Simon Duval Smith (SDS): Can you tell us what the big challenges are at the moment – I know there is a slight flatness in demand, how is this affecting automation and labour here?
Sarangarajan Thathapillai (ST): The main problem is the volume; the volume is not growing in the Indian market. That has been happening for the last five to six months. Almost no growth: that is the biggest challenge. Fortunately more than 40% of our production is for export, so we are managing [by] juggling between export and domestic, and also we have a very strong portfolio of models.
SDS: Which export markets are most significant for you?
ST: The markets we are mainly exporting to are South America, Africa, Australia and the UK.
SDS: And not so much in the ASEAN countries?
ST: Yes, we sell very little in Thailand and the Philippines and Malaysia.
SDS: What is your model mix in the two plants here in Chennai?
ST: In Plant 1 we make the Eon, Santro, i20, Accent, Elantra and Sonata. In Plant 2 we make the i10, Grand i10 and the new Verna. The new Verna was introduced at the beginning of 2012.
SDS: You must be following the global Hyundai manufacturing system, but have you added some India-specific features?
ST: Yes, we have a high level of integration of IT between the plant floor, our dealer network and our suppliers. We call this our Advanced Planning System 2 (APS2). This enables us to produce a daily production plan covering a month in advance and this includes in-line sequenced schedules of four days at a time. This enables our suppliers to plan better. Maybe it is more information than suppliers might get in Korea or the US or Europe but it works well for India-based suppliers.
SDS: Is this advanced planning system possible because the Indian market buys mainly from stock? And how does your export demand fit into this?
ST: 40% of our capacity goes for export; export vehicles are all ordered to specification. Domestic demand is based on a forecast of popular models, colours, features etc. Usually, in-plant and dealer stock combined is one to 1.2 months. We do not keep any stock for export.
SDS: As the Indian car buyer is accustomed to walking into a dealer and driving out with a car the same day, do you ‘group build’ cars to suit this?
ST: Sometimes grouping happens for export but for domestic demand it [production ordering] is random, based on the trend forecast from the dealer groups through our sales departments. For domestic production, we keep about one month’s stock, including on our site here, and dealer sites.
SDS: Across the range that you produce, what is the India-supplied component percentage?
ST: For a high-volume model like the Eon, i10 and Grand i10, we have about 95% local suppliers but for low-volume models like Santa Fe or Sonata, the local level is about 20%.
SDS: And some parts for Sonata are not coming from Korea but from China, I imagine?
ST: Yes, we get parts for Sonata from China. As it is a well-established and high-volume car there it has a big local supply base in China.
SDS: You have expanded stamping and assembly a great deal here in Chennai, with Plant 2. What about expansion in powertrain?
ST: The new plant’s biggest addition is that it can now make 300,000 engines per year. This is a globally unique plant; we can make petrol and diesel engines on the same line, not just on the same assembly line but on the same machining lines also. We started diesel engine production in July 2013. Before this, all diesel engines came from Korea.
SDS: How have you managed to get the paintshop to keep up with the tremendous demand without building a new facility or even expanding the existing paint line significantly?
ST: We have focused on what we call colour grouping. The method is to try and paint the same colour as much as we can. This saves time and money and is also much better for the environment. Every time you change colour, you cause a lot of waste and possible pollution. This is a zero discharge plant and to keep that standard up, we change as little as possible.
SDS: Are you working with a smaller palette than some OEMs in the US and Europe?
ST: We have about 14 colours and from this 14, eight are common across all models. Each model will have two or three unique colours. We can thank the designers for this. Unlike in some areas of the car, where we might find the same assembly with different fasteners on different cars!
SDS: In China, some Hyundai models are customised by Chinese designers for that country’s tastes. You do not seem to have as many ‘specials’ in India.
ST: On large volume models like the Eon and Grand i10 and i10 there are no changes as these were designed for India. Some minor changes have been made to the Sonata and Santa Fe for the Indian market.
SDS: The level of automation here is very high. What are the percentages in bodyshop, paintshop and so on?
ST: Bodyshop is 100%, paintshop is fully automated as well and in assembly it is around 10%. In the new engine shop, machining operations are almost 100% automated as well.
SDS: Hyundai traditionally has used Korean, Japanese and European production machinery. Are you using any Indian-made machines and are you open to proposals from Indian companies?
ST: We have some Indian machines, such as handling equipment, and some machining centres. Of course, most machine suppliers would like to provide a complete line, a turnkey operation, so they will tend to specify their own machines or at least machines from their own country. If a German company is building say, a grinding line, they will tend to specify German machines for ease of matching machines and the transfer equipment. We will always look first at Indian machinery but we must have the best accuracy and repeatability qualities in machines; if they can supply the right equipment with the right service. For local parts supply etc we are happy to consider Indian companies.
* Simon Duval Smith spoke to Sarangarajan Thathapillai during a tour of Hyundai Motor India.