Hyundai may halt production at one of its Chinese plants due to slowdown

06 March 2019 - 17:18 By Reuters
Hyundai is planning to suspend production at its oldest plant in China.
Hyundai is planning to suspend production at its oldest plant in China.
Image: Hyundai

Hyundai Motor Company is considering plans to suspend production at its oldest plant in China, the South Korean car manufacturer said on Wednesday, as it reels from tumbling sales and massive overcapacity in its biggest market.

The move by Hyundai, which together with affiliate Kia Motors was the third biggest automaker in China until 2016, highlights the reversal of fortunes of China's auto industry.

"Hyundai Motor is reviewing production to enhance competitiveness and profitability," the company said in a statement, adding that the plan includes the "suspension, not closure, of Plant 1 in Beijing".

The company, which has three manufacturing plants in the city, said it has yet to decide when the suspension would start. However, the Korea Economic Daily newspaper reported that the suspension could start as early as next month.

All of Hyundai's five factories in China are operated by its Chinese joint venture with BAIC Motor Corp. About 2,000 employees have already taken voluntary retirement or transferred to other factories, the company said.

A BAIC spokesperson was not immediately available to comment.

China's car industry has been slowing after a period of strong growth, hit by a weakening economy and the fallout of trade friction with the US. Last year car sales in the country contracted for the first time since the 1990s, with Hyundai's sales amounting to only half its total production capacity in the country.

Hyundai's troubles have been exacerbated by a diplomatic row between Seoul and Beijing that have hit demand for South Korean products in China.

A lack of attractive models and strong branding also makes Hyundai vulnerable to competition from both Chinese and global carmakers, analysts and dealers have suggested.

Hyundai will start to produce its new ix25 SUV at its latest plant in Chongqing from September, according to an internal document seen by Reuters. The current ix25 is made at Plant 1, which was built in 2002. The model is Hyundai's second-biggest selling SUV, with sales reaching more than 75,000 last year.

Hyundai Motor CEO Lee Won-hee said last week that the company was considering cutting capacity in China, said sources.