Hyundai starts Brazil production in September
Financial Times
Hyundai Motor’s first plant in Brazil will begin making cars in September, starting with a compact “B” segment vehicle, according to a senior executive at the South Korean carmaker.
ST Kim, Hyundai’s chief operating officer, told the Financial Times that the car would be offered as a hatchback, saloon and small sport utility vehicle and be equipped with a 1.0 litre “flex-fuel” engine able to run on ethanol, like most cars in Brazil.
The remarks come as Hyundai, whose global unit sales rose 12 per cent last year, seeks to slow its expansion and focus on consolidating its market share gains from rivals. Hyundai says the new plant in Piracicaba, near São Paulo, will be its last for some time, and that it will cope with expanding volumes by upgrading its existing plants to improve their productivity.
Last week the Korean company said it was adding a third shift at its sole US car plant in Alabama.
“You learnt from Toyota’s case that bigger is not always the right thing,” Mr Kim said. “It can spin out of control and be dangerous for the company if the economic situation gets worse or if we face some difficulties.”
South America is the last big region where Hyundai, the world’s fourth best-selling carmaking group and its affiliate Kia Motors, do not have a plant.
The new factory, with 150,000 units capacity, will build Hyundai’s small car on a version of its Accent platform modified to accommodate a 1.0 litre engine. Brazilian tax regulations strongly incentivise 1.0 litre engine flex-fuel cars.
Rival carmakers, including Nissan, Toyota, Fiat, Volkswagen and PSA Peugeot Citroen, are expanding their factories or building new ones in Brazil because of the market’s recent sales growth and regulatory changes encouraging local car production.
However, car sales are going into reverse because of a slower economy and tighter credit. Registrations of light vehicles in April were down 10 per cent on a year ago.
Separately, Mr Kim said that Hyundai was making contingency plans to ship cars to the Middle East via alternative routes if the standoff with Iran over its nuclear programme escalates and disrupts shipping through the Strait of Hormuz.
“We have to think about how we can deliver cars to destinations in Middle East countries if they block the Persian Gulf,” said Mr Kim, Hyundai’s third-ranking executive. “We are prepared already for that kind of scenario.”
Hyundai said it would ship via various alternative sea routes, including the Red Sea, and overland. The Middle East is one of the strongest markets for the Korean group’s Equus, Genesis and Azera premium models.