Hyundai with Kia Aiming for World Top Five Automaker Spot with New Plants in China and Europe

---

Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Hyundai Motor Group KSE:05380) (Seoul, Korea), with its affiliate Kia Motors (KSE:00270), is hoping to become one of the world's top five automakers by 2010. It is planning a new manufacturing base in China to push its expansion in the world's fastest growing auto market that the company predicts will grow to eight million unit sales per annum by 2008. Sales estimates for 2003 are well over four million units. Kia is also planning its first manufacturing facility in Europe that will be sited in either the Czech Republic or Slovakia.

The new Chinese base in Jiangsu Province may be sited next to the company's existing 50,000 unit manufacturing base at Yancheng, east China, 330 kilometers north of Shanghai or at another site in the province. Kia, Dongfeng Motor Corporation and Yueda Automobile Group will invest around $600 million in the new venture, which is a joint venture between the three companies. The new plant will have a total production capacity of 400,000 units a year and will be into production before 2005. Kia, Dongfeng (one of China's largest automakers based in central China's Hubei Province) and Yueda (a smaller Jiangsu player) control 50%, 25%, and 25% of the joint venture respectively. Hyundai plans to increase the capacity of the joint venture to 550,000 units per annum by 2010. The company also operates a joint venture in Beijing with a local partner producing the mid-size Sonata sedan.

The joint venture has just launched the new 1.3 and 1.6 liter Qianlima sedan that will retail at between $10,000 and $14,200 and is seen as a new starting point in the venture's aim to become one of the top economy car producers in China. The venture, which also produces the Pride model and is expected to manufacture Kia's sport utility vehicles as well as sedans, plans to introduce one or two new models in the Chinese market every year.

An in depth feasibility study is now under way for the first European plant which is due to start construction after completion of the company's first $1.2 billion North American plant in Hope Hull, Alabama in 2005 (PEC 04002386). The 300,000 vehicle per annum plant is being built on 1,600 acres and will create 2,000 jobs in the area. In 2001, Hyundai and Kia sold 569,956 units in the US market representing and increase of 29% over 2000 and the largest increase in the auto industry.

Eastern Europe is considered to be the best location in terms of wage levels, brand awareness, and economic factors. The Czech Republic's Ostraba region already hosts a range of world-class auto parts manufacturers that can provide Kia with supplies of locally produced components. It has a highly skilled labor force and provides easy access to western European export markets. There is also a pool of skilled technical and engineering professionals.

Hyundai sees the Kia European plant as a progression from opening plants in the US, India, and China. Kia sales have improved in Europe, with the introduction of high value-added vehicles and SUVs, such as the Opirus and Sorento.

In the first half of 2003, Kia's sales rose 13.6% year-on-year to $5.4 billion and net profit for the same period rose 17.4% to around $280 million.