Hyundai to Build 2 Factories in China to Better Compete with VW, GM

Hyundai said the factories, which will start production in 2016 and 2017, would help it better compete with rivals including Volkswagen and General Motors. Affiliate Kia Motors Corp. also said it would expand capacity at one of its three Jiangsu province factories to up to 450,000 vehicles by 2016 from 300,000 now.

The automakers declined to give a value for the investments, but Hyundai said the factories -- which would be capable of producing 300,000 vehicles each -- would help it and Kia maintain their market share of over 10 percent in China.

The duo said they expect to have a combined China production capacity of 2.7 million passenger and commercial vehicles by 2018, compared with 1.95 million vehicles this year.

Hyundai and Kia's expansion plans come a few days after executives at Toyota Motor Corp. told Reuters the Japanese automaker was likely to miss its 2014 target due to a faster-than-expected economic slowdown.

The plans announced today also provide further evidence that the two automakers are easing an unofficial moratorium on capacity growth imposed about two years ago by Chairman Chung Mong-koo due to quality concerns.

Hyundai said construction of its Hebei province plant, to be located in city of Changzhou, will start in the second quarter of 2015. The factory will be able to produce small vehicles by the second half of 2016 and production will reach full capacity by 2018.

Construction on the Chongqing plant will start in the third quarter of 2015. That factory will make small and midsize vehicles as well as vehicles specifically targeting China from the first half of 2017, Hyundai added.

Hyundai currently has three factories in China.

People familiar with the matter said the automaker had initially planned to build just one plant in southwestern Chongqing to tap demand in that part of the country. It, however, increased the number to two after the Chinese government wanted Hyundai to build a plant in northeastern Hebei province as part of a development plan for the area.

Chasing Volkswagen

Volkswagen said last month it would raise its Chinese plant capacity to more than the previously targeted 4 million autos a year by 2018. That compares with capacity there of more than 3.1 million vehicles in 2013.

GM plans to spend $14 billion from 2014 through 2018 to open five vehicle assembly plants and support annual sales of about 5 million cars and trucks in the country, the company said in October.

Hyundai has sold more than 1 million vehicles in the first 11 months of this year, up 8 percent from a year earlier, according to data compiled by Bloomberg.

The company forecast its sales in China would total 1.13 million vehicles this year, including trucks, helped by country-specific models including the Mistra sedan and the completion of its commercial-vehicle manufacturing plant in Sichuan, CFO Lee Won Hee said in January.

The carmaker’s annual sales in China surpassed 1 million vehicles last year for the first time, according to data compiled by Bloomberg. It sold 640,698 units in South Korea and and 720,783 in the U.S.