Rural market helped push our sales: Rakesh Srivastava

Q&A with Hyundai's Senior Vice President, Sales and Marketing

Hyundai Motor India Ltd (HMIL), the subsidiary of South Korea-based auto major Hyundai, has managed to increase its market share in the first seven months of the current calendar year. One of the strategies that has helped the company is rural market, which contributes around 16.9 per cent of its sales.

In an interview with T E Narasimhan, HMIL's Senior Vice President, Sales and Marketing, Rakesh Srivastava, said that with a strong product line-up from Eon to Santa Fe and a new model Grand, which will be positioned between the i10 and i20, the auto major is hopeful that it will further improve its performance in the Indian auto industry.

The company is also conducting feasibility studies on the small sedan, SUV and MPV as these segments have good volumes and are growing.

Hyundai, the country's largest exporter of passenger cars, said rupee depreciation will help to a certain extent, in the short term. However, if it is continuous, it will have a reverse impact on pricing in the export market and an adverse impact on the input costs, which may lead to a further drop in already stagnating demand in the domestic market. Edited excerpts:

At a time when the passenger car industry is facing a tough time, Hyundai managed to gain market share. What strategies helped the company?

HMIL's market share rose to 20.4 per cent in January-July 2013 from 18.3 per cent a year ago. We have gained market share in the last seven months continuously and this was due to focus on the improvement of channel operational efficiencies, marketing initiatives, quality products and price value equation.

Rural markets are a key part of Hyundai's sales strategy. The customers of these brands have a strong preference for brands that are tried and tested. We are putting continuous efforts for penetration into these vital markets.

Any particular products helped the company to boost the volumes?
All our nine brands have done exceptionally well in their respective segments. Some of the brands like Verna and Elantra are segment leaders.

Brands like Eon, i10, i20 are strong brands in their respective segments and continue to seek leadership positions. The i10 is our flagship brand followed by Eon becoming the trendsetter in its segment. In January-July 2013 the cumulative sales for Eon stood at 57,054 units, i10 stood at 56,992 units and i20 stood at 46,173 units.

You say rural markets are a key part of Hyundai's sales strategy....
Customers in rural market have very stable income, positive cash flow and change in lifestyle.

HMIL scores well in these markets as it connects with rural customers owing to strong brands like Santro, Eon, i10 and i20; these brands offers low cost of acquisition, low cost of ownership with a strong assurance of higher resale values.

Hyundai is focusing on the rural markets (beyond top 110 cities) to increase sales by increasing the number of Rural Sales Outlets (RSO). Currently there are 270 RSO’s and the plan is to increase it to 350 by the end of this year supported by a strong service network. Rural sales outlets are built in tier 3 cities to achieve the maximum penetration.

In last two years there has been a noticeable upward sales trend. In 2011 around 15 per cent of sales came from the rural and semi urban markets. In 2012, it grew to 16.9 per cent. In 2013 (CY H1) the sales grew to 18.6 per cent and we expect it will increase to over 20 per cent by 2014.

How many products are lined up in the next two fiscals?
We have a strong product line-up from Eon to Santa Fe. In September, new model Grand will be launched and it will be positioned between the i10 and i20. The product will be offered in both diesel and petrol variants. It will definitely be a winner and will offer new standards of maturity in its segment.

We are also doing feasibility studies on small sedan, SUV and MPV as these segments have good volumes and are growing.

OEMs have decided to bring down production to cut down inventory, but you seem to be increasing output....

We currently function at 630,000 units per annum but by re-engineering the production lines we can increase the capacity to 670,000 units. We have been operating on three shifts, with our current capacity HMIL can meet the market demand.

Hyundai’s flexibility to adjust the production between domestic and export helps in offsetting the downturn in one market and adjusting production to meet greater demand in a particular market by estimating and forecasting the demand. We are currently operating at full capacity (current efficiency is 99 per cent) on 3 shift basis.

How are exports faring? Are you worried about rupee depreciation? How you are addressing it?

The rupee has depreciated nearly 18 per cent since beginning of this year. This has really affected the economy as a whole and the auto industry in particular, with rising fuel and input costs.

We have a substantial export operation, with more than 40 per cent of our total production being exported to over 125 countries globally. Exports have a strong role in our business strategy.

The rupee depreciation is helping the company to a certain extent, in the short term. However, continuous depreciation will have a reverse impact on pricing in the export market and an adverse impact on the input costs, which may lead to a further drop in already stagnating demand in the domestic market.

Hyundai mitigates the exchange risks with a combination of natural hedge and forwards.

Hyundai is the largest exporter of the passenger cars from India for the past eight years. We export to around 125 countries globally and our shipments include models like Eon, Santro, i10, i20 and Accent. In FY 2012-13, we exported 259,811 cars compared to 237,370 in the last fiscal, an increase of around 9.5 per cent.

The greater demand of Hyundai cars in European countries and non-European markets, such as Algeria, South Africa, Mexico, Columbia, Australia, Lebanon and Israel, led to the growth in the exports. The non-European markets has contributed around 70 per cent in the last financial year.  

Nearly 30 per cent of HMIL exports go to EU countries such as Germany, Spain, Italy and the UK, which are very quality-conscious markets and we cater to their growing needs and demands.

How are the prospects of the industry and for Hyundai?
The slowdown of economy is impacting vehicle sales. The market sentiments are suppressed as the slowdown in the economy has affected the disposable income. The cost of ownership has gone up with high fuel prices, high interest rates. This suppressed customer enquiry levels and sales volumes.

We foresee the pressure on volumes to continue till there is significant improvement in macro-economic factors.