'Transformed into an Export Forward Base on the Brink'... Hyundai Motor Invests 1.6 Trillion KRW with Chinese Joint Venture

Hyundai Motor Company has decided to invest approximately 1.6 trillion won together with its local joint venture in China to strengthen its business capabilities in the country. While developing new vehicles targeted at local consumers, it will also increase production volume for nearby exports. This move to expand investment is attracting attention as the Chinese market shifts towards local electric vehicle companies, causing global automakers to struggle with poor performance.

Beijing Automotive Industry Holding Co. (BAIC), Hyundai's joint venture in China, announced on the 11th that "BAIC Investment and Hyundai Motor have agreed to jointly invest $1.09546 billion (about 1.57 trillion won) in Beijing Hyundai." Beijing Hyundai is a local joint venture equally owned by BAIC and Hyundai Motor, and this joint investment will also be shared equally. The capital of Beijing Hyundai will increase to over $4 billion.

Hyundai Motor China Joint Venture Beijing Hyundai Emblem

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Regarding this investment, the company stated, "We plan to release more products tailored to Chinese consumer demand and expand export volumes overseas. In the short term, we will maintain capital stability, and in the long term, we will support achieving new development strategies by investing in new technologies and products."

Hyundai operates three factories in China with BAIC. In the past, it expanded to five factories (Beijing plants 1 to 3, Changzhou, and Chongqing), but due to the controversy over the deployment of the Terminal High Altitude Area Defense (THAAD) system in 2016 and subsequent restrictions on Korean cultural content, local business declined, leading to the sale of some plants. In 2016, vehicles produced and sold at local factories reached 1.14 million units, but this year, from January to October, the number shrank to around 100,000 units.

Hyundai's recent investment contrasts with major automakers like Toyota and Volkswagen, which have recently reduced or restructured their China operations due to poor local sales. In China, local manufacturers such as BYD and Geely have been continuously launching new energy vehicles like electric vehicles and plug-in hybrids, strengthening the preference for domestic brands.

Toyota's sales in China from January to November this year were about 1.59 million units, down approximately 8% compared to the same period last year. Volkswagen, once considered the top brand in China, has lost its lead to BYD. There have been recent reports about the sale or closure of local joint venture plants in places like Nanjing. According to a recent Bloomberg survey, Volkswagen's market share in China has decreased by about 6 percentage points over the past five years, the largest decline among major brands. Other Japanese makers such as Honda and Nissan have also seen their market shares drop by about 3 to 4 percentage points. American automaker General Motors (GM) is also planning to reduce its local operations due to poor business performance in China.

Beijing Hyundai showroom. Provided by Hyundai Motor Company

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Kia, a Hyundai Motor Group affiliate, has been attempting a 'structural transformation' ahead of others. It is launching electric vehicles targeted at local demand while transforming into a base for producing export volumes to nearby regions such as the Middle East and Southeast Asia. Annual sales dropped to around 120,000 units in 2022, but this year, up to October, nearly 200,000 units have been sold domestically and internationally. About half of these sales are reported to be exports. Meanwhile, Hyundai's China factories produced and sold about 140,000 units from January to October this year, with around 110,000 units sold domestically.

This Hyundai investment is also expected to proceed in a similar direction to Kia's. Within Hyundai Motor Group, there is a sentiment that "since the business has already hit bottom, there is sufficient potential for a rebound" regarding the China market. The group has appointed a Chief Technology Officer (CTO) specifically for China to develop products and technologies targeting local demand, as well as a system to expand their application overseas. Hyundai Motor Group has established advanced digital research centers, technology research centers, and commercial technology research centers in China. It is the only overseas operation with a fully independent research and development system across all fields.

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