Officials at Hyundai Motor India (HMIL), a wholly owned subsidiary of South-Korea’s Hyundai Motor Company, are talking to the state government of Rajasthan as the company is now aggressively scouting for land to set up its manufacturing facility at a location preferably in the north or western region of India.

When contacted by Autocar Professional for a clarification, a Hyundai Motor India spokesperson said: "As regards your query on HMIL exploring opportunities in Rajasthan for expansion of operations, as of now we have no such plans."

According to three sources aware of the development, HMIL is in touch with officials at Bureau of Investment Promotion (BIP), an agency in charge of investment promotion and single window clearances (just like Gujarat) in the state of Rajasthan, India. BIP plays a significant role in developing investment policies for the state, and supports investors that are exploring investment opportunities in Rajasthan. According to BIP, Rajasthan, this nodal government agency provides services, which are focussed on investments above Rs 10 crore in the state.

Talking to Autocar Professional, a source added that “Hyundai’s preference for any location other than South India is logical as it would try to set up its second manufacturing facility in either the northern (Rajasthan / Delhi NCR) or western regions (Gujarat) to gain from better, timely deliveries of its cars across the country. While a delegation from Hyundai Motor India had earlier taken a close look of various sites in Gujarat, they are now scanning the possible locations in Rajasthan.”

The company is known to have an annual production capacity of close to 680,000 units at its Chennai facility. According to SIAM data, in FY2013-14, HMIL cumulatively manufactured 619,876 units of passenger vehicles, and rolled out 406,314 units between April-November 2014, lower by 4.39 percent year-on-year. However, the ratio between the domestic and export despatches for the ongoing financial year so far stands at roughly 2:1.

Figuratively, for the same period the company has cumulatively sold 276,554 units in India (up by 10.85 percent YoY) and has exported 133,809 units, down by 21.89 percent (due to sharp cut in exports to Europe).

These statistics clearly indicate that HMIL, which is focussing on a compact SUV model for India, has to possibly fast-forward its plans of finalising the second site to make way for future capacity expansion.

“Once a decision is taken by the management, the company will take at least 18-24 months to add fresh capacity. In the meanwhile, they will have to internally restructure the manufacturing operations to accommodate increasing domestic demand,” added another source aware of the development.

According to recent reports, HMIL has restructured its export shipments to Europe from India by shifting the production of some undisclosed European models to its plants in Turkey and Czech Republic, thereby taking off some load from the Chennai facility. This is expected to make way for some additional capacity with an immediate effect for Indian requirements.

On the other hand, Rajasthan has been successfully able to attract investments from the likes of Hero MotoCorp, JCB India, and multiple companies under JETRO (Japan External Trade Organisation), Eicher-Polaris, Amtek Auto, Honda and many other prominent auto players.

“Rajasthan is soon developing into another automotive hub connecting the national and commercial capitals of India. The Bhiwadi, Neemrana and Alwar belts lie close to the Delhi-Mumbai industrial corridor, which is a big logistical advantage for the companies setting up business there,” added another source. The BIP, Rajasthan website states that the state is host to more than 100 automotive and auto component manufacturing companies.

A source also added that Eicher-Polaris’ manufacturing plant, which is currently being constructed, is scheduled to commence its operations in 2015. It can be recalled that the 50-50 JV has been setting up a greenfield facility to manufacture a range of personal vehicles for India and other emerging markets.