CHINA PAIN FOR HYUNDAI, KIA
Anti-Korean sentiment and competition from local carmakers threaten earnings
HYUNDAI Motor Co and Kia Motors Corp have sharply cut vehicle production in China, said sources, as anti-Korean sentiment and competition from Chinese brands play havoc on sales and threaten earnings.
Hyundai and Kia saw their combined China sales slump by 52 per cent last month from a year earlier, Yonhap news agency reported yesterday, endangering not only the carmakers’ earnings but those of its South Korean suppliers. China, the world’s biggest car market, accounted for over a quarter of the pair’s overseas sales last year.
Political tensions have soared since late February when South Korea’s Lotte Group agreed to provide land for a United States missile defence system near here.
South Korean firms, including Lotte Group, have been targeted in a Chinese backlash involving boycott calls in state media, protests and suspensions of operations.
Analysts and sources said while the diplomatic row was a nuisance, the bigger problem for the South Korean carmakers was their inability to compete in China and the US, where their mainstay sedans had lost market share to sport utility vehicles.
Kia Motors had cut production shifts at its China factories, said two of the sources familiar with the matter. Hyundai also had eliminated a second shift from its three factories in Beijing starting the middle of last month, said one of the people.
Hyundai had already suspended output at its factory in Hebei from March 24 to yesterday.
Operating one shift instead of two shifts was a “drastic, rare move” for Hyundai Motor and could cut daily output by more than half, said Lee Myung-hoon, an analyst at HMC Investment & Securities.
The anti-Korean sentiment was unlikely to end soon, he added, citing the example of the year-long backlash against Japan in 2012 over a territorial dispute that forced Japanese carmakers to slash production.