Hyundai may suspend production at one of its Chinese plants as downturn bites

New Hyundai Verna

Hyundai Motor is thinking about the plans to suspend production at its oldest plant in China, the South Korean automaker stated on Wednesday, as it reels from decreasing sales and massive overcapacity in its biggest market.

The move by Hyundai, that together with affiliate Kia Motors was the No.3 automaker in China until 2016, shows the reversal of fortunes of China’s auto industry, which had hard time due to its first contraction in decades last year.

Hyundai and Kia face major threats from the industry’s downturn, with the duo already grappling to fend off rivalry from Chinese competitors and global automakers in the world’s biggest auto market.

“Hyundai Motor is evaluating production to enhance competitiveness and profitability,” the company stated, adding that the plan consists “suspension, not closure of Plant 1 in Beijing”.

The company, which has three manufacturing plants in the city, said that it has yet to decide when a suspension would start. However, the Korea Economic Daily newspaper reported that suspension could begin as soon as next month.

All of Hyundai’s five factories in China are operated by its Chinese joint venture with BAIC Motor Corp, at which about 2,000 employees have taken voluntary retirement or transferred to other factories, the statement said.

Hyundai Motor shares increased as much as 3.6 percent on Thursday.

“My view is that Hyundai is taking measures to closing the plant. It has been dragging its feet over a shutdown, and it is positive that they are finally taking action,” Samsung Securities analyst Esther Yim stated.

Hyundai’s redesigned Sonata sedan, which was revealed on Wednesday, has also sparked hopes that Hyundai would be able to regain ground in its mainstay sedan segment, she stated.

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