Hyundai India's troubles-Business Today Article; May 8, 2005 Ever wondered what's on with Hyundai India? Why are they in a conundrum? Some answers to their problems lie in this fortnight's Business Today. Excerpts from the article and personal points of view:
Compact class: Sales down by 4.28% over previous year. (includes Xing and Getz)
Mid-size: Sales down by 7.45 % (Accent only)
Executive: Elantra brings in the last few percentage points of the sales graph.
Premium: Sales down by 7.56% (Sonata sales behind Camry as well!)
There's more. Hyundai grew by a rather paltry 10%, while market leader Maruti grew by 17% and Tata, a staggering 34%. The problem areas
Lets begin with a small job called production line expansion. Clearly, an increase in capacity from 1,50,000 units to 2,50,000 units should have been a cakewalk, especially when the 1,50,000 unit plant took no more than 18 months to setup. Right?
Wrong. Hyundai messed it all up. When the new capacity plant started running full-steam, the robots played havoc. Breaking down 8-10 times a day, they halted production several times. Result? Hyundai lost nearly 20,000 units in sales. Dealers could do nothing but turn customers away. That compounded matters as the market buzz believed that Hyundai no longer can deliver on time. Sales were further gnawed away by rivals.
If that is not all, Maruti is back. And in a resurgent manner. The Alto sales have doubled over the last year. The Wagon-R from the 6000 units a month average is now in the 8000+ mark. The Esteem has revitalized itself in the new avtaar, with sales of the ageing sedan doubling over the last couple of months. Even the Baleno has seen a more than 3 times jump in sales over the previous year. All this has meant that the Santro sales grew by no more than 3000 units over the previous year, inspite of the bumper Rs. 3 lakh Santro bonanza. The ageing Accent suddenly feels overpriced in a market where all its rivals have cut prices to induce volumes. The Ikon currently sells 400 units a month more than the Accent. Suddenly Hyundai is feeling the heat.
The production line expansion was meant to handle the small car exports commitment issues as well as further expansion of local production lines to handle increased sales in the future. While the exports scene looks bright, the same cannot be said about domestic sales. Inspite of 2 new cars last year, the Getz and Elantra, neither have been able to set the sales chart afire.
First, the Elantra. Great car, but poor positioning has relegated it to the last position in its segment. The Getz. Another great package letdown by a higher markup. Then both car prices see revisions. But its too late. The market has already perceived them to be duds. And Hyundai's first mover advantage in the B+ segment will see Maruti as its biggest beneficiary. The Swift, scheduled for a launch next month will totally change the rules of the game. Smart looking and modern, it is like no other Maruti ever launched here. Maruti thinks it can sell 4000 of these beauties a month. Really? Yes, they just might. Maruti plans to position the base model at a lipsmacking Rs. 4 lakh. Yes, you read it right. Coupled with the proven Esteem 13BB engine and looks to die for, Maruti finally has got up to the concept of crossover, modern cars that combine practicallity and style. If that is not all, the Wagon-R might undergo a southwards price revision. Result? The Santro and all its desperate "5 seater" advertising cannot prevent the smart Wagon-R from snatching sales from Hyundai's bread and butter model.
That isn't the end of Hyundai's woes. In the premium segments, they are virtually non-existent. The Terracan is a quiet player in the market, but that is also because the 20 lakh + SUV segment is yet to catch on. The Sonata is now far too old a platform. The Accord outsells it 4:1. The new Sonata is expected later this year, but can Hyundai convince the market that it truly can build an Accord beater?
Hyundai is in recouping mode. Currently a new Santro platform is being worked on. Expected to make a 2008 entry, the next gen Santro should be far removed from its current avtaar. The Getz will be repositioned in the price chain. The new Accent should be here in 2006, but how serious is Hyundai on it is something to be watched. The new Sonata is going to be Hyundai's fighting attempt on correcting its Premium segment image in India. The Tuscon will need more than just luck to stay afloat in a market where the CR-V and Endeavour set the benchmark. Its work is cut-out, but yes it needs to come back. Even if it means a certain Mr. Subbu losing his hair over it.
Revvmaster |