Blog: Small cars equal small margins
Dave Leggett | 26 March 2007
I see Hyundai is underlining its Indian capacity's status as a small car hub with Indian-made exports of the Getz now bound for Europe. Small cars have small margins, so grouping their production in a low-cost place makes a lot of sense. The idea is to keep unit costs as low as possible.
But small margins also mean sensitivity to costs. Shipping costs, in particular, could seriously dent margins on small cars. India to Europe by sea is quite a long journey.
Add to that the opportunity cost of using the Indian capacity for European exports when it could be supplying the high-growth domestic market, or other nearer export markets, and we can perhaps see why Hyundai is keen on building more European capacity for the supply of volume models.
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