Car sales in India hit a record high in February, driven by a burgeoning middle class and easier access to loans.
The rising cost of steel, rubber and other inputs has forced some Indian carmakers to raise prices in recent months, although Hyundai's Indian unit, the country's second-largest carmaker after Maruti Suzuki , has not done so.
"That's become of one the biggest challenges that we have been facing because there is a continuous increase in terms of several input costs," Arvind Saxena, director and board member of Hyundai Motor India, said in an interview.
"Also the interest costs, that's another thing," he added.
Saxena said he expects the Indian automotive industry to grow 12 to 14 percent annually over the next 4 to 5 years. The Indian car industry grew by a record 31 percent in 2010 to 1.9 million units.
"At this point it looks like the first three months have been very good but on an annualised basis it should be close to about 15-17 percent," Saxena said of Hyundai's India outlook.
Hyundai, the leading exporter of cars from India, posted a 1 percent rise in March total sales to 55,552 units. Domestic sales grew 23.1 percent in 2010 but exports, a substantial portion of which go to recession-hit Europe, fell 8.5 percent.
Earlier on Friday, General Motors' India head said the Indian automotive industry will see softening growth in 2011 and growth of 12-15 percent for the sector was "reasonable."
South Korea-based Hyundai plans to invest 4 billion rupees ($89.6 million) for a diesel engine plant in India, which will be operational in 2013, Saxena said.
The company plans to launch two models a year for the next three years, in addition to its existing products, which include compact hatchbacks Santro, i10 and i20.
India's largest car maker Maruti Suzuki and largest utility vehicle maker Mahindra & Mahindra on Friday reported their highest ever sales in a month. Maruti's March sales grew 28.2 percent while Mahindra's rose 18 percent. Sales at Tata Motors rose 11 percent.
"With rising interest rates and increasing prices due to higher input costs the market is less buoyant than what it was last year," Saxena said separately in a statement.
The company, which also makes sedans such as Accent, Verna and Sonata, said its Indian operations were "not really affected" by the Japan crisis. (Reuters)
