Hyundai to *finally* set up a Diesel engine plant in India

[GTO]

High Points

- Hyundai's diesel plans got a shot in the arm after the Govt didn't impose an additional cess for diesel cars (Link to thread (The 2012 Budget & the Indian Car Scene : All you need to know))

- The company currently imports its diesel engines. Only petrol engines are locally manufactured.

- Hyundai could invest in the region of 500 crores, and the plant might be located at its Chennai facility itself.

- On the anvil are:

1.1L 3 cylinder diesel (i10)
1.4L 4 cylinder diesel (i20 & Verna)
1.6L 4 cylinder diesel (Verna)

- Would it make sense to consider a 1.5L instead for the Hyundai Verna? I think so. There is a substantial excise duty difference for engines over 1.5L in size. Plus, the previous-gen Hyundai Verna 1.5L CRDi offered segment-leading performance.

Source & Full Article

NEW DELHI: Within days of FM Pranab Mukherjee deciding against imposition of additional tax on diesel vehicles, Hyundai has finalized plans to set up a diesel engine plant in India. The company, that currently imports diesel engines to strap on cars like i20 hatchback and the Verna sedan, is likely to invest around Rs 500 crore for the engine facility, and an announcement is expected soon.

[Vid6639]

Hopefully this brings the maintenance costs down as well as engine spares pricing. I doubt Hyundai will reduce the prices of the diesel variants but it will probably have an effect on parts.

Going by the ownership reviews, engine parts cost a bomb if they fail. If the vehicle is out of warranty it will burn a big hole in the pocket.

[smartcat]

This is good for Indian automotive industry in general. Because when it rains, it starts pouring soon enough. No manufacturer would like to lose competitive advantage to Hyundai - and hence more manufacturers will setup their diesel engine plants here.

According to ET, Honda will setup a diesel engine manufacturing plant next, and that the Indian plant will be the sole supplier of diesel engines below 1.8L to Honda globally. Above 1.8L diesel engines are already been manufactured in Britain apparently.

Maruti/Fiat/Tata already have their diesel engines made in India. Ford, Nissan/Renault, VW group and Toyota are next in line.

[.anshuman]

Finally Hyundai gets serious about setting up a Diesel plant here. This is surprising since it was Hyundai who first brought the CRDI technology to masses(Accent CRDI), ever since the Accent CRDI they have had very good line up of Diesel engines here but still they always imported these engines.

Just like Vid mentioned above, i also hope this brings down the maintenance costs of these engines which are comparatively expensive to maintain.

I love Hyundai's punchy, free revving, refined Diesels. Currently both i20 and Verna have the most refined Diesel engines in the segment.

[Shrek_924]

The biggest beneficiary of capacity installation will be the people in queue of the never ending waiting queue, especially for diesel Verna.

This will also enable Hyundai to power its whole fleet with diesel heart including the anticipated i45 & Elantra. And if they could pass on even fraction the cost benefit to end customer, it will make them more competitive as compared to Maruti's. (as cost for Maruti will be Fiats production cost + margins)

[mayankjha1806]

I see the whole move based on flawed logic, making strategic corporate decisions based on budget announcements and policies (Which can change in a span on one year) is not in best interest of the company nor the economy as a whole.

Tomorrow if the government wants to either bring price parity between petrol and diesel (highly unlikely, but possible) or tax diesel cars, then the demand of diesels will drop, and when that happens what will Hyundai do with so much extra capacity? Hopefully this increase in capacity has more long term, regional rationale rather than purely Indian budget policies driven.

The only positive out of this is probably cheaper parts, as they are produced locally, leading to cheaper repairs and employment generation.

[rohanjf]

Hyundai has only announced its plans. Seems like they haven't even zeroed in on the plant's location. By the time they actually set up a plant and start producing engines here, won't it be 2014 already? By then the next budget will be out, and what if diesel engines are super-taxed then?

[smartcat]

If future government takes steps to curb demand of diesel cars in India, Hyundai can always tap the export market - the reverse of what happened with i20.

Initially, Hyundai had expected i20 to sell around 1,000 units per month in India. But Hyundai had built up capacity of manufacturing 6,000 - 8,000 units per month, hoping to export the rest. When Hyundai noticed the buoyant demand for i20 in India, they re-routed the i20s to the Indian market (around 4000 - 6000 units/mo) and is exporting the rest. So what happened to the European demand for i20? They just adjusted production of i20s from their other plants in Korea/Europe.

Similarly, if the demand for diesel cars in India falls because of government taxes, Hyundai will probably just export the engines made here. I'm pretty sure they would have thought about all possibilities before sinking Rs. 500 cr into the plant.

[Ashley2]

Originally Posted by mayankjha1806

I see the whole move based on flawed logic, making strategic corporate decisions based on budget announcements and policies (Which can change in a span on one year) is not in best interest of the company nor the economy as a whole.

Tomorrow if the government wants to either bring price parity between petrol and diesel (highly unlikely, but possible) or tax diesel cars, then the demand of diesels will drop, and when that happens what will Hyundai do with so much extra capacity? Hopefully this increase in capacity has more long term, regional rationale rather than purely Indian budget policies driven.

The only positive out of this is probably cheaper parts, as they are produced locally, leading to cheaper repairs and employment generation.

Originally Posted by smartcat

If future government takes steps to curb demand of diesel cars in India, Hyundai can always tap the export market - the reverse of what happened with i20.

..

Hyundai is very pessimistic in their investments. They dont rely this plant solely meant for Indian market alone. They will start exporting once their indian volumes are met.

Infact the work for the plant(means ground work and other neccesary training for the employees) started before 6 months itself.
The decision was strengthened by Budget and not been taken after budget.

The best part is spare parts cost should get reduced, but need not be always

[recshenoy]

Originally Posted by Vid6639

Hopefully this brings the maintenance costs down as well as engine spares pricing. I doubt Hyundai will reduce the prices of the diesel variants but it will probably have an effect on parts.

Going by the ownership reviews, engine parts cost a bomb if they fail. If the vehicle is out of warranty it will burn a big hole in the pocket.

yeah. I always used to doubt about claims "Hyundai diesel is expensive to maintain" until one of my friends uncle got his Accent CRDI engine repaired. It cost him 85K

Since he is elderly and learnt driving late, he was comfortable with Accent he had,hence got it repaired instead of buying new car. But 85K for engine repair and reconditioning is too much. Hopefully this new plant will reduce maintenance costs.

This move is good for indian customers though, More competition means better products and options.

[libranof1987]

As I see it, the disparity between petrol and diesel prices will continue at least for the forseeable future; so, diesel passenger cars will not really go out of favour.

As for this not being a favourable investment for Hyundai should diesels be taxed heavily, there's always exports! India has immense potential and is regularly used as a export hub. So, there's no way this could backfire for Hyundai.

Now, it's up Hyundai to pass on the benefit of localized diesel engine over to customers.

PS : Why 1.4 and 1.6 Verna? Is there that big a diff.?

[misquitas]

Originally Posted by GTO

High Points

- Hyundai's diesel plans got a shot in the arm after the Govt didn't impose an additional cess for diesel cars (Link to thread (The 2012 Budget & the Indian Car Scene : All you need to know))

- On the anvil are:

1.1L 3 cylinder diesel (i10)

Phew! Wisdom has finally dawned on Hyundai on the need to introduce more diesel variants in its line-up here in India, given the petrol-diesel price disparity. And if the 1.1L 3 cylinder diesel does end up in the i10, it could propel the i10 sales even further. Do consider that the supposedly "overpriced" petrol-only i10 currently sells about 10,000 cars a month, despite the huge demand at present for diesel cars.

Assuming that the petrol-diesel variation continues for the next few years, I'm keenly awaiting the i10 diesel to be sold in India. Imagine an i10 with a refined diesel engine, smooth gear box and superb fit and finish.

[swiftnfurious]

Originally Posted by GTO

- On the anvil are:

1.1L 3 cylinder diesel (i10)
1.4L 4 cylinder diesel (i20 & Verna)
1.6L 4 cylinder diesel (Verna)

- Would it make sense to consider a 1.5L instead for the Hyundai Verna?

I say, make a 1.1L 3 cylinder for i10 & a 1.5L 4 cylinder which will go into both i20 & Verna in different state of tunes! This will help i20 get the excise duty benefits & will save some taxes on Verna as well. Different state of tunes mean, there is enough differentiation as well. Now in addition to this, bring is a 2.0L mill for Elantra & Sonata, again in different state of tunes. This should make sure they serve all offerings from one plant & should make max bucks for the investment.

[vvijay]

With the petrol i10 selling already a good 10,000 numbers on a monthly average, wonder how sky-rocketing will its sales figures set once its diesel mill is also out. Did anyone happen to know the planned production capacity of the plant? With 3 engine variants on 3 cars whose numbers are already big and one being only petrol for now, and considering export markets and premium cars too, this would be one busy diesel engine plant in the country.

[avira_tk]

Originally Posted by recshenoy

yeah. I always used to doubt about claims "Hyundai diesel is expensive to maintain" until one of my friends uncle got his Accent CRDI engine repaired. It cost him 85K

Since he is elderly and learnt driving late, he was comfortable with Accent he had,hence got it repaired instead of buying new car. But 85K for engine repair and reconditioning is too much. Hopefully this new plant will reduce maintenance costs.

This move is good for indian customers though, More competition means better products and options.

I think its subjective, the reconditioning is done after a 100k or few years, if you look at the running cost, it goes up by around 1 rupee/km. Its a good trade off between cost and performance. The reason why this is because CRDI engines from Hyundai are not detuned like the one in the Toyota Innova (2.5L 102 BHP ). You have to remember the low running cost/ awesome power in the initial years is an acceptable trade off for a lot of people.

The new plant will not reduce that maintenance cost which is associated with casting , for all their advances Koreans aren't on top in this particular process.

The new Engines should reduce initial ownership costs and drive up sales, effectively lowing part prices. Hyundai is really serious about taking on Maruti, if only their new Sonata had launched with a diesel, to go head on with the Euros.