Hyundai Motor considering 2nd engine plant in India

SEOUL, May 9: Hyundai Motor Co. is considering building another engine plant in India, a company official said on Tuesday, amid concerns that a cash-for-favours scandal may affect the auto maker's global expansion plans.

The proposed move comes after Hyundai, the world's seventh-largest auto maker with affiliate Kia Motors Corp. in terms of sales volume, said in February that it aimed to more than double annual output in India by 2007 in an effort to meet explosive demand and expand overseas production.

''It is a natural step to have another engine plant there as we are expanding production,'' a Hyundai official, who declined to be named, said by telephone, when asked about a local media report on the plan.

The official said that nothing had been decided.

Hyundai already has a car factory and engine plant in India and aims to boost its market share further in one of Asia's fastest-growing markets, building on the firm's success with its Santro hatchback and other small cars in India.

It may also help alleviate some concerns about the global growth plans at South Korea's top auto maker, which postponed a groundbreaking ceremony for a plant in the Czech Republic as its chairman Chung Mong-koo was embroiled in a bribery case. Chung was later arrested on charges of misusing corporate funds.

Hyundai plans to raise annual output at its current factory in India to 300,000 units this year, from 280,000.

A second car factory, under construction, would produce 300,000 units annually of the follow-up to the Santro, after the plant opens by October 2007.

Hyundai aims to raise sales in India by 11.2 percent to 280,000 cars this year. It also plans to sell 330,000 vehicles next year and 600,000 in 2008.

In April, the firm sold 25,849 vehicles, 30.2 percent higher than a year ago although below a record 30,038 units in March.

Hyundai, the second-largest auto maker in India after Maruti Udyog Ltd. , expects India's car market to grow to 960,000 units by 2010 from 600,000 this year, driven by economic growth of 7-8 percent and the stronger purchasing power of India's burgeoning middle class.

Shares in Hyundai fell 0.82 percent to 84,300 won by 0159 GMT, while the broader market was flat.

REUTERS