April 20, 2024

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[THE INVESTOR] Hyundai Motor said on June 17 it will invest over 50 billion won (US$45 million) in a local car-manufacturing joint venture proposed by a municipal government.

On June 19, Hyundai Motor plans to sign an agreement with the Gwangju city government to become the second-biggest shareholder in the JV, which will produce vehicles under an original equipment manufacturing contract for carmakers, a company spokesman said. The Gwangju government plans to build a 700 billion-won car-manufacturing JV with capital of 280 billion won and a loan of 420 billion won and aims to complete the plant by 2020, he said. 

Of the 280 billion won capital, Hyundai reportedly will foot 53 billion won and the remaining 227 billion won will be provided by the Gwangju government, making it the biggest shareholder.

Hyundai said it plans to have the plant produce mini cars with 1-liter engines in OEM contracts. The maker of the Sonata sedan and the Santa Fe SUV does not produce mini cars domestically, though it makes similarly sized models such as the i10 in its overseas plants.

The vehicle production JV is aimed at generating jobs in Gwangju, 330 kilometers southwest of Seoul, and helping support the local economy. The Gwangju government proposed tax benefits to investors such as a 75 percent reduction in acquisition taxes and another 75 percent cut in income taxes for the first five years, Hyundai said.

The Gwangju government said it plans to pay employees at the plant an annual salary in the mid-30 million-won range, far lower than the average of 90 million won for workers at Hyundai plants.

Hyundai expects to produce vehicles at low cost in the OEM plant.

By Park Han-na and news wires (hnpark@heraldcorp.com)