Hyundai Motor Co. (NASDAQ:$HYMTF) is clashing with its Chinese partner over an effort to cut supplier costs, simultaneously grappling with the impact of a stand-off between Beijing and Seoul.
Hyundai and its affiliate Kia Motors (NASDAQ:$KIMTF) has been in the middle of the political row over a missile defense system deployed in South Korea, and China.
Until last year, the two companies combined to rank third in sales in China. From January to July, Hyundai’s sales have dropped by a gloomy 41%. This has strained relations with local partner BAIC Motor Corp Ltd (NASDAQ:$BCCMY).
Timeline
- Last month, Hyundai suspended production at its four China plants for a week when a French supplier refused to provide fuel tanks when its bills were unpaid
- Tuesday, Hyundai suspended production at one of its plants in China after a German firm went unpaid
- Hyundai and BAIC are in a joint venture of 50:50 partnership, and are divided over how to solve the issue of suppliers and tougher competition
- Hyundai wants to protect its South Korean supply chain, while BAIC favors shifting to cheaper Chinese suppliers to cut costs
What does this mean?
The standoff underscores the depth of crisis facing Hyundai and its suppliers in China, who are heavily reliant on sales to Hyundai Motor and Kia Motors. For the time being, Hyundai responded by replacing its head of operations in China, and plans for a local “brand” store to accelerate the launch of a sport-utility vehicle. Hopefully, Hyundai will see an alleviation in its recent abysmal sales decline before having to accept the last resort of BAIC’s solution.
Featured Image: twitter
