Hyundai Motor Considering Fourth China Plant to Meet Demand

Hyundai Motor Co., South Korea’s largest automaker, is considering building a fourth car plant in China to meet demand in the world’s biggest auto market.

Chairman Chung Mong Koo will sign an agreement tomorrow with the government of Chongqing city to study the possibility of locating a plant there, Hyundai said in an e-mailed statement. The city is the most likely site for the factory, the Seoul-based company said.

Hyundai faces rising competition in China, its largest market, as sales at Toyota Motor Corp. and Nissan Motor Co. have recovered from anti-Japanese boycotts touched off in 2012 by a territorial dispute. The Korean carmaker joins rivals including Volkswagen AG and General Motors Co. in seeking to make and sell more cars in China as economic growth and urbanization stoke demand for vehicles.

“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.”

Hyundai rose 3.2 percent to 240,000 won as of 10 a.m. in Seoul trading. South Korea’s benchmark Kospi index gained 0.8 percent.

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.

China Output

The fourth plant would have capacity of 300,000 cars a year, bringing Hyundai’s China output to as many as 1.51 million vehicles, according to the statement.

This year, the company forecasts its sales in the nation will total 1.13 million vehicles, including trucks, helped by China-specific models including the Mistra sedan and the completion of its commercial-vehicle manufacturing plant in Sichuan, Chief Financial Officer Lee Won Hee said in January.

The company expects China’s overall auto demand to reach 20.06 million units by 2016, according to the statement. Hyundai needs to increase output in the country to keep pace with rivals, the company said.

Hyundai began production in China in late 2002 and makes 10 models in the country, including the Langdong sedan and the Santa Fe sport-utility vehicle, the company said in an e-mailed response to a Bloomberg query. It isn’t exporting any cars from China.

Hyundai’s three existing Chinese car plants are in Beijing. Its commercial-vehicle business also has a new plant under construction in Sichuan, with capacity to build 150,000 vehicles a year, scheduled to begin production in the first half of this year, the company said in the statement.

Before it's here, it's on the Bloomberg Terminal.