After putting it up for sale in August, Hyundai Motor cut the minimum asking price for its auto plant in China’s southwestern city of Chongqing by almost 30%. The reduction to 2.58 billion yuan from 3.68 billion yuan came as the South Korean car maker continued its rejigs in China amid fierce price competition and slowing demand. The carmaker seeks to reduce excess capacity in the world’s biggest market, where homegrown brands such as BYD Co are gaining market share and hurting sales of imported models.
The plant is currently not operational, and Hyundai has slashed its sales target for this year in the country from 310,000 units to 260,000 vehicles. It has also instituted an emergency system for its operations in China, including hiring senior executives to take charge of the local operations.
Hyundai, which, together with affiliate Kia Motors, was once the third-biggest vehicle maker in China, is facing overcapacity after its sales plunged last year. The company is looking to streamline its operations in the country by selling off its plants and optimizing output for export to emerging markets rather than domestic consumption.
The move to sell its Chongqing plant follows Hyundai’s vow in June to further restructure its China business, focusing on enhancing profitability. The carmaker had five plants in the country at its peak but sold one in 2021 and plans to operate just two plants, boosting production for exports eventually.
The Chinese government has been stepping up efforts to crack down on overcapacity in the car industry as it tries to curb surging vehicle prices that are fuelling inflationary pressures and hurting consumer spending. Foreign carmakers have responded by closing factories and reducing production, but the impact on overall car sales has been modest.
Despite the setbacks, Hyundai remains optimistic about its future in the market as it sees steady growth in demand for electric vehicles (EVs) and SUVs. Sales of the Tucson SUV in the US and Ioniq EV in Europe have helped it to record earnings in recent months.
However, the global downturn and a slowdown in China’s economic growth are making it harder for automakers to boost sales. Analysts have forecast that China’s auto market will grow at around 5% this year and next, well below the pace in previous years when it grew by more than 10% annually. Experts say China’s car market will shift towards EVs and SUVs in the longer term. This will require manufacturers to restructure their production lines and build new factories to meet rising demand and adjust their models’ content according to consumer preferences. The shifting landscape puts pressure on foreign and domestic carmakers to adapt quickly.