September 16, 2014 / 9:59 AM / in 3 years

Hyundai Motor to build two new plants in China instead of one: sources

SEOUL/SHANGHAI (Reuters) - South Korean automaker Hyundai Motor Co 005380.KS plans to build two new factories in China instead of one, two people familiar with the matter told Reuters on Tuesday.

Kia cars are reflected in the Hyundai auto logo at a shipping yard of South Korea's biggest automakers Hyundai Motor Co and sister company Kia Motors at a port in Pyeongtaek July 21, 2014. REUTERS/Kim Hong-Ji

The increase is to meet the request of China’s central government, which wants Hyundai to build a plant in the northeastern Hebei province as part of a development plan spanning Beijing, Tianjin and Hebei, one of the people said.

Hyundai, which has three factories in Beijing, in March signed a preliminary agreement to build a plant in the southwestern city of Chongqing to help the automaker expand into western China.

One of the people said Hyundai had planned to open its $1 billion Chongqing factory in early 2016, but would likely start production later because the automaker has yet to gain central government permission.

Hyundai, which has a joint venture in China with Beijing Automotive Industry Holding Co Ltd, now aims to open a factory in the Hebei city of Huanghua in 2016, ahead of its proposed plant in Chongqing, the two people said.

“This is like hitting two birds with one stone,” in that building two plants would please both the central and Chongqing governments, one of the people said.

The two people spoke on condition of anonymity because the plans are confidential.

Hyundai’s decision comes as foreign direct investment in China fell in August to a low not seen in at least two and a half years, adding to a string of weak economic indicators in the world’s second-biggest economy.

In the same month, Hyundai’s sales in China slipped 1 percent to 84,516 vehicles, from 85,091 vehicles a year earlier.

The change in plan is also reminiscent of a decision by Fiat Chrysler’s Chinese partner Guangzhou Automobile Group Co 601238.SS to build two plants, after competition between the cities of Guangzhou and Changsha to host the auto partnership.

A Hyundai spokeswoman said in a emailed statement that nothing has been decided regarding new factories in China.

Editing by Christopher Cushing

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