Y.S. Kim (left), MD, and B.V.R. Subbu, President, Hyundai Motor India

Have one more helping of salad,'' urges yang Soo Kim, rising from his table at Oberoi's La Rochelle & Wine Bar in Delhi. "The price is fixed, so the second plate won't cost you anything," he points out, his 5-foot-3-inch frame making its way to the buffet counter for a refill of salami and fish. In Delhi for a whirlwind tour of dealers in nearby cities, the 59-year-old Managing Director of Hyundai Motor India is trying to lighten up the mood at the end of an hour-long interview. But make no mistake. Kim rarely jokes. And about value propositions, never.

Six years ago he arrived in India from the Korean car major's headquarters in Seoul to set up Hyundai's largest manufacturing base outside Korea. Local financial institutions laughed when Kim-accompanied by parent Hyundai's then President Byung Jae Park-told them that they planned to sell 50,000 cars in the first year. Not only was Hyundai an unknown brand compared to some other foreign automakers like Ford and General Motors, but the 1-litre car that it was planning to launch in a market barely 60,000 units-a-year big was funny looking-a squat "tall boy" with a flat rear. And, of course, Maruti Udyog straddled the market like a colossus. Its depreciated facilities were churning out cars at bargain prices, making life hell for new entrants.

Today, it's Kim who's laughing all the way to the bank. In 2001-02, Hyundai's plant in Irrungattukottai near Chennai rolled out 87,822 cars, raking in Rs 3,403 crore in revenues and an estimated Rs 210 crore in net profits-yes, net profits. It has just three cars in its portfolio, but all lead their respective segments. The Santro, for instance, led the B-segment in 2001 with 66,396 units, while market leader Maruti Udyog's Zen-for long the segment definer-trailed at around 63,900. Ditto its mid-segment sedan, Accent, which at 16,267, outsold Maruti Esteem by around 4,460 units last year. Ford's Ikon and General Motors' Corsa-which compete in the same segment-were behind at around 15,220 and 5,810 respectively. But the surprise of them all? The Jaguar knock-off, Hyundai Sonata, which at around Rs 12 lakh apiece, beats contenders Ford Mondeo and Honda Accord hands down (See Car Czar: Hyundai Leads All Its Segments).

In other words, the mild-mannered Kim has made automotive history. Hyundai is the only foreign car manufacturer in India to have raced to market leadership and staggering profitability in less than four years. (No doubt as a reward, Kim is being deputed to oversee Hyundai's maiden $1-billion facility in Alabama, USA, which upon completion in 2003, will roll out 3 lakh cars a year.)

Having gained a lead, the company is revving up. In September this year, it will launch Terracan-a 2.5-litre sports utility vehicle. At a price tag of Rs 18 lakh, it is expected to do a Sonata to the pricey SUV segment, where imported models rule. Earlier in January this year, Hyundai launched a 1.1-litre version of its best-seller Santro. By June 2003, it could be joined by another small car named Getz, which is due for launch in the European markets in July this year.

Getz apart, there are other models lined up: a luxury car, Grandeur XG; a mid-luxury car (Elantra or Matrix) and even a one-tonne truck that will target the niche market for ambulances. An IPO-which will float about 10 per cent of the fully-owned subsidiary-should hit the markets in either September 2002 or January 2003 and mop up between Rs 200 crore and Rs 300 crore. By 2005, Hyundai hopes to have eight cars in its portfolio and a topline breasting Rs 6,000 crore. "The market is evolving and so are the customers,'' says Kim, ''so, we'll bring out appropriate products at the right time.''

More Bang For The Buck

Like his buffet lunch, Kim's strategy in India has been centred around value. The original candidate for launch was the Accent, but in the run up to d-day in September 1998, Hyundai made a mid-course correction: it dumped Accent and brought in its best-seller in Korea, the Atos, christened Santro for India. It was clear that action was moving from Maruti 800's A segment to Zen category (or the B segment). A crucial decision that it made was to sink $641 million (Rs 3,076.8 crore at today's price) into its plant near Chennai. The idea was to make as much as possible locally so that the end-price of its cars could be controlled. With the result that Santro started off with a local content of 70 per cent (in value terms) and today almost nine out of every 10 parts that go into it are locally sourced. Hyundai itself makes the gear box and the engine-stuff imported by most other players.

"All I know is that in the car business no one is making money. There are too many players and none has reached a profitable economical size." Aditya Vij, MD, General Motors India

Typically, though, in the auto industry localising components is a chicken-and-egg situation. Vendors won't price components low unless they are assured large volumes, but the manufacturer can't generate volumes unless he is able to price his car competitively-which can happen only if components are priced low. To break this vicious cycle, Hyundai had to get its positioning right. Film star Shah Rukh Khan was roped in at an estimated cost of Rs 7.5 crore to be Santro's brand ambassador. And at a starting price of Rs 2.99 lakh, Santro not only became a challenger to Zen, but also an alternative entry point for car buyers. "Everybody said the Indian customer was price-sensitive, but we figured that was not true: he was value-sensitive," says B.V.R. Subbu, HMI's President.

Santro's success made one thing apparent to Hyundai: one need not necessarily price below rivals, but one had to pack more into the car. Therefore, its second offering, the Accent, was packaged with a powerful engine and sleek interiors at an attractive price range. The strategy worked. Within a few months, the Accent was nipping at Maruti Esteem's heels and in 2000 overtook it. More recently, Sonata has done that in the luxury segment by pricing itself at Rs 12 lakh (ex-showroom Delhi), compared to Mondeo's tag of Rs 15.56 lakh and Accord's Rs 14.95 lakh. In fact, Hyundai even gave Sonata a richer interior borrowed from its luxury car Grandeur. "With Hyundai, you always get the impression that you are getting more than what you paid for," says Hormazd Sorabjee, Editor of AutoCar India.

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