Production Move
Rumors came out on Jan. 14 that Hyundai Motor can build the new version of its Accent small car at a Mexican plant owned by sister company Kia Motors next year, shifting some output of the low-margin vehicle out of high-cost South Korea.
Although the demand of the Accent is sluggish in South Korea, labor costs for production is high. This is because such rumors emerged that the company will shift its production lines to Mexico, has cheap labor along with its proximity to the North American market.
An official from the auto industry said, “As labor costs in Mexico are just one fifth of that in Korea, and the country is in the proximity of the North American and South American markets. Since it is possible to export cars produced in Mexico to North American and South American markets free of duty through the free trade agreement, it will be better to shift small car output to Mexico and increase higher-margin subcompact SUV output at home.”
Exports of the Accent far surpasses its domestic demand. Due to the low demand of small cars in the domestic market, Hyundai exports 94 percent of the Accents made at home and Kia ships 97 percent of its Rio production overseas. Last year, Hyundai sold 18,280 Accents in South Korea and 61,486 in the United States.