Hyundai Motor shifts focus to India from China, Russia

Former President Moon Jae-in, front row fourth from right, and Hyundai Motor Group Executive Chair Chung Euisun, front row fifth from right, leave the carmaker's plant in Chongqing, China, after inspecting vehicles produced there, in this Dec. 16, 2017 photo. Korea Times file

By Kim Hyun-bin

Hyundai Motor is redirecting its focus toward India to offset plunging sales in China and Russia as demand for cars has been exploding in the South Asian country in recent years in line with its robust economic growth, according to company officials and industry experts, Thursday.

As part of efforts to downsize operations in the world's second-largest economy, Korea's largest automaker decided to shut down its plant in Chongqing, which has been idling for the past year. Hyundai Motor also reportedly plans to sell another plant in Changzhou due to sluggish sales. Its Russian plant in St. Petersburg, which has been shut since Russia's invasion of Ukraine early last year, is expected to face a similar fate.

To make up for these production losses, the Korean automaker has been expanding its presence in India by acquiring a plant from GM.

"We are actively pursuing various business efficiency improvements in China to enhance our operations. We plan to strengthen efforts to enhance profitability through streamlining production and operations. Details, such as potential divestitures, have not been determined," a Hyundai Motor Group official said.

According to Reuters and the Beijing Stock Exchange, Hyundai's China subsidiary, Beijing Hyundai, put the Chongqing plant up for sale on the Chinese bourse on July 11. The starting price is 3.684 billion yuan ($505.9 million), but so far, there have been no confirmed buyers.

The Chongqing plant, established by Hyundai in 2017 with an investment of 1.6 trillion won ($1.21 billion), was its fifth plant in China and has an annual production capacity of 300,000 vehicles. However, due to poor sales, it ceased operations in December 2021.

During an Investor Day for CEOs held in June, Hyundai confirmed its intention to sell two Chinese production plants this year. Hyundai also plans to sell its Changzhou plant.

The sale of the Chongqing plant is seen as part of Hyundai's efforts to restructure its business in China due to declining sales. Since entering the Chinese market in 2002, Hyundai built five plants, expanding its annual production capacity to 2.7 million vehicles.

However, in 2017, sales were disrupted by the Chinese government's retaliation against Korea's decision to deploy a U.S. Terminal High-Altitude Area Defense (THAAD) missile system, resulting in double-digit annual sales declines. Hyundai Motor's market share also plummeted from 8.1 percent to 3.5 percent. In addition, the automaker faced increasing competition from Chinese rivals that were rapidly growing after receiving substantial government aid.

Hyundai Motor's St. Petersburg plant in Russia / Courtesy of Hyundai Motor Group

As Hyundai aims for global restructuring, it is also eyeing its Russian plant, which has been halted due to the Russia-Ukraine conflict. The St. Petersburg plant used to produce 200,000 vehicles annually, serving as Hyundai's flagship facility. However, it has been idle for a year due to the war.

Local media reported earlier this year that Hyundai's Russian subsidiary was in negotiations to acquire the plant. Hyundai's official stance is that no decision has been made, but industry watchers expect Hyundai to significantly restructure its struggling Chinese and Russian plants.

Kim Eun-soo, left, executive vice president of Hyundai Motor India, Middle East & Africa Strategic Region, poses with Asif Khatri, vice president of production at GM India, after signing an acquisition agreement for the Talegaon plant in Gurugram, Haryana state, India, Aug. 16 (local time). Courtesy of Hyundai Motor Group

Hyundai sees India as a land of opportunity to offset the challenges in China and Russia. Rising as one of the top three automobile markets globally, sales of new cars in India reached 4.76 million last year, showing rapid growth. Hyundai recently acquired a plant in Talegaon, India from General Motors (GM), aiming to enhance its position in the Indian auto market.

The Talegaon plant has an annual production capacity of around 130,000 vehicles. Subject to Indian government approval and other procedures, full-scale production is set to commence in 2025. With the expansion of the Chennai plant's production capacity from 750,000 to 820,000 vehicles in the first half of this year, Hyundai's total production capacity in India could reach up to 1 million vehicles.

"It looks like Hyundai Motor is seeking opportunities in markets such as India, as it faces challenges in China," an industry official said.

Last year, Hyundai sold 552,511 vehicles and grabbed a 14.5 percent market share in India, ranking second. With the acquisition of the Talegaon plant, Hyundai aims to respond actively to local demand by rapidly introducing various vehicle models, in line with the Indian government's policy to increase the share of EV sales to 30 percent of total car sales by 2030.