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08-17-2010 16:30

Indian carmakers rush to Korea

By Kim Tae-gyu When Tata Motors of India acquired Daewoo Commercial Vehicle in 2004 to set up Tata Daewoo Commercial Vehicle (TDCV), many worried about how the outfit would be able to compete in the already saturated Korean market. Yet, the Gunsan, North Jeolla Province-based outfit muted critics with an impressive record by chalking up great success. It has more than doubled sales and operating profits during the past six years and now even exports its products to 40-plus countries. Another Indian automaker Mahindra & Mahindra, the South Asian countrys top utility vehicle producer, also has their eyes fixed on Korea where Ssangyong Motor, the nations smallest automaker, has been put on sale. Earlier this month, Mahindra was picked up as the preferred bidder for Ssangyong, which is currently under court receivership, and if all things go as scheduled, the final deal is supposed to be signed in November. Market watchers are saying that the alliance between Korea and India makes sense in the automobile sector. ``As far as the automotive industry is concerned, Korea and India seem to make a good partnership. They are quite a match, KB Investment & Securities analyst Shin Chung-kwan said. ``Hyundai Motor is doing well in India and Tata has proved quite a success here. Mahindra is also widely expected to play a big role in reviving Ssangyong, which has an edge in sports utility vehicles and luxury sedans. Indeed, Hyundai is one of best known brands in India where its Santro Xing cruises in the compact car markets. Since its debut in 2003, the premium hatchback has gained wide popularity there, selling upside of 80,000 vehicles last year alone. With an annual capacity of more than half a million cars, Hyundai Motor India churns out advanced models in its state-of-the-art Indian facilities situated near Chennai to meet the rising demand in the populous country and also exports to Europe. The performances of TDCV are by no means inferior to those of Hyundai Motor India. TDCV has remained profitable since its launch in 2004 and recorded 683.8 billion won in turnover and 23.5 billion won in operating profits last year. The figures represent more than 100-percent jumps compared to 2004 and its 2009 exports quadrupled with the help of Tatas global sales networks. ``Another advantage between the Korea-Indian collaboration is the implementation of the Comprehensive Economic Partnership Agreement (CEPA). Companies of both nations can easily trade car components with reduced costs, Shin said.

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CEPA, the bilateral agreement between Korea and India, is by and large similar to a free trade agreement. The contract, which took effect early this year, is predicted to support further transactions between the two economies. Win-win formula Many observers say that Mahindra is a welcome solution for Ssangyong with the hope that the company can put Ssangyong on track unlike Shanghai Automotive Industry Corp. (SAIC), the previous owner. ``SAIC is regarded to have invested in Ssangyong to take its advanced technologies and thats it. Mahindra would also assume the technologies but it seems to be equally ready to help Ssangyong regain its prowess in the markets, Mirae Asset Securities research Lee Sok-je said. TDCV has already indicated that the Korea-India company can forge a win-win formula. ``Tata had financial leeway and Daewoo had technological competitiveness. The joint venture between the two generated great synergy during the past few years, TDCV spokesman Kim Hyoun-gon said. ``In particular, Tata does not try to control every detail of the Korean operation. It just lets TDCV make timely decisions here in most cases. Tata delegates authority and allows the Korean management certain powers. Indeed, out of about 1,300 TDCV employees, just seven came from Tata Motors and its head is Korean. On top of the automotive industry, Indian corporations are wading into the Korean market in other segments such as metals and plastics. Novelis, a subsidiary of Hindalco Industries as the flagship firm of the Aditya Birla Group, took over Alcan Taihan Aluminum in early 2005. Novelis Korea is Asias top-tier manufacturer of aluminum rolled products. Alchemy Mold & Plastic in Pyeongtaek, Gyeonggi Province, was also set up with Indian investment.

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