Hyundai Motor agrees to invest in mini SUV joint venture at home

Lim Chang-won Reporter Posted : 2019-01-31 19:16 Updated : 2019-01-31 19:16
글씨작게 글씨크게

Hyundai Motor workers shout slogans in a rally to oppose a new car plant in the southern city of Gwangju.[Yonhap News Photo]

SEOUL -- In a deal hailed by South Korean President Moon Jae-in as a win-win, Hyundai Motor agreed to invest in the construction of a new plant in cooperation with a municipal government to produce compact SUVs in the southern city of Gwangju.

As a non-management investor, Hyundai will invest 53 billion won ($47 million) to acquire a 19 percent stake in the joint company, with the Gwangju city government owning 21 percent. The plant will assemble compact SUVs with one-liter engines under an original equipment manufacturing (OEM) contract.

In a signing ceremony in Gwangju, Moon said that the joint venture would be an opportunity for innovation in the auto industry as it will be a new car factory to be built at home for the first time in 23 years. "It might be a chance for other manufacturing factories, which went overseas to save money, to come back."

Moon has supported the car factory in Gwangju as essential for a regional economic recovery and balanced national development. For the 700 billion-won joint venture plant, Gwangju has promised to provide tax and other benefits, with workers receiving an annual salary of less than 40 million won, far lower than that of regular Hyundai workers.

Hyundai's labor union has opposed the Gwangju factory, insisting the company does not need extra production facilities. Hyundai and its affiliate Kia Motors together are capable of producing 9.68 million vehicles per year.

For Hyundai, it will re-enter the mini car market suspended two decades ago. The domestic mini car market decreased to 127,429 units in 2018 from 202,844 in 2012. Currently, mini cars are being produced by Kia, GM Korea and Renault Samsung Motors.