Beijing Hyundai Chongqing plant may stop production, Korean cars in China market share less than 2%

Although the first plant in Beijing's Shunyi area was sold to Ideal Car, the troubles of Beijing Hyundai's overcapacity do not seem to have eased.

The first financial reporter exclusively learned today that Beijing Hyundai's factory in Chongqing may be in a state of suspension. "Beijing Hyundai's Chongqing factory has no output now, and most of the workers are on holiday." An insider of Beijing Hyundai told reporters that the Chongqing plant had stopped production since December last year.

In response, Beijing Hyundai responded that it did not receive any internal documents regarding the suspension of production.

Beijing Hyundai has five factories, in addition to the first factory that has been sold, Beijing Hyundai also has two factories in Beijing, one in Chongqing and one in Cangzhou. According to public data, the production capacity of these five factories is about 1.65 million units, while the cumulative sales of Beijing Hyundai in 2021 are only about 385,000 units, down 23.3% year-on-year, and there is still a big gap from the sales target of 560,000 vehicles set at the beginning of 2021.

It is worth noting that since 2017, Beijing Hyundai has fallen into the waterloo of sales and has not been able to reverse the decline so far. The performance of Dongfeng Yueda Kia, another joint venture of the Korean series, is also not optimistic, and the Chinese partner Dongfeng Motor Group has withdrawn. According to data released by the China Association of Automobile Manufacturers, the market share of Korean passenger cars in China was only 1.7% in January this year.

Overcapacity

Whether it is selling the factory or stopping production in Chongqing, it is related to the current market performance of Beijing Hyundai. In 2013, Beijing Hyundai's sales exceeded one million units for the first time, and reached a peak sales volume of 1.14 million units in 2016. Today, sales have fallen sharply for several consecutive years, and they are no longer seen in the top 15 sales list of the association.

Beijing Hyundai is a joint venture car company that has reached the sales volume of one million in the shortest time. It was in those years of rapid development, out of optimism about the automobile market, Beijing Hyundai began to expand production capacity, and the Cangzhou factory and the Chongqing factory were built successively. Among them, the Chongqing factory was completed in 2017, and in that year, Beijing Hyundai's sales began to decline. According to public information, the Chongqing plant was completed in 2017 with a total investment of 8.39 billion yuan, with an annual production capacity of 300,000 vehicles and an engine design annual production capacity of 300,000 vehicles.

The reporter learned that The new Reina, Onsino, Fiesta and ix25 are all produced in the Chongqing factory. It is worth noting that in the 2021 Sales Results of Beijing Hyundai, it only highlights the performance of the seventh-generation Elantra, the fifth-generation Tucson L, the new ix35 and the Kustu, which means that these models produced at the Chongqing plant may not sell well. In the case of Onsino, for example, this model has basically lost its voice, and its sales volume in many months is even only double digits, while Rena is the lowest-end model in Beijing Hyundai's product sequence.

An industry insider said in an interview with the first financial reporter that in the process of increasing production, Beijing Hyundai is too focused on the immediate sales changes and does not consider the long-term demand. Entering 2018, Beijing Hyundai's sales have declined rapidly, and in 2019, the news about the personnel adjustment and factory suspension of The first factory of Beijing Hyundai has continued. Finally, in October last year, Ideal Automobile announced that the Beijing Green Intelligent Factory officially started construction in Shunyi District, Beijing, which is the use of the original Beijing Hyundai First Factory to build a pure electric passenger car intelligent manufacturing factory, with a total area of 270,000 square meters and an investment of more than 6 billion yuan in the entire project. It is worth noting that the first plant is the first plant of Beijing Hyundai in China, which was officially put into operation in 2002, as the first joint venture automobile enterprise introduced after China's accession to the WTO, which once attracted attention from the outside world, and the annual output of the factory in its heyday was about 300,000 vehicles.

Beijing Hyundai's five-seat plant has a production capacity of about 1.65 million units, and based on the production capacity of the first plant of 300,000 vehicles, the remaining four plants of Beijing Hyundai have a production capacity of about 1.35 million units. Beijing Hyundai will sell 385,000 units in 2021, and even after the first plant is sold, Beijing Hyundai's capacity utilization rate is still less than 30%. Since last year, rumors have continued to circulate about the sale of the second factory of Beijing Hyundai to Xiaomi Automobile and the sale of the Chongqing plant to Ideal Automobile again.

With the decline in sales, Beijing Hyundai personnel has also changed, and in 2021, executives such as Xiang Jinping and Fan Jingtao have left, and only Executive Deputy General Manager Du Junbao is sticking to it. The successive departures of localized executives have increased the uncertainty about the future direction of the Korean brand. As a representative of the Korean side, Choe Dong-woo's tenure in the past few years has not been able to reverse the unfavorable situation of Beijing Hyundai. "For a while, we indulged in the glory of the past and forgot our original intention prematurely. We need to re-sort out what Beijing Hyundai has done right, ignored, and given up in the past 20 years of development, and needs to find the right direction as soon as possible. Cui Dongyou, general manager of Beijing Hyundai, said in an interview with the media.

Korean car market share is less than 2%

In order to reverse the decline, in the second half of 2020, Beijing Hyundai has launched a number of new models, including the Elantra, the new Sonata and Tucson L. In 2021, Beijing Hyundai launched six new cars, including an MPV model, the Kustu, while streamlining the number of dealers. However, from the current situation, the effect of new cars has not been obvious. Among them, only the A-class Elantra can maintain the sales fulcrum, with monthly sales reaching 10,000 units, and the annual sales of the Elantra in 2021 will exceed 130,000 units.

The industry believes that Beijing Hyundai has not innovated in strategy and models according to market changes, and the localization process is relatively slow, and at the same time, too many similar models have been launched, resulting in its uneven distribution of marketing resources, and it is unable to quickly respond to changes in the market, which makes Beijing Hyundai once miss the opportunity for self-innovation. Although this multi-generational sales strategy has gained sales in the short term, it has had a negative impact on Beijing Hyundai's products and brands, and the products cannibalize each other. One of the most typical examples is that after the realization of domestic production in Elantra, Beijing Hyundai has successively launched the replacement models of Elantra, Such as Yuedong, Langdong and Lingdong. And with each replacement, old models and new models are sold at the same time. In 2020, Beijing Hyundai adjusted its sales strategy of multi-generational co-location.

Hyundai Motor Group occupies a leading position in the global market, but the Chinese market has been very weak in recent years. The industry believes that this is a manifestation of "water and soil dissatisfaction". The game between China and South Korea will cause internal friction in management, which makes Beijing Hyundai unable to keep up with the changes in market rhythm in time.

In addition, for many years, Beijing Hyundai's label was cost-effective. "With the rise of independent brands and the downward exploration of the price of mainstream joint venture brands, the market share of Korean cars has been squeezed out. Korean cars have no obvious label and are inferior in brand power. In recent years, the terminal price of Korean cars has been greatly preferential, and the brand has been hurt more greatly, and the price range of their main products is below 150,000 yuan. Zhang Xiang, an analyst in the automotive industry, told reporters that it will still take a long time for Korean cars to change the predicament. In addition, Korean cars are also relatively passive in the field of electric vehicles. According to the plan, Beijing Hyundai will only launch the first electric model based on the pure electric platform in 2023.

Similar to Beijing Hyundai, another Korean-based car company, Dongfeng Yueda Kia, has also embarked on a downward spiral since 2017. Not long ago, Dongfeng Motor has officially withdrawn from Dongfeng Yueda Kia. Today, it is reported that Beijing Hyundai may be brewing a change in the joint venture share ratio, and Hyundai Motor Group is beginning to increase its shareholding in the Chinese joint venture Beijing Hyundai, or to follow Kia's role in the new joint venture company and seek more dominance. However, in response to rumors of Beijing Hyundai's share ratio adjustment, Cui Dongyou said in an interview with the media in January this year that Hyundai has no plans to adjust the beijing Hyundai joint venture ratio, and the joint venture contract between China and South Korea will only expire in 2032.

Due to the continuous decline in sales of Korean cars, the current market share is less than 2%. According to data released by the China Association of Automobile Manufacturers, from 2016 to 2021, the market share of Korean cars in China's passenger cars was 7.35%, 4.63%, 4.98%, 4.7%, 3.8% and 2.4%, respectively. In January this year, the market share of Korean cars fell further, only 1.7%.