Hyundai plans to move some of its production to Mexico image

The South Korean automaker intends to shift some of its small car output in Mexico next year, at its sister company Kia facility, sources told Reuters.

Hyundai’s plan is to bypass the high-costs involved in building low-margin cars in South Korea by moving some of the output to Mexico, where its sister company Kia has a production line, two people familiar with the matter told Reuters. The first car that will be built there is the new Accent, a move that would bring the production closer to the North American market and the South American one as well. Another major factor behind such a decision is the low labor costs in Mexico, as they are just “one fifth of that in Korea and Hyundai will be able to save a lot in small car production and better compete with rivals which have manufacturing presence in Mexico,” said Ko Tae-bong, auto analyst at Hi Investment & Securities.

The effects of the shifting imply the halving of the production in South Korea, where the demand for small cars is at low levels, a person with direct knowledge of the matter said. But he added that the move is likely to be offset by plans to build a new higher-margin subcompact SUV at home. The production of the new Accent in Mexico is due to start in July 2017 and build 20,000 units that year, said the person, adding that Hyundai targets to make 76,000 units in 2018 and 100,000 the year after. He also said Kia planned to build its Rio subcompact at the Mexican factory, which is set to begin operating in May with production of the Forte compact.

Via Reuters