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South Korea’s foremost carmaker Hyundai Motor Company is in the final stages of deciding whether to set up the company’s first diesel engine manufacturing facility in India. Hyundai’s decision was based upon soaring sales of small-size and compact diesel vehicles in India.
Hyundai has been manufacturing and launching gasoline engines and gasoline-powered vehicles in India so far. However,
Hyundai’s initial consideration to build a diesel engine plant for small-size cars dates back two years ago as demand for diesel-powered small-size and compact cars was on the rise due to lower diesel prices which is 40 percent cheaper than gasoline in India.
In addition, Hyundai expanded diesel engine exports to India by 50 percent from 7,000 units to 10,500 units per month. Hyundai’s plan to construct the plant appeared to be disrupted by the Indian government’s movement toward hiking taxes on diesel-powered automobiles.
However, the Indian government has indicated that it will not impose higher taxes on diesel fuels, so Hyundai has speeded up its plan to establish its first diesel engine plant in India.
Hyundai Motor India targets sales of 410,000 cars in India this year, up 10 percent from the previous year. Hyundai manufactures gasoline engines in its plant in Chennai with an annual output of 600,000 units and produces car models such as the Eon, Santro, i10 and i20, Accent, Verna and the Sonata in India.
374,000 units were sold in the Indian market and the remainder were exported to overseas markets last year. Once Hyundai constructs the diesel engine plant in India and increases the supply of 1.1 to 1.6-liter diesel engines, Hyundai could boost sales in the Indian market by marketing small-size and compact cars such as the i10, i20, and the Verna that are equipped with diesel engines manufactured in the local plant.
Meanwhile, Maruti Suzuki, the only carmaker that outperformed Hyundai in India, announced last year that it plans to invest 17 billion rupees ($330 million) in constructing a diesel engine plant as it expects sales of diesel-powered cars would jump 10 percent.
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