Hyundai Will Add Two Factories in China to Meet Demand

Hyundai Motor Co. (005380) will build two more plants in China with local partner BAIC Motor Corp. (1958), expanding local output about 57 percent to meet demand in the South Korean carmakers biggest market.

The factories in Cangzhou, Hebei province and Chongqing city will begin production in the second half of 2016, according to BAICs statement to Hong Kong stock exchange today. Annual output will be 300,000 vehicles each, BAIC said, without giving an investment amount.

Hyundai joins competitors including Volkswagen AG and General Motors Co. (GM) in making and selling more vehicles in China as urbanization and economic growth increase demand. The South Korean carmaker already has three plants in the country, where it faces rising competition and ranks fourth in sales among foreign brands.

Although the Chinese auto markets growth has slowed recently, it still is a key market with high demand for vehicles, and Hyundai will be able to take advantage of that with the increased capacity, said Shin Chung Kwan, an analyst at KB Investment & Securities Co.

Hyundai shares fell 1.5 percent to 169,000 won at the close in Seoul trading. BAIC Motor fell 1.7 percent to HK$8.95 in Hong Kong.

Hyundais affiliate Kia Motors Corp. (000270) will also increase capacity at its third plant in Jiangsu province to 450,000 units by 2016 from the current 300,000, according to an e-mailed statement from Hyundai Motor today.

The additions at Hyundai and Kia will boost the two carmakers output in China to 2.7 million units by 2018, compared with 1.95 million vehicles this year, the company said. Hyundai alone has production capacity of 1.05 million units in China and plans to raise that to 1.65 million units by 2018, the carmaker said.

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 new 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 7.7 percent from a year earlier, according to data compiled by Bloomberg.

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Hyundai Will Add Two Factories in China to Meet Demand