Hyundai considers passenger vehicle biz
By Gong Zhengzheng (China Daily)
Updated: 2004-06-04 08:53

Hyundai Motor, South Korea's biggest automaker, is mulling a new passenger vehicle joint venture (JV) in China to speed up its expansion in the world's fastest-growing auto market.

The joint venture partner is expected to be Huatai Automobile Co, a privately owned firm based in East China's Shandong Province, said Zhang Cailin, general manager of the Chinese firm's sales company.

Huatai is now producing the Terracan sport utility vehicle (SUVs) under the Hyundai brand according to a technical licensing deal with the South Korean automaker.

"We badly need a joint venture to bring our collaboration to a higher level as the current technical licensing deal doesn't suffice to explore China's booming auto market," Zhang told China Daily.

However, the plan will possibly be derailed by China's newly launched auto policy if Hyundai and Huatai want to create a joint venture directly, because Hyundai and its affiliate Kia Motors have two passenger vehicle joint ventures with different Chinese partners.

The new auto policy, released on Tuesday, said if a foreign automaker controls a majority stake in another foreign one, they will be treated as one company in China and one foreign automaker will be only permitted to set up two joint ventures in China to produce the same types of vehicles.

Hyundai runs a joint venture with Beijing Automotive Industry Holdings Corp producing Sonata and Elantra sedans.

Kia, Dongfeng Motor - one of China's top three State-owned automakers - and Yueda, a smaller vehicle producer in East China's Jiangsu Province have a joint venture to make Qianlima compact sedans.

"We have a new idea to create a joint venture with Hyundai, but I cannot reveal it now," Zhang said.

The new auto policy also said foreign automakers will be allowed to have more than two joint ventures in China if they join forces with their existing joint venture partners to merge with other companies in China.

"Hyundai will have to team up with Beijing Automotive, Dongfeng or Yueda to acquire Huatai in an effort to create a joint venture with Huatai. This is the only way according to the new policy," said Zhang Xin, an auto analyst with Guotai & Jun'an Securities Co.

General Motors, the world's No 1 automaker, has four joint venture plants in China through mergers of smaller companies jointly with its main joint venture partner Shanghai Automotive Industry Corp.

"Foreign automakers will prefer joint ventures to technical licensing co-operation with Chinese partners as it will give them more power in China's auto market which is becoming more important for all of them," said Zhang of Guotai & Jun'an.

Almost all of world's major automakers have built one or two joint ventures with Chinese partners.

Hyundai also has technical licensing co-operation with Jianghuai Automobile, which is located in East China's Anhui Province and producing Refine multi-purpose vehicles.

Industry sources said Hyundai is expected to introduce its Santa Fe and Tucson SUVs into Jianghuai Automobile and the joint venture with Beijing Automotive respectively later this year.

Huatai's Zhang said the company aims to produce and sell more than 30,000 Terracans this year, up from 10,000 units last year.