After several years of adhering to a “quality before quantity” approach, Hyundai may be ready to resume building new plants and expanding production capacity.
Worried about maintaining quality after a period of rapid growth, Hyundai chairman Chung Mong-koo halted output expansion back in 2012. Since then, Hyundai’s bottom line has benefited from squeezing more out of existing plants – its 9.5 percent operating margin is among the best in the industry – though quality has been a mixed bag, with the automaker ranking third last year in number of recalls issued.
But now, with its factories straining to run at a collective 105 percent of capacity, Hyundai is seriously considering new factories in strategic locations such as Mexico and China, sources close to the situation have revealed to Bloomberg.
A new plant in the United States, where Hyundai and its affiliate Kia currently operate two facilities, is also a possibility, though the country’s crowded marketplace may spur investment elsewhere instead.
Along with allowing Hyundai to chase further growth, the new factories would allow the automaker to reduce dependence on its home market of South Korea, where two-thirds of its global volume is assembled. A strengthening currency and rising labor costs have significantly reduced South Korea’s appeal as a manufacturing base.
Looking to the future, Hyundai and Kia hope to increase global sales from 7.56 million in 2013 7.86 million this year. New production facilities could let the automakers target 8 million annual sales and beyond.
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