Hyundai Motor Company | Hyundai Motor India: Localisation will help Hyundai to position cars well in both IC & EV space in India: Tarun Garg

Tarun Garg, COO, Hyundai Motor India, says in terms of electrification, Creta EV is going to be launched in the next quarter, followed by three more EVs in the mass and the mass premium segments. This EV plan is being backed by a very strong localisation. The battery packs are being localised in Tamil Nadu. Going forward, Hyundai is looking at LFP cell manufacturing with a local Indian partner. They are looking at powertrain, drivetrain and power electronics as well, also the charging infrastructure, which will again be a growth driver moving forward.

Congratulations for closing India’s biggest IPO and listing on Indian exchanges. In terms of creating long-term shareholder value, what would Hyundai India’s plan be? You had a very tepid response today at the opening. How would you turn around the shareholder perception in the long term?
Tarun Garg: Hyundai has been in India now for more than 26 years and we have been the second biggest auto OEM in the passenger vehicle space. Going forward, our growth strategy is very clear. So, if you see in terms of sales, we believe in quality of growth, which means that not only volumes, but also profitability and market share.

The second is, of course, the capacity expansion. Our current capacity is 824,000. However, we have acquired the Talegaon plant, which will give us a 250,000 capacity and take us to 1.1 million capacity by 2028.

The third, of course, is a big focus on exports along with domestic. We are the hub for the emerging markets. We are exporting currently to 80 plus countries and 20% of our production is exported. So, going forward, this is a very strong lever which we have. In terms of electrification, we have already announced that Creta EV is going to be launched in the next quarter, followed by three more EVs in the mass and the mass premium segment. This EV plan is being backed by a very strong localisation.

As we speak today, the battery packs are being localised in Tamil Nadu. Going forward, we are looking at LFP cell manufacturing with a local Indian partner. We are looking at powertrain, drivetrain and power electronics as well, also the charging infrastructure, so which will again be a growth driver moving forward.

As we all know, India is at an early stage of electrification and Hyundai wants to play a big role in terms of taking lead in increasing the electrification. On cost optimisation, our record is very good and we intend to pursue all efforts to really further reduce the cost. Last but not the least is the premiumisation, the featurisation. As Indian customers become more and more aspirational, not only are we seeing that the SUV penetration is going up, but also the featurisation, the top trim percentages, the ADAS, the connected cars, the sunroofs, all these things are adding not only to the volumes, but also to the high trims and also to the margins and profitability. We intend to pursue this path which will help us create long-term shareholder value going ahead in the Indian market.

You have spoken about the EV localisation. How do you want to take this forward in terms of making India an export hub for Hyundai’s EV vehicles and also building up on the EV platform and also on EV goals. Can you tell us more?
Tarun Garg: Like I mentioned, Creta is a very strong brand and we believe that Creta will be a strong entry in the high-volume EV space and then following it up with three more models and along with localisation which will help us to position these EVs very well. Our track record has always been like that. We introduce a product in the Indian market, make it successful, great economies of scale, and then we look at the export opportunities and this is what we have pursued over the past 26 years.

So, in the EV space as well, currently we are exporting to 80 plus countries and we will see that wherever there are opportunities in terms of exporting the EVs, we will look at those opportunities going ahead.

You have very high hopes, very high expectations from the EV Creta. In terms of the pricing point and in terms of competition, how do you see it fitting in the Indian market?
Tarun Garg: Hyundai has always been ahead of the curve in terms introducing new products with modern and futuristic technologies and also bringing a great value to the customer, so this is in our DNA and we will pursue all efforts and I already mentioned about localisation which will really help us to position our cars well both in the IC as well as in the EV space as well.

You have also spoken about making India an export hub and you want to increase exports out of India. Going ahead, which are the countries that Hyundai Motor India will be looking to export cars to and specifically EV cars? Right now I believe the mix is 80-20 domestic and exports. Do you see this mix changing in the future?
Tarun Garg: Our revenues from the export market is currently 23% and domestic is 77%. In terms of volume, it is 20-80. We are exporting to 80 plus countries across the Middle East, Latin America, Central America, Asia, and Africa.

We believe that these economies, these countries, the preferences are similar to the cars which we produce in India with the Talegaon plant and the additional capacity coming in, and this will give us more opportunities to increase our volume going forward. While it will be very difficult for us to really give what would be the percentage going forward.

In the past, Hyundai has always big-time focus on exports. It gives us great foreign exchange and our currency is the dollar which also makes us stronger. We believe that opportunities are only going to go up with Indian plants being very efficient and we intend to really leverage it with the capacities going up.

What are the goals, the long-term plans that the global leadership, that Hyundai Motor Company has? Can you share that with us?
Tarun Garg: It is the third biggest market for Hyundai Motor Company outside of the US and Korea. India is very important.

Point number two is that we are the first country outside of Korea to get the listing. So, very clearly India is a very important market. The plan going forward is to improve the R&D capabilities even further not only for India but also for the other emerging markets. So, India plays a very-very important role because of our demographic mix, because of our high market share in India, because of the success which we have got in India all these years and now the IPO is giving us another opportunity to further Indianize and make Hyundai as one of the most trusted brands in India.

The HMC leadership is very optimistic and upbeat about the Indian market, the Indian economy with the GDP going up, the demographic population and of course HMI’s performance all these years.

Earlier, there was a limitation that you could not talk to us about the future. But that has been lifted now. I expect some more colour on the future viability and the vision that you have. I ask you that because analysts are pegging in that the volume CAGR for the next two years is likely to be around 8% and that would drive the profitability for the next few years in the range of 15% to 20%. Directionally, would it be off the mark to expect a high single digit kind of volume growth or are you expecting it to be at least double digit?
Tarun Garg: Look, to forecast the future is always very difficult and I will not like to really stick my neck out and try to forecast the future. What is more important is what our strategy is. That is very important and we intend to pursue this strategy of quality of growth, the focus on domestic and export, electrification, the cost optimisation, the capacity expansion as a strong margin and volume lever going forward. These are the things which will help us to maintain a strong volume as well as profitability, but I will not really like to give you exactly what kind of growth in profit or volume we can expect in the next couple of years.

Lastly, I wanted to understand about the parent company Hyundai Motors shareholding in Ola Electric. Should one read between the lines that have anything to do with the India business as well and the plans of Hyundai Motors going ahead?
Tarun Garg: No, that is an HMC investment, so I have no comments to make on that.

The royalty rate is a bit of a black box and people are trying to figure that out as to which end it will go towards. Right now, around 2.5% is where you are at. Street is expecting it to go up to around 3.5% going forward. Any clarity there?
Tarun Garg: We pay a rate of 3.5% and we get access to all cutting-edge technologies whether it is electric vehicles or going forward any kind of technology which we will have, the brand, etc. I want to just put it on record that Q1 FY24-25 is already a part of the RHP and includes the higher royalty rate. This is something I want to clarify. So Q1 FY24-25 which is April to June period FY24-25, includes the higher royalty rate and that makes things very clear.

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}