Hyundai Mo­tor Co plans to ship China-made cars to SEA

Chi­nese sales plunge fol­low­ing diplo­matic spat with South Korea

The Star Malaysia - StarBiz - - Front Page -

SEOUL: Hyundai Mo­tor Co plans to ship China-made cars to South-East Asia, its China joint ven­ture and two peo­ple fa­mil­iar with the mat­ter told Reuters, as a plunge in Chi­nese sales has left much of its mas­sive lo­cal man­u­fac­tur­ing ca­pac­ity idled.

Hyundai once ranked third by China sales along­side af­fil­i­ate Kia Mo­tors Corp. But just as it opened its fifth fac­tory in the country last year, a diplo­matic dis­pute saw Chi­nese con­sumers turn against South Korean goods, dam­ag­ing Hyundai’s sales and brand im­age.

Diplo­matic ties have since nor­malised but Hyundai’s re­cov­ery has been er­ratic.

The au­tomaker booked China sales of 30,018 cars in July, down 40% from July last year and its low­est monthly to­tal since the 2008 global fi­nan­cial cri­sis. Yet sales for Jan­uary-July are up 17%.

“A China re­cov­ery will take time. Hyundai needs a sur­vival plan,” said one of the peo­ple with di­rect knowl­edge of Hyundai’s China op­er­a­tions, who were not au­tho­rised to speak to the me­dia and so de­clined to be iden­ti­fied.

The ex­pe­ri­ence ex­posed South Korean com­pa­nies’ re­liance on the Chi­nese mar­ket, push­ing the Seoul govern­ment to court coun­ter­parts in South-East Asia where the num­ber of Korean cars is pal­try com­pared with those of neigh­bour­ing Ja­pan.

“Hyundai is con­sid­er­ing (ex­port­ing Chi­na­made ve­hi­cles) to emerg­ing mar­kets such as South-East Asia,” the per­son said.

“Europe may also be a con­sid­er­a­tion.” Most ve­hi­cles for­eign au­tomak­ers build in China with lo­cal joint-ven­ture part­ners are des­tined for the do­mes­tic mar­ket.

Among those that ex­port China-made vehi- cles, Gen­eral Mo­tors Co (GM) ships to the United States and Volk­swa­gen AG (VW) plans to ex­port to South-East Asia.

A spokesman at Bei­jing Au­to­mo­tive In­dus­try Hold­ing Co – Hyundai’s Chi­nese joint ven­ture with Bei­jing Au­to­mo­tive Group Co Ltd (BAIC) – con­firmed the ex­port plan.

“Yes, we plan to ex­port cars to South-East Asia. The ear­li­est could be the end of this year,” he said.

The au­tomaker will de­cide on mod­els de­pend­ing on lo­cal de­mand, he said.

Hyundai in a state­ment said the plans are not yet fi­nalised.

“Our main fo­cus is on fur­ther de­vel­op­ing our busi­nesses in China, but we are also con­sid­er­ing dif­fer­ent op­tions which may in­clude ex­ports of China fac­tory-spe­cific mod­els,” Hyundai said.

China was once the big­gest mar­ket for Hyundai-Kia, whose lo­cal pro­duc­tion was ex­ceeded only by VW and GM. Yet their data showed a mar­ket share of 4.4% com­pared with 8.1% be­fore the diplo­matic spat, and as high as 10.5% in 2012.

Ex­ac­er­bat­ing Hyundai’s plight is the in­creas­ing pop­u­lar­ity of sport util­ity ve­hi­cles (SUVs) – a seg­ment in which the au­tomaker has rel­a­tively few mod­els – as well as height­ened price com­pet­i­tive­ness of do­mes­tic ri­vals.

Hyundai re­cently re­placed the head of its China ven­ture and gave its re­search-and-de­vel­op­ment vice chair­man the added re­spon­si­bil­ity of over­see­ing China prod­uct de­vel­op­ment.

It aims to sell 900,000 cars in China this year ver­sus 785,000 last year, how­ever the tar­get is al­most half of its 1.65 mil­lion ve­hi­cle ca­pac­ity.

Should it ex­port from China to South-East Asia, it may avoid tar­iffs of up to 78% in Viet­nam, for in­stance, on cars built in South Korea ver­sus 50% for those made in China.

It was un­clear what im­pact any ex­port plans would have on Hyundai’s cur­rent South-East Asia strat­egy, un­der which it is con­sid­er­ing build­ing a fac­tory in Viet­nam or In­done­sia.

South Korea’s trade min­is­ter said, to help re­duce de­pen­dence on China as well as the United States, the govern­ment would sup­port firms ex­pand­ing in In­done­sia, where Korean au­tomak­ers’ mar­ket share is 0.1% ver­sus Ja­pan’s 98.6%.

Across Asean, sales of South Korean cars are grow­ing, with those of Hyundai-Kia ris­ing 26% on year to 71,847 cars in Jan­uary-June in In­done­sia, Malaysia, the Philip­pines, Thai­land and Viet­nam, showed data from LMC Au­to­mo­tive.

The data provider fore­cast over­all ve­hi­cle sales in those five coun­tries to grow 5% to 3.29 mil­lion ve­hi­cles this year from 2017, reach­ing 3.41 mil­lion ve­hi­cles in 2019.

“Given Ja­panese firms’ dom­i­nance in South­east Asia, it will be dif­fi­cult for Hyundai to fully off­set China’s ex­cess ca­pac­ity with ex­ports,” said an­a­lyst Kang Dong-wook at Hi In­vest­ment & Se­cu­ri­ties.

“It needs to im­prove prod­uct com­pet­i­tive­ness in China.”

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