Hyundai Motor Co. plans to increase manufacturing capacity in China by 60% over the next three years, reflecting its high confidence that the world's largest auto market by unit sales will continue rapid growth, a senior executive said.
Hyundai's plans include a fifth plant in China, scheduled to open by 2012, Noh Jae-man, president of Hyundai's joint-venture with Beijing Automotive Industry Holding Co., said in an interview Monday. Hyundai, which has seen rapid growth in sales of its Hyundai- and Kia-brand vehicles in China, also plans to increase manufacturing capacity at its four existing plants in China by 20% next year to a combined 940,000 vehicles annually. The new plant will be capable of producing 300,000 vehicles a year and should boost overall capability to 1.24 million cars when it is completed, he said.
Even as they have scaled back in many of their home markets, international auto makers are racing to expand production in China. Helped by government stimulus measures, vehicle sales in China have grown about 40% so far in 2009, and are likely to exceed 13 million vehicles for the full year, surpassing the U.S. as the world's largest auto market. Although growth is expected to slow in 2010, many auto executives feel the Chinese market has years of significant expansion left, given that its rates of car ownership remain low.
Mr. Noh said China is on the verge of the type of "full-fledged motorization" of society that Japan experienced in the 1970s and the 1980s and that Hyundai's home country of South Korea underwent roughly a decade later. "We need more capacity," Mr. Noh said. "Every auto maker [operating in China] needs more plants."
General Motors Co., for instance, plans to double sales in China to more than two million vehicles and introduce more than 30 new or updated models over the next five years. To reach that sales target, GM executives have said the company would most likely need to build another plant over the next few years. BMW AG said last month it would build a second plant in China with its joint-venture partner that would cost about 560 million euros ($831 million) and more than double its production capacity in China to 100,000 cars a year. Others such as Volkswagen AG and Nissan Motor Co. either have already added a new plant or are expanding existing facilities.
Further highlighting the significance of the China market, Daimler AG's Mercedes-Benz unit announced on Monday that it had bought the naming rights to an arena currently being built in Shanghai. The arena, being developed by three companies including the National Basketball Association, will be the first Mercedes-Benz named venue outside Germany and the first arena in China to have a naming-rights partnership, the companies said. Financial terms weren't disclosed.
Hyundai's China sales for its main brand grew about 80% in the first ten months of this year, and Kia sales grew about 55%, both faster than the overall market. Mr. Noh expects sales to slow next year, but thinks the company can continue to outpace the market's overall rate. He projects Hyundai and Kia together should be able to sell nearly a million vehicles in 2010, up well over 20% from this year, while China's overall vehicle sales grow about 10% to 15%.
Jim Park, chairman of U.S.-based consulting company Global Auto Systems, says Hyundai is committing to China "big time," noting that it plans to launch at least one new compact sedan for each of its brands developed especially for China in the near future.
Hyundai currently has two plants in Beijing, run jointly with Beijing Auto, and Kia has two in Jiangsu province, operated with another Chinese partner. Next year the company will increase capacity by 100,000 cars a year in Beijing and 50,000 cars in Jiangsu.
Mr. Noh said Hyundai could add a sixth plant in China over the medium to long term, possibly in southern China, which the company is hoping for significant growth. The company also plans to make southern China a focus in expanding its Hyundai-brand stores, which it plans to expand to 600 next year, from an expected 500 by the end of this year.
Mr. Noh said the company's two brands are especially under-represented in Guangdong, the huge southern province that is currently dominated by Japanese car brands.
Hyundai had wanted to locate the fifth plant, being planned for Beijing, in Guangdong instead, he said, but acceded to the wishes of the Beijing city government, which owns Beijing Auto.
"The Beijing government is pouring resources right now to develop the city's auto sector and didn't want us to locate our new plant in South China," Mr. Noh said.
(Source: irco.biz)
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