Hyundai eyes million-car production in China

BEIJING ― Following territorial disputes between Beijing and Tokyo, the dramatic fall-off in demand for Japanese vehicles has been an unexpected boon for Korea’s Hyundai in the all-important Chinese market.

In September, when Toyota Motor Corp. saw its Chinese sales almost halve from a year ago, Hyundai Motor’s sales in China increased by 15 percent to post record sales.

Some industry watchers warn the Toyota-led sales slump could drag down the Chinese car market overall. But Hyundai seems more bullish than ever in expanding its presence in the world’s biggest auto market.

The recent opening of its third factory in Beijing reflects such confidence in the market it entered 10 years ago. The carmaker unveiled the new plant on Monday for the first time to the media.

Adding to the existing production capacity of 600,000 vehicles at the first and second Beijing factories, the third one can build up to 300,000 units, with expansion work for an additional 100,000 due to be completed next year.

The annual production of 1 million cars will be one of the largest outputs for a foreign car brand in China, according to company officials.

“Considering overtime work, the production could increase to 1.1 to 1.2 million vehicles next year,” said Baek Hyo-heum, president of Beijing Hyundai Motor Co., the Korean carmaker’s 50-50 joint venture with Beijing Automotive Industry Holding Co. 

“China’s annual car sales are expected to reach the 20 million mark by 2016. We aim to grow along with the Chinese market, securing a market share of 10 percent,” he said, adding that Hyundai would be put to another crucial test in the coming three to five years.

Chinese industry people are already showing keen interest in the 260,000 square-meter facilities that boast Hyundai’s car assembly and coloring prowess. It is also an auto factory that was completed within the shortest period of 18 months.

The plant started producing the new Elantra, known as the Langdong in China and Avante MD in Korea, in July, while the sport utility vehicle Santa Fe is also planned to start production in December for the Chinese launch.

As the Chinese Communist Party has been preparing for a leadership transition early next month, the carmaker delayed the factory’s grand opening ceremony to November.

“Considering the special ownership structure of the company, we need to invite high-profile party leaders for future business and show them Hyundai’s achievements over the past 10 years,” Baek said.

Since 2002, the combined Chinese sales of Hyundai and its affiliate Kia Motors surged from 50,000 vehicles to 830,000 this year. Currently, their market share stands at 10 percent, next to Volkswagen’s 20.8 percent and GM’s 10.4 percent. Japanese carmakers make up more than 20 percent.

The company admitted the market competition would get fiercer in China as tastes of Chinese drivers continue to change, and almost all players within the industry are pinning high hopes on the market for growth.

As a result, Hyundai is seeking to rebrand itself as a manufacturer of higher segment cars, just as it is doing so in Korea and other overseas markets.

Until 2009, Hyundai focused more on introducing compact entry cars into the Chinese market and the strategy proved to be successful.

However, sales of higher segment cars like the Sonata sedan and the Tucson SUV have doubled in volume from 15 percent in 2009 to 36 percent currently.

Baek, however, was cautious about the Chinese production of upscale models like Equus and Genesis, citing the still low demand for luxury cars overall in China.

By Lee Ji-yoon, Korea Herald correspondent
(jylee@heraldcorp.com)