Hyundai Motor Co. share price rallies, considers building a fourth car plant in China

The largest auto manufacturer in South Korea – Hyundai Motor Co. revealed in an e-mailed statement that it is considering building a fourth vehicle plant in China. The move of increasing the capacity expansion is provoked by the companys attempt to become more competitive on the Chinese auto market, which is known as the worlds biggest one.

This is going to be the first expansion of Hyundai outside its home market in two years time.

The company wrote in its statement, which was cited by the Wall Street Journal: “The construction of another new plant in China is essential given the explosive growth in this auto market.”

The decision to build a new plant in China comes at a moment when the company is trying to increase its capacity globally by joining forces with its affiliate Kia Motors Corp. In its statement the company also explained that its Chairman will sign a preliminary contract to build the new plant, but the plan still needs to be approved by the Chinese government. If authorized by Beijing, the deal will be operated by the joint venture of Hyundai and Beijing Automotive Industry Holding Co.

One of the analysts working for NH Investment & Securities Co. – Lee Sang Hyun commented for Bloomberg: “To increase or at least keep its market share, the decision to build a new plant would have been inevitable for the company. Although the China auto market’s growth has slowed compared with a few years ago, it is still a rapidly growing market.”

Hyundais three factories that already exist in China have recorded a total annual capacity estimated to 1.05 million vehicles. The new factory that is to be built will provide the company with the opportunity to target the western region of the country at a moment when the government has set the urbanisation and development in the region as a top priority.

Hyundai Motor Co. rose by 4.52% in Seoul today to close the trading session at 243 000 won, marking a one-year change of +10.20%. The auto maker is valued at 53.53 trillion won. According to the Financial Times, the 30 analysts offering 12 month price targets for Hyundai Motor Co have a median target of 300 000 won, with a high estimate of 330 000 won and a low estimate of 224 000 won. The median estimate represents a 29.03% increase from the last price of 232 500 won.