New Delhi: Hyundai Motor India is planning its diesel plant, which is likely to be set up near Chennai, to start production by the end of next year.

The new plant, which will have an initial capacity of 50,000 units, will help the company to fulfill the demand of its diesel models such as the newly launched i-20 and Verna.

Speaking at the sidelines of the launch of a diesel variant of its premium compact car i20, H.S. Lheem, Managing Director and CEO of Hyundai Motor India Ltd said, “Till now we were importing diesel engines. Our diesel plant should be operational by the end of next year.”

He did not mention about the investments involved to set up the new plant. The cost of importing an engine is about 25 per cent of the total cost of the car. The strategy of the company to set up a diesel engine plant and localise parts will enable to decrease costs as it intends to increase the sale of its diesel models.

On July 7, the company has launched a diesel version of the i20 with a 1.4-litre engine. It is priced at Rs 6.19 lakh for the base model and Rs 7.20 lakh for the top-end variant. Hyundai has also launched an automatic version of i20 in the petrol variant, with the base model priced at Rs 7.31 lakh.

The company will contend with diesel models of Maruti such as the Swift and the Ritz, which have a waiting period. It also competes with recent launches such as the Jazz and the Grande Punto. Hyundai has targeted a monthly sale of 4,000 units of i20. Of this, 2,200 units will be diesel and 1,800 will be of the petrol variant.

Arvind Saxena, Senior Vice-President, Sales and Marketing, Hyundai Motor India Ltd said, “I don’t think we are competing with the Swift diesel. In terms of features it is far more highly positioned. The market is growing for diesel cars.”

Regarding the sales outlook, he said, “From January to June the market grew 5-6 per cent. The market will grow faster. But too much buoyancy is difficult to expect.”