Automobiles 20120- Hyundai To Announce Plans On India Diesel-Engine Plant In 2 Weeks

To also raise diesel engine imports from South Korea by 50%

-- Says higher diesel-engine supplies will help cut waiting periods

-- Hyundai aims to sell at least 410,000 vehicles in India in 2012

-- Executive says India auto sales should grow 13%-14% a year for four-five years

(Recasts with executive's comments on diesel-engine plant in 1st-2nd and 7th paragraphs; vehicle sales in 12th-13th paragraphs.)

By Nikhil Gulati

Of DOW JONES NEWSWIRES

NEW DELHI (Dow Jones)--Hyundai Motor Co. (005380.SE) will announce within two weeks plans to build its first diesel-engine factory in India, a senior executive said, as the auto maker tries to meet soaring demand for its cars that run on the cheaper fuel.

The South Korean company had earlier halted its plans for a diesel-engine plant in India due to a lack of clarity on government policy, Arvind Saxena, director of marketing and sales at Hyundai Motor India Ltd., told Dow Jones Newswires in a recent interview.

The automotive industry had been expecting India to impose higher taxes on diesel cars and sport-utility vehicles because the government subsidies the fuel due to its heavy impact on inflation--rising sales of diesel will increase the government's fuel subsidy burden.

However, New Delhi didn't make any such proposals in its budget for the fiscal year that started April 1.

In India, diesel costs about 38% less than gasoline--which isn't under government price regulation since June 2010--and diesel cars are considered more fuel-efficient than petrol models. These advantages have led many people to purchase diesel vehicles, resulting in long waiting periods to deliver cars at companies as market leader Maruti Suzuki India Ltd., Hyundai and Ford India Pvt. Ltd.

Maruti last month announced plans to invest INR17 billion to build a diesel-engine plant. The company expects sales of diesel cars to rise 10% in this fiscal year that began April 1, but estimates those of gasoline-driven cars to fall 6%.

Saxena didn't disclose the investments and capacity of the plant Hyundai is planning.

Hyundai, the second-largest car maker in India by market share, meanwhile plans to source more diesel engines from South Korea to cut the waiting periods for the diesel-driven variants of its Verna sedan and i20 hatchback.

On Monday, Hyundai said it will boost diesel engine imports from Korea to 10,500 a month starting April from 7,000.

The company has a factory in the southern city of Chennai that can manufacture 600,000 gasoline engines a year.

It manufactures hatchbacks Eon, Santro, i10 and i20 and sedans Accent, Verna and Sonata in Chennai.

Saxena said Hyundai aims to sell at least 410,000 vehicles in India in 2012, up 10% from last year. In 2011, its sales grew just under 5%.

"Vehicle sales in India should continue to grow at a stable 13%-14% each year for the next four to five years," he said.