Chung Mong-koo, chairman of Hyundai Motor group, might sign tomorrow, March 27, a preliminary agreement to build the automaker’s fourth plant in Chongqing, China.
According to an anonymous source, Hyundai’s joint venture in China might invest around $900 million in the new plant, where production is slated to begin in 2016. The source added that the facility would have a production capacity of 300,000 units annually.
Hyundai has to deal with increased competition in the Chinese market, which is its largest market. Nissan and Toyota have managed to recover from the 2012 anti-Japanese boycotts, while GM and Volkswagen plans to manufacture and sell more vehicles in China as urbanization and economic growth lead to an increase in demand.
“To increase or at least keep its market share, the decision to build a new plant would have been inevitable for the company,” said Lee Sang Hyun, an analyst at NH Investment & Securities Co.
“Although the China auto market’s growth has slowed compared with a few years ago, it is still a rapidly growing market.”
In 2013, Hyundai’s sales in China surpassed 1 million units for the first time, and reached 720,783 vehicles in the US and 640,698 vehicles in South Korea.
“Considering China’s future demand growth outlook, we need to build a new plant to maintain our stable market share of 10 percent in China,” Hyundai said in a statement on Wednesday.
The move will bring Hyundai’s total output to 2.3 million vehicles / year.
– more details tomorrow morning after the official annoucement