Hyundai Kia Motors Cuts 4,500 Employees in China Last Year Amid 'Sales Slump'

Impact of Restructuring on Production Facilities Due to Poor Sales Performance
Number of Employees Last Year Decreased by 20% to 19,462

[Asia Economy Reporter Kim Ji-hee] Hyundai Kia Motors cut 4,500 employees in the Chinese market last year. The sluggish performance in China triggered by the Terminal High Altitude Area Defense (THAAD) system has continued for several years, accelerating restructuring efforts to reduce costs. This trend is expected to continue for the time being as Hyundai Kia's sales in China this year have yet to recover from the impact of the novel coronavirus disease (COVID-19).

According to Hyundai Motor's 2020 Sustainability Report released on the 3rd, the number of Hyundai Motor employees in China stood at 14,638 last year, down 19.3% from the previous year. This means that nearly 3,500 Chinese employees left Hyundai Motor within a year. The number of Kia Motors employees in China also decreased by more than 1,000, from 5,834 in 2018 to 4,824 last year.

The decline in employees at the Chinese subsidiaries is notable compared to other regions where Hyundai Kia operates. Last year, Hyundai Motor increased its workforce across major markets including domestic Korea, Europe, and India. Although Kia Motors saw a reduction in employees in Korea, Mexico, and Europe, the decrease was less than 100 in each region. Notably, the number of employees in other regions, including Southeast Asia?which is considered an alternative market to China?tripled to 1,682 last year compared to the previous year.

The sharp reduction in workforce only in China appears to be due to Hyundai Kia's prolonged sales slump in the country. Hyundai Kia's sales plummeted following China's retaliation over the THAAD deployment in 2017 and have struggled to rebound since. After peaking at over 1.16 million units sold in China in 2018, sales dropped to 909,000 units last year. Consequently, Hyundai Kia reduced its Chinese workforce by more than 1,000 in 2018 and further cut nearly one-fifth of its total staff last year.

In response to nearly three years of poor performance, Hyundai Kia began improving profitability through "downsizing" starting last year. Early last year, Hyundai Motor started relocating some employees from its Beijing plant to Changzhou and Chongqing plants and halted operations at Beijing Plant 1. Kia Motors also suspended operations at its first Chinese plant, Yancheng Plant 1, last summer and leased it long-term to its joint venture partner, Yueda Group.

The problem is that the business situation is worsening this year. In the first quarter, Hyundai Kia's sales shrank by more than 80% year-on-year due to the direct impact of COVID-19. Although the Chinese automobile market has recorded growth for three consecutive months since the second quarter, recovering quickly from the COVID-19 shock, Hyundai Kia's situation remains challenging. While automobile demand in China increased by 2.7% year-on-year in the second quarter, Hyundai Motor's sales volume actually decreased by 16.4%.

In the second half of this year, Hyundai Kia plans to launch new major sport utility vehicles (SUVs) such as the Palisade to create a momentum for recovery. Additionally, the Genesis brand, which has recently been performing well in the global market, is reportedly considering entering the Chinese market in the second half of this year or the first half of next year, which is another hopeful factor.

An industry insider said, "During the early spread of COVID-19, temporary sales slumps were inevitable for all automakers, but the situation after the second quarter can be seen as a performance directly linked to Hyundai Kia's competitiveness in China. The new models to be released after the second half of the year will be key to escaping the slump in China going forward."

This content was produced with the assistance of AI translation services.