SEOUL: Hyundai Motor Co agreed yesterday to set up a US$1.24bil commercial vehicle joint venture with China's Guangzhou Auto Group, joining global rivals to target the world's third biggest vehicle market.
Hyundai's expansionary drive is aimed at helping the country's top carmaker achieve its ambition of becoming the number six global auto giant by 2010.
But some analysts raised eyebrows, saying Hyundai's move came as Chinese consumer demand was wilting. They questioned Hyundai's ability to build engines for commercial vehicles, its weakest spot in their view.
“Hyundai's move appears to be to try to take early control over the relatively untapped market in China,” said Kim Hakjoo, a Samsung Securities analyst.
“It has had remarkable success in the passenger car segment where its models are hugely price competitive. But in the commercial vehicle segment, it lacks engine technology and, without quality, it will be very hard to compete.”
Hyundai said in a statement the 50-50 joint venture with Guangzhou Auto, which is also the Chinese partner of Toyota Motor Corp and Honda Motor Co, was intended to meet explosive demand for commercial vehicles.
The venture in south China will receive an initial investment of US$430mil, with plans to boost output to 200,000 units in 2011 after mass production begins in 2007, Hyundai said.
China's car market has taken a downturn in recent months, squeezing foreign players that also include General Motors, Toyota and Volkswagen.
After nearly doubling in 2003, growth in China's car sales slowed to 15% in 2004 and analysts expect growth will ease further this year. – Reuters