Producing at Home
Hyundai-Kia Motors showed the highest domestic production ratio among major global automakers last year. The higher the home production ratio is, the greater contribution that a company has made to Korea’s economic growth due to higher employment rates and consumption encouragement in the country. However, it also means that the company lags behind in establishing the production system through global parts sourcing.
According to data from Japanese auto research firm FOURIN and the Japan Automobile Manufacturers Association on July 28, Hyundai-Kia Motors recorded a 44.8 percent home country production ratio, the highest among the nine carmakers with global production exceeding 3 million units in 2014.
The Korean carmakers produced a combined total of 8 million cars in the global market in 2014. Of those, 3.59 million, which was slightly less than half of the total, were manufactured in Korea. Its domestic production ratio was much higher than the group average of 31.2 percent. In terms of domestic production, Hyundai-Kia Motors came in second following Toyota, which produced 4.21 million units in Japan, overtaking Volkswagen of Germany with 2.68 million units and GM of the U.S. with 2.09 million units.
In contrast, Volkswagen, which showed the highest production last year, produced a combined 10.56 million cars, of which it churned out only 2.69 million units in Germany. Its domestic production ratio stood at only 25.4 percent. The figure of GM also reached as low as 21.6 percent. Nissan of Japan showed the lowest home production ratio with 18.9 percent among the group.
However, some express concern over Hyundai-Kia Motors’ high domestic production ratio. An official from the industry said, "The domestic market is mixed with labor-management disputes, regular wages, and high-cost systems. In the overseas market, there are currency problems. In order to be stable, the group needs to increase local production so that it can cope with uncertainties more actively."
Meanwhile, Hyundai-Kia Motors is recently making efforts to increase global production with the goal of annual production of more than 10 million units. Hyundai Motor already started building its fourth and fifth plants in China, while Kia Motors will complete the construction of its plant in Mexico next year. Also, the group is positively considering whether or not to open additional plants in the U.S. and India. If the group relocates its production facilities to other countries, the domestic auto industry can wither. Therefore, the group has a lot to think about.