FAR EAST: SOUTH KOREA REPORT
South Korea’s Hyundai Motor has announced that it will sell two plants in China. Beijing Hyundai, a joint venture with China’s state-owned auto giant Beijing Automotive Group, will reduce the number of plants in operation to two. Sluggish sales in the Chinese market have prompted the company to make structural reforms.
Hyundai Motor’s sales in China were 260,000 units in 2022; in 2016 it sold 1.13 million units, a 77% decline in six years.
“Over the past few years, the Chinese business has been made tougher by a variety of negative factors, both internal and external,” said a company announcement. “We will focus on high-performance models to improve our brand image, which has declined.”
Hyundai Motor plans to improve the production efficiency of its two remaining plants and use them as export bases to emerging markets. In the Chinese market, Hyundai Motor plans to reduce the number of models it sells from the current 13 to 8, and to sell high-end models such as the Genesis luxury model and SUVs, mainly in Shanghai.
Source: The Nikkei
PSR Analysis: Although there are many factors behind this situation, one of them is the fact that the quality of Chinese domestic brands is improving every year. Compared to models made in Korea and Japan, Chinese-made models in the same class are about 20% cheaper, and this pricing strategy has led to the rapid growth of local brands and sluggish sales of foreign brands. This cost competition in the Chinese market is expected to intensify further, and as a result, foreign brands will increasingly challenge the Chinese market with luxury cars, as Hyundai Motor has done at this time. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research
