Kia Motors' first plant in China will eventually close down at the end of this month due to a sharp drop in sales. A similar situation is also taking place at Hyundai Motor’s first plant in China. The plant is open but workers are loitering.
Kia will lease Dongfeng Yueda Kia's Yancheng Plant 1 in Jiangsu Province, China to Yueda Group, its partner in setting up Dongfeng Yueda Kia.
Dongfeng Yueda Kia's Yancheng Plant 1 will produce Kia models only until the end of June and will turn into an electric car factory in the first half of 2021. It will produce electric cars for Human Horizons, a subsidiary of Yueda Group. Production of Kia’s sport utility vehicle (SUV) Sportage will be transferred to Yancheng Plant 2.
The Yancheng 1 plant was the first plant built jointly by Kia, Dongfeng and Yueda Group in 2002 when they set up Dongfeng Yueda Kia. It can produce 140,000 units a year.
Earlier in April, Beijing Hyundai, a joint venture between Hyundai Motor and a Chinese company, stopped operating its Beijing Plant 1. The plant went into operation ahead of other plants of Beijing Hyundai when Hyundai established Beijing Hyundai, a 50-50 joint venture with Beijing Automobile in 2002. Its annual production capacity is 300,000 units.
The sales slumps of Hyundai and Kia are attributed to their failure to catch market trends. China’s retaliation for the deployment of the THAAD System in South Korea also played a role.
In 2015, an SUV boom gripped China. However, Hyundai had only two SUV models, the Tucson and the Santa Fe, at the time. To make matters worse, the two SUV models were 30 to 40 percent more expensive that those from Chinese producers. As a result, local consumers shunned Hyundai cars.
Hyundai and Kia also had trouble selling eco-friendly cars that grew rapidly in China. In May, total car sales in China dropped by 12.5 percent to 1,582,000 units, but electric vehicle sales grew by 144 percent to 94,000 units. Neighborhood electric vehicle (NEV) sales soared 83 percent until April this year.
The two companies are seeking a breakthrough by shifting their sales focus to electric vehicles.