Behind the "five consecutive declines" in Beijing Hyundai's annual sales: selling factories, stopping production, and changing the stock ratio?

Reporter Gong Mengze

After being taken over by ideal automobile for 6 billion yuan, the problem of overcapacity of Beijing Hyundai has not been alleviated. On February 23, news came that the Beijing Hyundai Chongqing plant was in a state of suspension. Although Beijing Hyundai insisted in response to the Securities Daily reporter that it had not received any internal documents regarding the suspension of production.

According to sources close to Beijing Hyundai, "most of the production lines of Beijing Hyundai's Chongqing factory have been suspended since December last year, and workers are also on holiday." It is reported that Beijing Hyundai previously had a total of 5 factories in China, in addition to the first factory that has been sold, it has 2 factories in Beijing and 1 factory in Chongqing and Cangzhou.

In fact, in recent years, the mainland passenger car market can be described as a changeable situation, traditional car companies have struggled to break through, and the sales volume of new car-making forces has repeatedly reached a new high. On the one hand, ideal car won the sales championship of medium and large SUV in 2021 with an absolute advantage of 91,300 units after taking the Beijing Hyundai First Plant under its umbrella. Beijing Hyundai, on the other hand, is focused on whether the other two factories will be resold.

Cui Dongshu, secretary general of the National Passenger Car Market Information Joint Association, said that with the intensification of brand differentiation in the domestic automobile market, many joint venture car companies have encountered challenges in their operations, and they are more eager to break through the current predicament through equity changes and look for new development opportunities. "From Suzuki Motor's withdrawal from the joint venture Changan Suzuki to the change in the share ratio of Dongfeng Renault, FAW Mazda and Dongfeng Yueda Kia, many cases reflect that the period of the joint venture car companies enjoying the dividends of the Chinese auto market has passed." Cui Dongshu said.

Sales stalled and overcapacity was severe

Encountered an unprecedented crisis

Ultimately, the beijing hyundai sale plant and the suspension of the Chongqing plant are closely related to their current market performance.

In fact, from the perspective of global market sales, Hyundai's performance last year was acceptable. According to the sales data released by Hyundai Motor Group, despite the adverse impact of the global epidemic and supply chain management problems, Hyundai Motor's global sales volume in 2021 still reached 3.891 million units. Together with kia motors' market sales, Hyundai Motor Group achieved the fourth best result in global sales after Toyota Motor, Volkswagen Group and Renault-Nissan-Mitsubishi Alliance.

It's just that in the Chinese market, this Korean car company seems to have lost its way and suddenly become unconvinced.

As Hyundai Motor's main joint venture in the Chinese market, Beijing Hyundai's market performance directly illustrates the problem. According to public data, Beijing Hyundai's cumulative sales in 2021 are about 385,000 vehicles, down 23.3% year-on-year. This is the fifth year since 2017 that Beijing Hyundai's sales have declined. Last year, Beijing Hyundai also failed to meet its sales target of 560,000 vehicles set at the beginning of 2021, with a target completion rate of only 68.75%.

In contrast, Beijing Hyundai's production capacity planning, the original five major factories are expected to have a production capacity of 1.65 million vehicles, compared with the sales performance in 2021, even compared with the sales target of 560,000 vehicles set at the beginning of 2021, there is a huge gap. "Even after the first plant was sold, the remaining four plants in Beijing Hyundai have a production capacity of about 1.35 million units. Capacity utilization is still less than 30%. Zhang Xiuyang, secretary general of the China Passenger Car Industry Alliance, believes that in the years of rapid development, Beijing Hyundai's analysis of the Chinese market and its own operating conditions was too optimistic.

According to the reporter's understanding, after 2016, Beijing Hyundai decided to expand production capacity, and the Cangzhou factory and the Chongqing factory were built successively. Among them, the Chongqing plant, with a total investment of 8.39 billion yuan, was completed in 2017 and has an annual vehicle design capacity of 300,000 units. Unexpectedly, in 2018, Beijing Hyundai's sales fell rapidly, and in 2019, negative news about the personnel adjustment and factory suspension of Beijing Hyundai's first factory was continuously exposed.

In order to reverse the decline, Beijing Hyundai has also actively organized self-help. In the second half of 2020, Beijing Hyundai will launch a number of new models, including the Elantra, the all-new Sonata and Tucson L. In 2021, Beijing Hyundai launched six new cars while streamlining the number of dealers. However, the performance of Beijing's modern market is difficult to return, and under the sharp decline for several consecutive years, it has long disappeared from the sales ranking list of the Association.

Seek a change in the share ratio

It faces greater difficulties and challenges

"Beijing Hyundai may be brewing a change in the joint venture share ratio." Some industry insiders, who did not want to be named, revealed to the Securities Daily reporter that Hyundai Motor Group is beginning to increase its shareholding ratio in Beijing Hyundai, a joint venture in China, and may follow Kia's role in the new joint venture. In this regard, modern China responded to reporters that "no relevant news has been received yet."

In fact, Hyundai motor has long been rumored to strengthen its dominance in the joint venture. As early as mid-2021, there was news that Hyundai Motor was ready to increase investment at the end of the year to increase its shareholding ratio in Beijing Hyundai. At that time, Beijing Hyundai did not respond to the rumors. Today, the first plant of Hyundai in Beijing has been taken over by Ideal Automobile.

In the face of rumors of Beijing Hyundai's share ratio adjustment, in January this year, Cui Dongyou, general manager of Beijing Hyundai, responded: "Hyundai has no plans to adjust the equity ratio of Beijing Hyundai, and the joint venture contract between China and South Korea will only expire in 2032." However, he also admitted that the market performance of Beijing Hyundai in 2021 has declined significantly compared with the previous year.

It should be pointed out that Beijing Hyundai is of great strategic significance to BAIC Group. According to the reporter's understanding, at the high point of performance in 2015, Beijing Hyundai's sales volume accounted for more than 40% of baic group. Although Beijing Hyundai's sales have suffered a continuous decline, its position in baic group is still very important, and the corresponding equity ratio adjustment appeal can be imagined.

In this regard, Zhang Xiuyang believes that if we want to achieve a flexible localization strategy, brand technology and product introduction rhythm to keep up with the changes in the Chinese market, it is inevitable that Hyundai Motor will have a greater initiative and voice in the relationship between the two sides. This is also the reason why there are constant rumors that Hyundai Motor intends to increase its stake in Beijing Hyundai.

In the view of Shi Jianhua, deputy secretary-general of the China Association of Automobile Manufacturers, after the full liberalization of the stock ratio, there may be some changes in the domestic automobile market, but in the end, it depends on the contributions and capabilities of The Chinese and foreign parties in the joint venture company. "In recent years, Chinese car companies have grown rapidly and have considerable confidence and strength, but foreign companies want to increase their shares in joint ventures in China, whether from the perspective of capital or localization development, the difficulty and challenge will not be small." Shi Jianhua said.