Hyundai to set up US$1.2b China truck venture
The two companies signed a memorandum of understanding and will spend US$430 million to set up the venture in the southern Chinese city, Seoul-based Hyundai Motor said in a statement today. The rest of Hyundai's investment in Guangzhou Hyundai Motor Co. will be made by 2011.
Hyundai Motor's second attempt to enter China's truck and bus market will deepen the company's foothold in the world's third-largest vehicle market. South Korea's largest automaker aims to boost vehicle production in China to 1 million units -- or a fifth of its global output -- by 2010.
``This is the right move by Hyundai as China's commercial market is going to be big,'' said Park In Hee, who helps manage about $1 billion at KB Investment Trust Management Co. in Seoul. She said she owns Hyundai Motor's shares.
Guangzhou Hyundai will begin production in 2007, aiming to make 20,000 vehicles a year, which will increase to 50,000 units in 2009 and 200,000 by 2011, the statement said. The venture is still subject to further talks between the two automakers.
The announcement of the new venture comes a year after Hyundai Motor cut off ties with DaimlerChrysler, the world's fifth largest automaker, to produce commercial vehicles for exports to China and Asia. Guangzhou Auto already makes vehicles in China with Honda Motor Co. and Toyota Motor Corp.
Hyundai Motor in December abandoned plans for a US$780 million assembly line with Jianghuai Automobile Co. in the eastern Chinese province of Anhui.
Hyundai Motor was China's fastest-growing carmaker in the first quarter, more than doubling its sales to 56,064 cars. China limits overseas carmakers to two domestic venture partners for each type of vehicle. Hyundai already makes passenger cars with Beijing Automotive Industry Co. and trucks with Dongfeng Motor Group Co.
Beijing Hyundai plans to boost sales this year by about 40 percent to 200,000 units by introducing two new vehicles in China. The Tucson sport-utility vehicle went on sale on June 16 and the NF Sonata sedan is scheduled to come out in the second half of the year.
Hyundai Motor is planning to expand its market share in China's passenger car market to about 20 percent by 2010 from 9 percent at the moment.
The venture with Hyundai may also help Guangzhou Automobile meet its target of becoming the fourth-biggest automaker in China in five years. The company aims to more than double sales in 2007 to in excess of 100 billion yuan ($12 billion) from 43 billion yuan in 2004. Guangzhou Auto has forecast sales of more than 200 billion yuan in 2010, Chairman Zhang Fangyou said on May 17.