India's economy, now with muscle

"It's like a hockey stick," says the Finn, Mr. Lehtelä, casting his mind back to things more familiar than cows and curry. "[The market] was very, very low for many years, and now it starts to go up."

Yet it is the growth of a domestic Indian auto market that most clearly presages India's manufacturing potential. In the past few weeks, automakers have piled into India like clowns into a Volkswagen.

• Honda announced its intention to triple its car sales to 150,000 by 2010, and it is in talks to build a second India plant near New Delhi.

• Toyota and Daihatsu will invest $86 million in a Bangalore plant to build 100,000 cars annually, ramping up to 200,000 by 2010.

• General Motors has decided to spend $300 million for a second plant that would raise its Indian capacity to 140,000 cars a year, from 60,000.

• German automakers Volkswagen and BMW are building their first factories in India.

In each case – except with luxury carmaker BMW – the primary goal is a better share of India's small-car market, which makes up 70 percent of auto sales here. Each major car company now needs to have an "India plan" – and in many ways, Hyundai is the foreign carmaker furthest down that road.

When it opened its plant in 1998, Hyundai was one of the first foreign brands to commit to India. Along the way to building up an 18.5 percent market share – good enough to be India's No. 2 brand – Hyundai has had to deal with all the frustrations that India has to offer.

The roads and congestion are so bad that it takes seven days for trucks to get Hyundai cars from here to New Delhi – roughly the same distance as Miami to Boston. It takes three to four hours just to get to the port 20 miles away. The state government promised to build a highway between Sriperumbudur and the port 10 years ago, but it is still not finished.

While Hyundai has a special power line from the government that promises uninterrupted electricity, at least one nearby supplier relies 100 percent on its own generators.

"We have experienced trial and error," says Heung Soo Lheem, managing director of Hyundai's India operations.

For example, he sees a large number of malnourished workers, meaning that they are weaker than workers in other plants. Moreover, there are unusually high absentee rates, and not just due to illness. "People will travel two or three days by train to go to a marriage," says Mr. Lheem.

Yet the bottom line is good: "The efficiency is not as good as in Korea, but it still has competitiveness," says Lheem, noting India's lower wages. "Our Indian operation is very much successful at this point."

Then he adds pointedly: "Even more so than our Chinese operations."

Indeed, the factory at Sriperumbudur is a plot of perfect Korean efficiency transplanted to the scrub of the south Indian plains – right down to the kimchi in the executive cafeteria. The factory's 9,000 employees, contractors, and apprentices split three eight-hour shifts – the only plant in Hyundai's worldwide network to be online 24 hours a day. In addition, the workers handle different car models on the same assembly line, shifting seamlessly between Santros, Sonatas, and the other four models Hyundai makes here.

At first, Hyundai had difficulty persuading outsiders that its India operations weren't substandard. European dealers wanted a discount on cars made in India. Surely, they reasoned, the cars would be shoddy, and it was only fair to trim the price for Europe's more discerning consumers.

Then, at Hyundai's bidding, they came to take a look at the plant. No one asked for a discount again.

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