Hyundai Motor Plans 1,000 Rural Outlets in India to Regain Market Share

Hyundai Motor Co. (005380), India’s second biggest automaker, may build a network of as many as 1,000 rural outlets and introduce a cheaper small car after losing market share to Ford Motor Co. (F) and Volkswagen AG.

“We are looking strongly at these markets and want to focus on growing our network there,” Arvind Saxena, the carmaker’s India director for sales and marketing, said in an interview yesterday in New Delhi. He declined to give a timeframe for the showroom plan.

Hyundai intends to expand in rural regions that generally have few dealerships as economic growth spreads wealth beyond urban areas in the world’s second-most populous nation. The Seoul-based carmaker’s Indian sales grew at about half the pace of the overall market last fiscal year as Ford, Volkswagen and Toyota Motor Corp. added models and opened showrooms in cities.

“Urban markets will be more and more difficult to grow so most automobile manufacturers will have to focus on rural markets,” said Darius Lam, a Bangkok-based analyst with J.D. Power Asia Pacific. “It will be challenging, but significant for the company.”

To help boost rural sales, Hyundai will also add a car costing less than the 293,902 rupees ($6,576) Santro, its cheapest model in India, Saxena said. The new model may compete against Maruti Suzuki India Ltd. (MSIL)’s Alto compact, the nation’s bestselling car, he said. He declined to say when it will go on sale.

New Models

Hyundai intends to add two new models a year in India, Saxena said. It yesterday introduced a new version of its Verna sedan, which costs from 699,000 rupees to 1.07 million rupees. It has no plans to build a model that will compete with Tata Motors Ltd.’s $3,399 Nano, Saxena said.

The automaker expects to sell a total of 400,000 cars in India in 2011, he said. It boosted sales 14 percent to 358,904 in the year ended March, according to the Society of Indian Automobile Manufacturers. That compares with a 30 percent jump for the overall market and a 26 percent increase for Maruti, maker of about half the cars sold in India. Hyundai’s market share slipped to 18 percent from 21 percent a year earlier.

Hyundai will also invest 4 billion rupees to build a new diesel-engine factory that will produce 150,000 units a year. The factory near Chennai in southern India will make engines for vehicles across the Hyundai range.

To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net.

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net.

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