Exclusive: Hyundai to make low-cost SUVs to battle Chinese rivals - sources

Thu May 12, 2016 4:00am EDT
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By Hyunjoo Jin

SEOUL (Reuters) - Hyundai Motor (005380.KS: Quote) and affiliate Kia Motors (000270.KS: Quote) plan to launch three low-cost sport utility vehicles (SUVs) in China, their biggest market, from next year, people with knowledge of the plans told Reuters.

Making cheaper models, their first for China, marks a shift for the South Korean automakers, whose strategy of appealing to price-conscious Chinese buyers with older model versions has faltered as local brands surge.

Hyundai and Kia's China market share slid to a 7-year low of 8.9 percent last year from 10.4 percent in 2014, according to company data, hit by the rise of Chinese rivals including Great Wall Motor (601633.SS: Quote). The drop in annual sales was the biggest among the top 10 automakers in China, data from IHS Automotive showed.

Latecomers to China when they began making cars there in 2002, Hyundai and Kia rank third behind Volkswagen (VOWG_p.DE: Quote) and General Motors (GM.N: Quote). But Chinese brands are gaining share by aping Hyundai's original formula: sleek, but affordable, smaller models. The battleground has shifted from sedans to SUVs, which are increasingly popular and affordable partly due to the slide in oil prices.

Hyundai plans to build a compact, no-frills SUV at its planned factory in Changzhou starting in November 2017, and a subcompact SUV at its new Chongqing factory in 2018, two of the sources told Reuters.

Kia will follow with its own subcompact, entry-level SUV in 2018, another two people said, with one adding that Kia also plans to produce its mid-sized SUV in China next year.

"After missing out on a segment where Chinese have a head start, Hyundai is rushing to build small SUVs," said one of the individuals, declining to be named as the plans are private.


Visitors walk around the new Hyundai Tucson during Auto China 2016 auto show in Beijing, China, May 4, 2016. REUTERS/Jason Lee