Hyundai hits pause as China market cools

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BEIJING -- Notwithstanding those big announcements by Volkswagen and Ford about building new plants, the sense of urgency in China may have subsided just a tad since the Shanghai auto show a year ago.

At that time the Chinese light-vehicle market was coming off 33 percent sales growth in 2010 and 54 percent in 2009.

But of course industry sales rose only about 7 percent last year and will probably grow less than that in 2012.

A year ago, Hyundai, for example, was talking about adding a fourth assembly plant in China just to keep up with the pace of growth. That was notable since it had announced plans for a third factory just a few months before.

Then-Beijing Hyundai President J.M. Noh, citing the country's rapid sales expansion, said Hyundai's desire to maintain its market share meant "we would need a fourth plant."

A spokesman confirmed at the time that plans for the plant were "under review."

A year later at the Beijing show, Hyundai's top executive in China says there are no plans to add another assembly plant.

"We think we can make it until 2015," said Hyo Heum Baik, president of Beijing Hyundai. "We have enough capacity."

The company currently has two plants in Beijing, each with capacity for 300,000 units annually, and the third will go on line in July. The new plant in Beijing will have capacity for 300,000 in its initial phase and 400,000 be the end of next year.

At the new plant, Hyundai will produce the new Elantra and Santa Fe and eventually an electric vehicle under Beijing Hyundai's new domestic brand, Shouwang.

Hyundai spokesman Frank Ahrens said Baik's statement does not represent a retreat for Hyundai in China.

Still, Baik says the Chinese industry is straining a bit from overcapacity.

Hyundai's passenger vehicle capacity has held steady at about 6.2 percent for the past two years and that remains its target for now. The company expects to sell about 800,000 units in China this year.

Hyundai hasn't backed down from its long-range forecast for the industry.

Baik says he expect passenger vehicle sales, including SUVs, to rise to 16 million in 2015, up from 12 million last year. And he thinks the overall market, including commercial vehicles, will reach 40 million by 2020 up from 18 million last year.

You can reach Richard Johnson at rjohnson@crain.com.

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