Hyundai Motor on Monday carried out due diligence on a contract car manufacturing plant site for potential investment, as the South Korean firm seeks ways to reduce costs and conserve capital to make new technologies such as electric vehicles.
The move comes after Hyundai’s announcement on Friday that it had submitted a letter of intent to think about investing in the plant proposed by the city of Gwangju in the southwest of the country.
Contract manufacturing has been heavily used by electronics industry – Apple Inc outsources production of the bulk of iPhones and other devices to Taiwan’s Foxconn – and established car manufacturers are gradually embracing contractors too in a bid to save costs.
Canadian auto parts supplier Magna International Inc produces BMW and other vehicles, and Hyundai’s affiliate Kia Motors outsources the production of its Picanto mini car.
But Hyundai’s investment, if finalized, would mark a rare extension by major car manufacturers into contract manufacturing.
“Even though the investment is confirmed, we are considering outsourcing and securing supplies of an economical new car by investing in a non-controlling stake without participating in the management of the new corporation,” Hyundai stated.
The Joonang Ilbo daily reported in the past week that the city of Gwangju government is looking to construct the plant by 2020 at the earliest and keep annual wages at 40 million won (28,010.49 pounds), or easily half that of Hyundai Motor.