Hyundai lowers target for mainland car sales

PUBLISHED : Tuesday, 04 September, 2007, 12:00am
UPDATED : Tuesday, 04 September, 2007, 12:00am


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Korean firm bows out of mounting price war

Hyundai Motor, South Korea's largest carmaker, is the first among foreign ones to cut its sales target for the mainland as it struggles with price cutting among competitors.

The company yesterday lowered its sales target to 260,000 units for this year from a previous goal of 310,000. Hyundai sold 290,000 cars in the mainland last year.

Spokesman Jang Jake said Hyundai reduced prices by 6 per cent to 13 per cent in the first half and will keep them there but has no plans to cut prices further this year.

'We had to go ahead to join the price reduction parade,' he said.

Hyundai China, whose 50-50 joint venture with Beijing Automobile Group, is due to start production at its second plant by May next year, projects total capacity to double to 600,000 units annually.

The company plans to redesign its Elantra and manufacture the car in the new plant. With the new plant, it aims to boost sales growth by next year.

Hyundai, which makes taxis for the streets of Beijing, sold 112,140 units in the first half, down 16 per cent year on year. Sales in the month of July were especially bad, down 31.9 per cent to 16,477 units from a year earlier.

On the other hand, total new car sales in the mainland reached five million in the first seven months, up 25 per cent year on year.

The strong growth was in line with analysts' estimates.

In an effort to grab market share, General Motors Corp launched a price war in January, slashing prices as much as 10 per cent for its Chevrolet models in the mainland.

Volkswagen China also announced two price reductions in the first half.

Honda Motor recently joined the fray, lowering the price of its Accord by 7.5 per cent to 14.8 per cent.

Only Toyota did not cut prices as sales were bolstered by its best-seller, the Camry sedan. Hyundai raised its sales base two years ago when it won the contract to supply the capital with taxis, replacing the old fleet mainly made up of the First Automobile Work's Xiali with the Hyundai's Elantra.

'Indeed, Hyundai set a relatively higher price for its models compared with other global players. Moreover, Japanese cars have higher brand awareness,' an industry source said.

Vehicle analyst Matthew Kong of Fitch Ratings in Beijing said Hyundai also faced pressure from mainland carmakers such as Geely Holding Group and Chery Automobile which are producing their own brands.

'Pricing is always a problem because local carmakers can sell their low-end cars cheaply,' he said.

'Hyundai's current priority should be cutting costs because in the early days when the South Korean carmaker entered China, it signed fixed contracts with certain [parts] suppliers which made the company's costs higher.'

Calling a truce

Hyundai will keep prices firm, having cut as much as 13 per cent earlier

General Motors launched a price war in January with a reduction of 10%

Honda Motor, the latest to join the fray, has cut Accord prices by up to 14.8%