[Report] Kia Motors' 'Edge of the Cliff' Production Base in Yancheng, China... All-in on EV5

EV5 Produced at Yencheng Plant 2... Plant 3 for Internal Combustion Vehicles
Plant 1 Only Outsources China's 'HiPhi' Production
EV5 Production Expected at Plants 1 and 3 if Demand Increases

Yancheng, Jiangsu Province, located about 950km east of Beijing, the capital of China. This coastal city, which serves as a hub for 'Korea-China economic cooperation' within the Yangtze River Delta, China's largest economic zone, is also a battleground where Kia Motors is striving to establish its production base. Through the joint venture Weda Kia with the local company Jiangsu Weda Group, Kia Motors has been targeting the Chinese market centered on Yancheng for 21 years.

The Weda Kia Plant 3 in Yancheng, visited on the 2nd, was operating quite busily amid noise. A K5 car fender (the external panel covering the wheel) was produced every 4 seconds, and bonnets neatly arranged on one side were waiting for assembly. Only eight types of internal combustion engine vehicles, including the New Carnival, K5, Sportage, and Pegasus, are produced at Plant 3. Plant 3 was completed in 2014 and is now in its 10th year of operation.

Some vehicles produced at the Wedagia Plant 3 in Yancheng, Jiangsu Province, China, visited on the 2nd, are waiting for assembly. (Photo by Hyunjung Kim)

Possibility of Reactivating Plant 1 if EV5 Succeeds
Expansion from Plant 2 to Plant 3 Expected

At the site, there was an atmosphere of anticipation for the launch of the ambitious EV5, which will start sales in China on the 17th. Zhou Zhuhua, General Manager of Weda Kia's Comprehensive Business Division, mentioned EV5 as the future core model and business focus. The EV5 is the world's first electric vehicle produced overseas, with a sales price somewhat lower than competitors such as Ford's F-150, Volkswagen ID.4, and Toyota bZ4X, ranging from 159,800 to 229,800 yuan (approximately 29 million to 42 million KRW). Although the production site was not disclosed to reporters, this ambitious model is produced at Plant 2, located about 5km from Yancheng Plant 3.

Mr. Zhou explained, "Thanks to the launch of new electric vehicle models like the EV5, Kia Motors' sales volume in China this year will increase by more than 40% compared to last year (about 130,000 units). Especially, if the demand for the EV5 grows and production at Plant 2 alone cannot meet supply, Plant 3 can also introduce electric vehicle manufacturing processes to produce them."

Looking at objective numbers, the current situation is not entirely optimistic. Due to sluggish business in China, Plant 3's operating rate is about 60% as of November. If the operating rate is increased to 100%, annual production can reach 450,000 units, but only 17,760 vehicles were produced in October alone. This is less than half of the monthly maximum production volume (37,500 units).

HiPhi Y vehicles produced at Weda Kia Yancheng Plant 1 are lined up. The 'Weda Kia' mark was stamped on the lower left rear of the vehicles. (Photo by Hyunjung Kim)

However, depending on the success of the EV5, the strategy for the Yancheng production base could change entirely. Plant 1, leased to the joint venture shareholder Weda Group in 2019 due to business downturn, is a representative example. Upon inspection at the site, Plant 1, with an annual production capacity of 140,000 units, was currently producing on consignment the 'HiPhi X' and 'HiPhi Y' models of the Chinese electric vehicle brand HiPhi (Gaohe). The HiPhi X is a premium SUV equipped with gull-wing doors and top-class audio facilities, with a maximum price reaching 800,000 yuan (144 million KRW).

An interesting point is that HiPhi does not have a vehicle production license, so it uses the license of Weda Kia, which entrusted the consignment production through Plant 1. Therefore, all vehicles produced at Weda Kia's Plant 1 for HiPhi bear the 'Weda Kia' mark at the lower left, representing the owner of the facilities and license.

If it receives a good response not only in China but also in the global market, Yancheng may be assigned a new role as an export base. Including Plant 2, which can produce 300,000 complete vehicles annually, the combined production capacity of the three plants in Yancheng reaches about 900,000 units per year.

Kia Motors' Slump Also Shakes Hyundai Mobis
One of Two Production Lines Suspended
Weda Kia Still a 'Leading Company' in Yancheng... Investment Expectations

Joo Jae-ming, Deputy Head of Production Department at Hyundai Mobis Yan Cheng Plant, is explaining the production equipment inside the factory. (Photo by Kim Hyun-jung)

Domestic automobile companies, including Kia Motors, are struggling particularly hard in the Chinese market. Although Kia Motors ranked 7th globally last year by selling 2.9 million electric vehicles, its performance in China is poor. According to Weda Kia, sales in China, which reached 650,000 units in 2016, sharply declined to 370,000 units in 2018 and 289,300 units in 2019. During the COVID-19 pandemic, the decline accelerated, with sales dropping to 249,300 units in 2020, 163,400 units in 2021, and plummeting to 94,300 units last year. Based on the first half of this year, sales (wholesale basis) did not exceed 60,000 units, and last month, only about 7,600 units were sold. Even this (October) was a 6.5% improvement compared to the previous year.

The fallout also affected Hyundai Mobis, which supplies key parts. Except for simple parts such as lamps and airbags, all parts produced at Hyundai Mobis' Yancheng plant are supplied to Kia Motors, resulting in high dependency. To facilitate this, a separate direct tunnel for parts transport vehicles was connected to the Weda Kia production plant. Due to Kia Motors' poor sales, Hyundai Mobis had suspended operation of one of its two production lines on the day of the visit, the 2nd. Zhueming Zhu, Deputy Director of Production at Hyundai Mobis Yancheng Plant, explained, "Because production volume is low, Line 2 is stopped, but it will resume operation tomorrow (the 3rd)."

Jeong Jae-ho, the South Korean Ambassador to China, is attending the Korea-China Trade and Investment Expo, which opened on the 3rd in Yancheng, Jiangsu Province, China, and is examining the Wedakia booth. (Photo by Kim Hyun-jung)

However, Weda Kia still ranks among the leading companies representing the city of Yancheng. Its influence is not small. Since establishing a corporation in China, the cumulative taxes paid by Weda Kia have exceeded 52 billion yuan, and the workforce, mostly local employees, totals about 3,800 at Plants 2 and 3 combined. There are 47 subcontractors in Yancheng alone, and including sub-subcontractors, the related companies number about 1,000. If Weda Kia collapses, Yancheng will inevitably suffer chain unemployment and other impacts.

Government-level expectations are also significant. Xu Kunlin, Governor of Jiangsu Province, mentioned Kia Motors at the Korea-China Trade and Investment Expo held in Yancheng on the 3rd, emphasizing, "Korea-China economies are closely connected through industrial chains and supply networks," and pledged cooperation for trade and investment. Jeong Jae-ho, the Korean Ambassador to China attending as the Korean representative, stayed at the Weda Kia booth at the exhibition, personally examining the EV5, EV6, and Carnival, and inquired about sales prices and market conditions.

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