Hyundai Aims To Build Another Manufacturing Plant, Possibly In Mexico

Amid fears that quality would suffer if Hyundai continued with their current capacity, Chairman Chung Mong-koo decided to call a halt to capacity expansion.

That looks set to change, though, as Hyundai and Kia are looking at investing in new manufacturing capacity.

Feasibility studies have shown that Mexico and another plant in China may be the best options.

The unofficial freeze, which was put in place to ensure that quality took precedent over quantity, is still in place.

That said, quality now seems to be assured, which means that opening a fourth plant in China before the end of the year may be a possibility.

A high-ranking Hyundai group official speaking anonymously said that mid to long term capacity investments are currently being looked into.

Hyundai is finding it impossible to get any additional capacity from existing plants, with both of the Korean companies squeezing out 105% of their installed capacity last year, which includes the Georgia and Alabama plants running flat out at around 125%.

The feeling is that this is something that simply isn’t sustainable in the long term.

The reasons for putting the freeze in place were good ones, especially when you consider how fast the company was growing.

Hyundai execs are pleased with overall quality, the company still came in third with total number of recalls behind Toyota and the Chrysler Group.

The goal is to sell 7.86 million vehicles this year as Hyundai move toward an annual capacity of 8 million units. That number has them perhaps looking at another plant in the US.

Some view the interest in expansion outside of South Korea as having to do with the effects of a stronger local currency, while others point to higher labor costs and less than stellar growth prospects in the home market.

South Korean sales topped off at 1.5 million vehicles last year and is expected to climb very little from that number through to 2020, if research is to be believed.

That slow growth means that investment opportunities in other parts of the world would make sense.

Hyundai and Kia have been working around the freeze somewhat, raising potential output to around 7.4 million vehicles, up considerable from the 6.5 million units that were being produced at the time of the freeze.

That was done by adding shifts at many of the plants before the freeze was put in place.

Both companies were able to hit their sales targets this year by increasing the amount of overtime work and overnight shifts.

They also began production at a third Chinese plant that was green lit before the freeze.

China is a crucial market, as auto sales there are expected to climb to as much as 38 million by the end of the decade.

That has Hyundai looking a t a number of different cities as potential locations for a new plant, which would be the first such investment since their Brazil plant and the third one in China, both of which opened in 2012.