According to industry sources on Friday, Beijing Hyundai Motor, a 50-50 joint venture with Beijing Automotive Group, and the Chongqing city government will sign an initial contract on Feb. 26, possibly on the construction of a new manufacturing plant there.
Hyundai Motor Group chairman Chung Mong-koo is also expected to join the signing event, though Hyundai’s Seoul headquarters declined to confirm this.
“Final talks are underway for both Hyundai and the city government to milk more benefits from each other,” a Hyundai executive said on condition of anonymity.
|Source: Hyundai Motor|
If finalized, the fourth China plant would be Hyundai’s first major manufacturing capacity investment since 2012 ― the year when the carmaker opened a car assembly plant in Brazil and its third China plant.
Chongqing, located in southwestern China, is also an attractive manufacturing site for global carmakers like GM and Ford due to the city’s burgeoning automotive industry.
Until late last year, Hyundai and its affiliate Kia Motors had claimed that they had no immediate plans for capacity expansion, pledging to focus more on improving the quality of their vehicles.
But a strategic shift came early this year as key rivals such as GM and Toyota announced they would expand their global manufacturing capacity, especially in the crucial Chinese market.
“GM is pushing hard for capacity expansion. Hyundai needs to speed up the fourth Chinese factory,” said another industry source. “Following the Chinese expansion, the carmaker is likely to consider expanding capacity in other regions such as the U.S., Russia and Mexico.”
Currently, Hyundai and Kia operate three factories each in China almost at their full capacity.
Hyundai and Kia produced 1.05 million and 750,000 vehicles, respectively. With the planned opening of the fourth plant, the Korean duo’s production capacity in China would reach an annual 2 million vehicles, possibly by 2016.
“Hyundai and Kia have built a reputation as they provide new models promptly into the market directly from the Chinese factories. Their added production capacity will help continue their recent sales momentum as well,” the source said.
Hyundai last year sold 1.03 million vehicles in China, a 20.4 percent increase from a year ago. It was the first time for the Korean brand to see more than 1 million car sales in a single market.
Kia also continued to improve its sales growth, with its car sales increasing 14 percent to 545,766 vehicles during the same period.
By Lee Ji-yoon (email@example.com)