COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

Daewoo, Hyundai not to hike Matiz, Santro prices

Faced with a recession-hit market, both the Korean automotive giants in India -- Daewoo Motors India Limited and Hyundai Motors India Limited -- have decided to absorb the entire hike in cost resulting from the proposals in the Union Budget for 1999-2000 and not alter the price tag of their respective small cars -- Matiz and Santro.

Although Hyundai's cost of production has increased by around Rs 3,000 per vehicle on account of the several levies in the Budget, Daewoo claims that the hike in its production costs have been neutralised by some benefits which the Budget has to offer.

A P Gandhi, president of Hyundai Motor India, said that the hike in costs is due to a slight increase in component costs. ''But, in the present market conditions, we would not be passing it on to the customers.''

However, he stated that a price increase is on the cards by the middle of next fiscal (1999-2000). ''It would come close to the launch of our second offering, code-named LC.'' Currently, HMIL makes three versions of the Santro car in India, priced at Rs 299,000, Rs 349,000 and Rs 369,000 (ex-showroom in Delhi).

According to S G Awasthi, managing director of DMIL, ''for us, it is net nil-nil effect, so there is no question of hiking prices.''

Meanwhile, Gandhi said, Hyundai has evaluated the impact of the change in excise duty structure on automobile components and is keeping a close watch on the market conditions. ''We have to wait for demand to pick up before making any upward revisions on the price tag. We expect a demand upsurge around August-September 1999 and that would be the time when we might hike prices.''

Hyundai is in the process of readying the LC, which would address the mid-size segment. A prototype of the same has already been prepared and the company has decided to offer it with 1.5 litre and 1.3 litre engine options.

''With these engines ready, we are very much on schedule,'' Gandhi said. The new mid-size car is likely to hit the city streets by October 2000.

The LC would be available in both 1500cc and 1300cc engine variants driven by both petrol and diesel. The model is being designed keeping the Indian tastes and driving conditions in mind, he added.

''Our Irrungattukottai plant near Madras is flexible enough to adjust the production lines for a new car in a totally new segment. This would help us in achieving optimal use of our capacities,'' he added.

The company expects to achieve break-even by 2001-02, the third year of its commencing sales in India. Pursuant to having achieved break-even, the company is also planning to divest a part of its equity to the Indian public. The company has not yet fixed the time-frame or the size of equity to be offloaded.

HMIL presently has an installed capacity of 120,000 units per annum of which around 80 per cent will be utilised in the first year.

HMIL has been set up with a total investment of $ 614 million. Of this, $ 189 million have been brought in as foreign equity, while $ 100 million have come by way of rupee loan and another $ 400 million through the external commercial borrowing route.

Business news