyundai is preparing to reach the foreign countries like Australia, East, Vietnam and in CIS countries to boost their overseas sales. Since there is a increasing demand for the small and fuel-efficient cars in overseas markets, HMIL has decided to add Turkey as their alternative manufacturing unit of i10 and i20 cars. Hyundai Motor India Limited} (HMIL), the second biggest auto company of India, has introduced six forms of cars in its A2 (Small cars), A3 (Mid size cars) and A5 (Luxurious cars) segments and the fast-moving autos are Santro Xing, i10 and i20. With its two car production plants in Chennai, it can produce more than five lakh cars, in a year. The budget cars i10 and i20 are produced only in the Hyundai plants of Chennai and they are exported globally. It has an R&D center in Hyderabad to improve their manufacturing methodologies and to modernize the styles of cars according to customer needs. Hyundai Motors India Limited recently announced that the company will be launching it six new models over the time span of three years. Besides, the launch and the temporary closure of bookings, this company will also indulge itself in few of the promotional activities. Now, that is different that those promotional activities seem to be the biggest activities of all. Hyundai will be spending roughly Rs 200 crores on this strategy within the next five years including major sponsorships of cricketing events. Hyundai Motor is keen to expand its market now to rural areas with setting up 300 new rural sale outlets all this expansion is in progress for the launch of the cheapest car from the Hyundai stable until November this year. The plans to launch a new car under a price tag of Rs 3 lakh shortly were announced by Hyundai officials this May. According to car experts the new Hyundai car which is codenamed as Hyundai HA, could fiercely compete in terms of sale with the present market king Maruti Suzukis Alto; in the small car segment. Currently Hyundai is maintaining its standard 325 dealership outlets within cities and this new expansion strategy could make the rural outlet number network extend to 1,000.

The EU accounts for nearly 45 per cent of Hyundai's exports from India. Another reason behind the dipping exports is that the company has decided to shift the export base of the i-20 compact car from India to Turkey. We used to export the i-20 hatchback also from India, but now have shifted the export base for the car to Turkey as it made more economic sense. QUESTION: Q.1 What is reason for Hyundais shift in focus towards India & Chinas car market? Q. 2 What are the strategies Hyundai is planning to put into action to increase its share in India?
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