SEOUL (Reuters) - Hyundai Motor (005380.KS) said on Wednesday it had resumed production in China after a supply disruption forced the suspension of operations last week, complicating its efforts to lift sagging sales in the world’s biggest auto market.
The production stoppage, although resolved, adds to investor concerns after the South Korean carmaker posted its smallest quarterly profit in five years amid political headwinds linked to diplomatic tensions between Seoul and Beijing.
Hyundai had to cut production at its four factories in China earlier this year due to slumping sales. Its fifth China factory was scheduled to start production this month.
Hyundai Motor’s sales from its Chinese factories plummeted 64 percent to 105,000 vehicles in April-June alone.
“The effects of the China production halt are yet unclear, but Hyundai’s third-quarter results are likely to be lower than the previous quarter partly due to continued weak performance in China,” said Park Sang-won, analyst at Heungkuk Securities.
Hyundai shares pared losses after skidding to their lowest level in more than four months on Wednesday, falling as much as 3.8 percent. They were trading down 0.4 percent at 0504 GMT (1.04 a.m. ET), compared to a flat wider market .KS11.
Hyundai said earlier on Wednesday its joint venture with China’s BAIC Motor Corp Ltd (1958.HK) began shutting down production last week after a fuel-tank components supplier refused to provide parts due to non-payment.
BAIC declined to comment and Reuters could not immediately reach the joint venture, Beijing Hyundai, for comment.
South Korean firms are weathering a Chinese backlash over Seoul’s decision to deploy a U.S. missile defense system to counter threats from nuclear-armed North Korea. China says the system poses a threat to its national security.
Hyundai’s weak brand image has put it at a disadvantage in China versus local and global rivals such as Honda Motor (7267.T), Toyota Motor (7203.T) and General Motors (GM.N), which all saw higher China sales for last month.
Additional reporting by Adam Jourdan; Editing by Stephen Coates