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Business news, 20.05.2010 17:07

Hyundai Upgrading Production Facility in Russia

Hyundai Upgrading Production Facility in Russia Just the Facts:
  • Hyundai will launch full-fledged stamping equipment in St. Petersburg.
  • The new operation is set to launch in September.
  • The stamping facility is the first to be built by a foreign automaker in Russia.

ST. PETERSBURG, Russia Hyundai Motor has set a September launch date for a full-fledged automotive forge-and-press unit at its assembly plant here, as part of its efforts to strengthen its footprint in the country. The Korean automaker is banking on a continued renewal of consumer confidence in Russia and will start test production by the end of May.

The Hyundai Motor Manufacturing Rus stamping unit, which consists of four consecutive presses with combined punching power of 5,100 tons, is the first to be built by a foreign automaker in Russia. The stamping equipment was produced by Rotem, the South Korean subsidiary of Hyundai, and was delivered in February.

An Chu Su, general director of the plant, said in a statement that the facility now "can be justifiably called innovative" because the new equipment will "enable a high degree of localization, while maintaining quality standards."

Company spokeswoman Yulia Tikhonova said that the company has invested more than $30 million in the forging unit, which is expected to fully meet the plant's production demands. The entire production facility is expected to cost the Korean automaker more than $626 million.

Hyundai is hoping to reach the initial production capacity of 100,000 cars per year within a few months. Production on the plant started in June 2008, and its eventual capacity is targeted at 150,000 vehicles.

In January last year, Hyundai Chief Financial Officer Chung Tae-hwan announced that the company would slow down construction of the Russian factory, after the credit crisis slammed sales and roiled already strained automaker budgets worldwide.

Foreign automakers have so far steered clear of building a full-fledged stamping plant in Russia because of the huge expense involved and the fact that their investment can only be recouped through mass production, the local Vedomosti business daily reported last Friday.

Earlier this year, French automaker Renault started using partial stamping of body parts for Renault Logan and Renault Sandero models at the Avtoframos plant, which it jointly owns with the Moscow city government, Vedomosti reported. The Spanish company Gestamp and Severstal, its Russian partner, are also expected to begin partial forge-and-press production in July at the Volkswagen production plant in Kaluga.

Analysts say the stamping unit could help Hyundai and its affiliate Kia Motors to position itself as market leader and pace-setter in production areas where other foreign automakers have been cautious to invest.

As car sales slumped in 2009, Hyundai pursued aggressive incentive campaigns in Russia, including opening the Hyundai Finance company to offer low-rate auto loans to consumers as well as a 15 percent rebate for car parts and servicing of Hyundai vehicles that are more than three years old.

In another effort to boost flagging sales, the Korean automaker recently offered up to $3,300 in discounts to Russian consumers on the Hyundai NF Sonata.

Hyundai sold a total of 74,607 vehicles in Russia in 2009, becoming the number-three foreign brand after Ford and General Motors. In the first two months of this year, Hyundai sold 11,821 units in Russia, accounting for 10.4 percent of the imported car market.

News source: EDMUNDS insideline

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