South Korea’s top automaker Hyundai Motor Co., striving to become one of the world’s top five automakers by 2010 through an aggressive drive for increased overseas sales, will add, in March, the Tucson sport utility vehicle to its current Chinese lineup. The addition of Tucson is part of Hyundai Motor’s long-term expansion plan for the Chinese market, writes Peter Chang.
As a result of the range expansion, Hyundai Motor’s the total production in China will grow by 33 percent to 200,000 units this year, the automaker said.
In 2004, Hyundai Motor sold 150,000 cars in China, compared with 52,200 in 2003.
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Furthermore, Hyundai Motor will invest $600 million more to build a second factory in Beijing to make the Click and Verna compacts. Construction of the second plant will start in the first half of this year for completion sometime in the second half of 2006.
“The output expansion will be possible as our Beijing Hyundai Automotive Industry Corp. will soon add the Tucson SUV to the current lineup of Sonata and Elantra sedans,” Jake Jang, a Hyundai Motor spokesman said. “We will begin to produce Tucson in March this year.”
The Beijing Hyundai Automotive Industry is a 50:50 joint venture, which was formed in 2002 by Hyundai Motor and Beijing Automotive Industry Holdings.
In a bid to make up for sluggish sales in South Korea, stemming from an economic slowdown, Hyundai Motor, based in Ulsan city southeast of Seoul, is looking depending on overseas markets including its main US market and the growing Chinese market.
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By GlobalData“In order to be one of the top global automakers by 2010, we have to compete and eventually overtake Volkswagen AG and General Motors in the Chinese market,” Jang said. “The increasingly competitive and growing Chinese market is a big potential market for our growth.”
It looks like a case of so far so good. In January, Hyundai Motor said it sold a total of 20,508 units in China including 16,000 Elantras, beating long-time No. 1 Volkswagen in the market.
“It is the first time that our monthly sales surpassed 20,000-unit-level since we started production in December 2002,” said Kyeong-In Kang, another Hyundai spokesman, adding that Elantra drew more attention from potential “family car” buyers, who are seeking cars looking bigger and more spacious in the segment.
Last year, Hyundai Motor and its affiliate Kia Motors Corp. sold 3.4 million vehicles worldwide, placing them ahead of Honda and PSA Peugeot Citroen.
Noting that Hyundai Motor’s sales in China tripled last year, Jang said China’s overall passenger car production total expanded 12 percent to 2.32 million units last year from 2003 with new car sales rising 15 percent to 2.33 million units. Car sales grew 76 percent in 2003 and expanded 50 percent in 2002.
But, the demand for cars in the fast-growing Chinese market began to slow down from the second quarter after the Chinese government moved to cool overheating sectors of its economy. Those measures squeezed carmakers’ margins after major players such as Volkswagen AG and General Motors slashed prices to try to shift more cars.
Volkswagen, GM and Toyota Motor Corp. are among foreign players spending over $13 billion to triple Chinese car production capacity to some six million cars annually by 2010, hoping to profit from increasingly wealthy Chinese getting behind the wheel.
In 2005, Hyundai Motor and subsidiary Kia Motors aim to sell some 3.6 million vehicles, up from an estimated 3.3 million unit sales last year, as part of their efforts to crank out five million cars a year to become a global top five car maker by 2010.
Kia Motors, meanwhile, hopes to sell 130,000 units this year of its three models – Carnival recreational vehicle (RV), Optima sedan and TianLiMa compact – in China from last year’s sales of 62,500 units. Carnival and Optima were launched last year in the country.
The three models are being produced in Kia Motor’s joint-venture plant, called Dongfeng Yueda Kia Motors, which is in Yancheng city, China.
Since it was launched two years ago, the TianLiMa, Kia Motors’ first compact passenger car made specifically for the Chinese market with the joint venture partner, has recorded combined sales of 101,586 units, becoming the most popular Kia brand in China.
“There is room for considerable growth (for Kia Motors) in China this year because of the success of TianLiMa in the country,” Kia Motors spokesperson Chris Dore said. “This year, we plan to launch the Cerato in China, believing that there is more room for us grow in the huge market.”
Except for the Cerato, Dore said Kia Motors doesn’t have any immediate plan to produce other models in the Chinese plant this year.
In a bid widely seen to make Hyundai and Kia cars more price competitive in China, South Korea’s biggest steel maker POSCO has opened a steel processing center in late October last year near Shanghai to supply some 200,000 tons of cold-rolled automotive sheet steel a year to the Chinese plants of Hyundai Motor Kia Motors.
“The 200,000 tons of cold-rolled steel will be largely sold to Hyundai and Kia Motors plants in China, but will be also sold to our local customers there,” said Dong-Ho Oh, a POSCO spokesman, adding the steel giant is selling its steel products to foreign carmakers such as Honda Motor, Nissan Motor, Mitsubishi Motors and Volkswagen AG.
The focus on China by Hyundai Motor and Kia Motors comes at a time when Shanghai Automotive Industry Corp. (SAIC), the joint venture partner of both GM Volkswagen is taking over South Korea’s fourth largest SUV automaker SsangYong Motor Co. for about $500 million.
Ssangyong Motor spokesman Mu-Young Chung said SAIC is to bring in Ssangyong’s Rexton, Korando and Musso SUVs as well as the luxury Chairman sedan into China sometime in 2005 to sell them through its network there.
“I don’t think Ssangyong Motor cars, brought into China by SAIC, will compete against Hyundai and Kia cars anytime soon, but once SAIC expands Ssangyong Motor’s production capacity, it could be a Hyundai-Kia competitor,” Kim Sang-Ik, an auto analyst at Daishin Securities Co.
One other possibility, Kim said, is the SAIC’s production of small cars in China to sell them in Korea. Such production could be possibly after SAIC learns enough manufacturing technology from Ssangyong, Kim said.
Ssangyong Motor has annual capacity to make 200,000 vehicles and plans to double production by 2007.
“Chinese auto companies are very fast in learning and copying other automakers’ styles and designs,” said Kim, referring to recent GM Daewoo Auto & Technology’s filing a suit against a Chinese auto company for what it alleged copying of the design of GM Daewoo’s Matiz subcompact vehicle.
