Report – Hyundai Motor ready to start adding capacity again image

The group’s chairman, Chung Mong-koo, issued a production capacity expansion halt two years ago, worried about production and quality issues triggered by a rapid growth. Now, Hyundai and Kia seem again ready to invest in new plants.

According to five people, who have inside knowledge about the group’s plans, the South Korean group has started running feasibility studies in promising regions like Mexico and also scouting for a location for their fourth plant in China, the world’s biggest auto market.

“We’re poring over mid- to long-term capacity investment plans now,” said one Hyundai group executive, who, like the other officials, didn’t want his identity made public as they are not authorized to discuss these matter with the media.

Although the chairman’s unofficial capacity stop decision might remain unchanged, some executives are now more optimistic about the group’s overall vehicle quality and a resolution on whether Hyundai will open an additional plant in China could come as soon as before the year’s end.

“That’s just not a sustainable approach if it lasts a few more years, even though the ban has been highly beneficial to Hyundai’s bottom line,” said one of the sources.

Hyundai Motor’s operating margin was 9.5 % in 2013, while for the same period both Hyundai and Kia had a combined 105 % utilization of the installed capacity – and the US factories were even higher, at 125 to 130%.

Via Reuters