Hyundai to make China-only vehicles, green cars to battle local brands

October 17, 2016 11:01 PM EDT

The logo of Hyundai Motor Co. is seen on a wheel of a car at a Hyundai dealership in Seoul October 21, 2013. REUTERS/Kim Hong-Ji

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By Hyunjoo Jin

SEOUL (Reuters) - Hyundai Motor Co on Tuesday said it aims to make more China-only and environment-friendly cars at two new Chinese plants, as it strives to fend off competition from Chinese rivals and slowing growth in the world's biggest auto market.

The plans are part of a strategy announced on the opening of South Korean automaker's fourth Chinese factory, which will be followed by fifth plant next year.

Hyundai and sister Kia Motors Corp, which together rank third in China sales, saw their combined market share fall to 8 percent this year, hitting their lowest since 2007 as domestic rivals won customers with cheaper sport utility vehicles (SUVs).

To boost sales capability, Beijing Hyundai - a joint venture with domestic peer BAIC Motor Corp Ltd - replaced its head earlier in October as part of a reshuffle of China executives.

Hyundai said its new plants will each have annual production capacity of 300,000 cars, raising total capacity in its biggest market by about half to 1.81 million cars. Including Kia's output, total capacity would be 2.7 million.

"We will accelerate our efforts to achieve a market share of more than 10 percent again with the (factory) opening," Hyundai said in a statement on Tuesday.

China's passenger car market is projected to grow 1 percent in 2017 versus 10 percent this year, Hyundai Motor said, citing data from China's State Information Center (SIC). Tax breaks for small engine cars, which boosted 2016 sales, will expire at the end of December.

Hyundai said its new plants will build models of varying sizes to compete with low-cost domestic rivals. It aims to sell a China-only SUV from as early as next year, with more SUV models planned. Reuters earlier this year reported that Hyundai and Kia plan to launch three low-cost SUVs in China from 2017.

"Not all SUVs will win - but the (makers) who localize the designs and features to Chinese tastes will be the winners," said James Chao, Asia-Pacific managing director at researcher IHS Automotive. He said SUVs will account for 40 percent of the passenger vehicle market by 2023, from 34 percent this year.

Hyundai also said it aims to produce nine green vehicles - petrol-electric hybrid, plug-in hybrid, electric and fuel cell - in China by 2020, making up 10 percent of its sales in the country by that year. At present, green vehicles account for a fraction of Hyundai's China sales.

China surpassed the United States last year to become the largest maker of electric cars following government subsidies aimed at curbing pollution.

(Reporting by Hyunjoo Jin; Editing by Kenneth Maxwell and Christopher Cushing)

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