Hyundai Motor enters race to woo Chinese consumer

SEOUL, Oct 14 Reuters reported that South Korea's Hyundai Motor Co Ltd; on Monday said it got the green light to produce cars in China, becoming the latest automaker to join the race for the world's fastest growing car market.

South Korea's largest carmaker plans to produce 500,000 cars a year by 2010 in China to compete with major global players like Volkswagen AG , General Motors and PSA Peugeot Citroen, which have already established mass-production capabilities in China. Just last week, Japan's Toyota Motor Corp rolled out its first Chinese-made car.

The company' joint venture with Beijing Automotive Industry Holding, which was approved on Sunday, will start making Hyundai's EF Sonata and Elantra XD passenger in a facility near China's capital Beijing starting near the end of this year.

Carmakers are jockying for postion to gain a foothold in China. The country's car market is expected to grow 40 percent to one million passenger cars this year.

The market is expected to expand dramatically boosted by China's entry into the World Trade Organisation and the Olympic Games due to be held in Beijing in 2008, analysts say. China will scrap all restrictions on vehicles produced by Sino-foreign joint ventures within the next two years under its WTO commitments.

Japanese carmaker Honda Motor Co Ltd and Suzuki Motor Corp have been making cars in China for several years, so Toyota was late to the party. Meanwhile, Ford Motor Co is expected to roll out its first car in China by the end of the year.

INCREASING TIES

The deal underscores the increasing ties between China and South Korea. China is now South Korea's second largest export partner, next to the United States, accounting for about 14 percent of Korean exports.

And investments are starting to flow both ways. China's third-largest auto firm, Shanghai Automotive Industry Corp Group, recently joined General Motors in a joint venture with South Korea's Daewoo Motor Co, the first Chinese auto maker to invest in a foreign one.

SAIC said on Sunday it would spend $59.7 million on a 10-percent stake in GM Daewoo Auto and Technology Co, which will own three of the bankrupt South Korean firm's manufacturing plants. The partnership would help Daewoo enter the China market.

GLOBAL AMBITIONS

Hyundai Motor Group, which includes South Korea's second-ranked Kia Motors Corp , is the world's eighth largest vehicle maker with 2.8 million production expected in 2002. It aims to raise production to five million by 2010.

Hyundai said it would initially invest $100 million in the joint venture and raise its investment to $430 million by 2005 and to $1.1 billion by 2010.

"A Chinese trade committee issued an approval for our joint venture plan on Sunday," said Park Sang-woo, a Hyundai Motor spokesman. "Our venture in China will serve as a spring-board to our ambition to become one of the top five players by 2010."

"In 2002, the joint venture will be able to produce 2,000 cars. And our capacity will be raised to 30,000 units in 2003, 200,000 in 2005 and 500,000 by 2010," Park said.

Expertise in making small cars at a lower price would help Hyundai Motor compete favourably with rivals in China, where auto ownership is expected to surge to 50 million in 2010 from 17.3 million in 2001, Analysts said.

"In addition, Hyundai plans to build a network of Korean parts suppliers in China to push its auto venture effectively," said Song Sang-hoon, an analyst at Dongwon Securities.

Hyundai Motor, 10 percent owned by U.S.-German automaker DaimlerChrysler AG, already operates five Chinese auto ventures making vehicles ranging from four-wheel-drives to commercial vehicles.

Hyundai Motor expects to produce 1.7 million vehicles in 2002, of which 900,000 are slated for exports. The United States will buy about 400,000 Hyundai vehicles with Europe importing about 260,000 units from the Korean maker.