Hyundai on Friday threatened to move production of its new i20 hatchback to Europe from India due to labour trouble, which would hinder the country’s plan to become a global car export hub.
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It would mark the first time a foreign company has taken such a step because of labour problems since India started opening up to overseas investors nearly two decades ago, AFP noted.
The production move from Hyundai’s manufacturing complex in the southern Tamil Nadu town of Sriperumbudur to facilities in Europe would also cast a shadow over India’s ambitions of becoming a major auto exporting centre.
“This (shift) is an option we’re considering,” Hyundai Motor India corporate communications head Rajiv Mitra told AFP.
He said there was still a “cost advantage” to making the i20 in India “but that is going away with the labour situation not being very friendly.”
His comments came as employees resumed work today at Hyundai’s Sriperumbudur site following an 18-day strike over workers’ demands for union recognition and pay hikes.
“We’ve a lead time of two months (for exports) so if they get delayed it’s a problem and 90% of the i20 exports are to Europe so there’s a lot of sense to do it (manufacture) there,” Mitra said, adding that a final decision should come in this financial quarter.
Hyundai Motor India is India’s second largest carmaker and largest passenger car exporter.
AFP said the strike was the latest in a series of recurring labour problems at Hyundai’s complex near Chennai, which employs around 10,000 workers.
A shift would involve moving production of 70,000 to 80,000 units of the i20, Mitra told the news agency. The company hopes to make 120,000 units of the five-door car this year. It was launched late last year and is so far made only in India.
The communications head said infrastructure problems – India is known for its dilapidated ports and roads – and currency fluctuations were also “eating into margins.”
“It’s not a very bad option to manufacture in Europe,” he added.
However, shifting i20 production would not affect output of the Santro, Accent, Getz and other models Hyundai makes at the plant, which has total annual production capacity of 600,000 units, he said.
Plans by South Korea’s Posco to build a US$12bn plant in the poverty-stricken eastern coastal state of Orissa met huge opposition from farmers objecting to loss of their land.
That came after farmers’ land seizure protests – often violent – forced Tata Motors to scrap plans to build the Nano in a 90%-complete new plant in West Bengal state and move the equipment to a different location.
