Hyundai and Kia cut production

Hyundai Motor and sister company Kia Motors are cutting production as a weakening yen and a heavy reliance on saloons weigh on the South Korean carmakers' global sales.

Hyundai reduced output at its plant in Asan, 100km south of Seoul, by 25 per cent for two days in late May while Kia cut working hours at its Chinese factories this month, the companies said.

Domestic plants comprise nearly 40 per cent of Hyundai’s annual output. Together, Hyundai and Kia rank as the world’s fifth-largest carmaker by sales.

The reduction in output is Hyundai’s first since the 2008 global financial crisis, according to analysts.

The plant in Asan produces saloons such as the Sonata and Grandeur but global demand has shifted from saloons to sport utility vehicles, given lower fuel prices. Hyundai has suffered more than has Kia, which has a better SUV line-up.

The steps were taken to “adjust the plants’ output in accordance with market demand”, the companies said on yesterday.

Hyundai’s plants operated beyond full production capacity for the past several years but the carmaker has lagged behind this year as a sliding yen buoys Japanese rivals and as it struggles to meet demand for SUVs. In May, sales fell 6.4 per cent from a year earlier.

“This is not a good sign,” said Chung Sung-yop, analyst at Daiwa Securities, referring to the reduced production. “In particular, sales in China seem to be weaker than expected because of its poor SUV line-up.”

Mr Chung predicted that Hyundai and Kia’s combined sales in China, their biggest market, would fall more than 10 per cent in the current quarter.

Hyundai, which offers 10 saloons and four SUV models in South Korea, has missed out on a global SUV boom, with none of its vehicles ranked among the 10 best-selling SUVs in China in the first quarter. Copyright The Financial Times Limited 2015