Hyundai Motors is planning to build a €1 billion plant in the Czech Republic to accelerate the Korean car-maker's push into Europe.
The move underscores Hyundai's ambitions to join the top ranks of global car-makers by 2010 by diversifying its production bases to overseas markets.
It also demonstrates the attractiveness of central and eastern Europe - dubbed "Detroitski" by some industry executives - as a production location, with Kia, Hyundai's low-price affiliate, already building a factory in Slovakia.
"Hyundai Motors, which has local production bases in most major regions in the world except Europe, has been mulling over the need of advancing into the European market," said Chung Mong-koo, Hyundai's chairman.
Hyundai, which will finalise the investment in the next few days, plans to start building in Ostrava, 230km east of Prague, next year to begin production in the second half of 2008, if final approval is given. The plant will have an annual production capacity of 300,000 units.
The South Korean maker expects the new plant to help reduce production costs and foreign exchange risks and avoid trade disputes with Europe. Kim Hak-ju, analyst at Samsung Securities, estimated that Czech labour costs were just one-tenth of those in South Korea. Hyundai is suffering from a rapid increase in wages as a result of frequent industrial action.
Hyundai, with a 2.1 per cent share of the European market, aims to raise its sales by 23 per cent this year to 462,000 units. Hyundai will become the third car-maker in the Czech Republic, following Skoda and a joint venture between Japan's Toyota and France's PSA Peugeot Citroën. Kia is also building a €1.1 billion plant in Slovakia, which will come on stream early next year. The new plant will produce 200,000 vehicles a year, starting in late 2006.
Central Europe has emerged as a key driving force in the world's automotive sector. By the time all three of Slovakia's car plants come on line in 2007, the country will produce the most cars per inhabitant of any country. - (Financial Times Service)