April 20, 2024

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[THE INVESTOR] Beijing Hyundai Motor, a 50-50 joint venture between Hyundai Motor and Chinese state-owned BAIC Motor, resumed production at Changzhou plant in eastern China on Sept. 8, after a three-day long suspension due to delayed payments to an auto parts supplier.

Operations there halted earlier this week when a German-based air filter supplier refused to deliver air intake systems due to unpaid bills.

“We are currently in talks with the supplier to resolve the payment issue. As for now, we have persuaded the company,” said a spokesperson of Hyundai Motor.

Suffering from halving sales in China in the recent months, payments to most of Beijing Hyundai’s suppliers have been delayed by about three to four months.

Hyundai has not yet paid the outstanding bill to the German supplier, the company said.

According to industry insiders, Beijing Hyundai is expected to encounter similar happenings until sales rebound.

“The state-run BAIC Motor will also continue to pressure Hyundai to change auto parts suppliers to local ones to cut down on production cost,” said Lee Ho-geun, professor of automotive engineering at Daeduk University.

Hyundai’s Chinese partner has been pushing Korean suppliers for a price reduction by some 20 percent, similar to the price level of Chinese suppliers.

Lee said, rising sales posted by Beijing Benz Automotive will drive the state-run Chinese company to pressure Hyundai to switch to local suppliers if suppliers refuse to cut down on price.

Beijing Benz Automotive is a joint venture between Mercedes-Benz and BAIC Motor that uses auto parts made by Chinese suppliers.

China’s retaliation against Korea for deployment of a US anti-missile system has taken a toll on sales of Beijing Hyundai.

Between January and July this year, Beijing Hyundai‘s sales showed a steep 40.7 percent on-year drop to 351,292 units, the company said.

Following the halt of Hyundai’s Changzou plant, Chinese state-run English newspaper Global Times published “Officials at BAIC are very determined to solve the issue (surrounding suppliers) once and for all, even if that might risk losing the JV.“

Prior to the latest factory suspension, Hyundai had stopped operations at four of the automaker’s factories -- three in Beijing and one in Changzhou -- last week when a French-Chinese joint venture stopped deliveries of plastic fuel tanks for a week due to payment issues.

Hyundai’s four plants in Beijing and Changzhou can produce a combined 1.35 million vehicles a year.

The construction of its fifth factory in Chongqing, capable of producing 300,000 units a year, has recently been completed. But it has not begun operation yet.

In efforts to support its suppliers, financial support worth a total 250 billion won ($221 million) will be offered to Korean auto parts companies in China by Hyundai Motor, the company said. 

By Kim Bo-gyung (lisakim425@heraldcorp.com)