Hyundai Ready To Add Capacity After Two-Year Break

After a two-year break in expansion mandated by Hyundai Motor Company Chairman Chung Mong-koo in order to avoid quality issues experienced by Toyota during their aggressive growing spurt in the 2000s, Hyundai and Kia are both looking through feasibilities studies to determine where to invest in expanding their manufacturing footprint.

Though the mandate is still in place, the expansion freeze is putting the pressure on both brands’ existing factories to produce more vehicles as it is. In 2013, Hyundai and Kia utilized 105 percent capacity of their factories around the globe, with those in the Southeastern United States running flat-out between 125 percent and 135 percent on two shifts per day.

Sources closes to the expansion plans noted the current ban, though highly beneficial to the parent automaker’s bottom line, is ultimately unsustainable for future success; Hyundai aims to sell nearly 8 million units globally in 2014, and expansion into Mexico and China — and possibly the U.S., though through a cautious approach due to tougher competition in a tight market — would help move the goal post past 8 million

The renewed interest in expansion comes as costs in labor and languid growth prospects in the automaker’s home market are prompting competitors — such as General Motors — to cut back on manufacturing and export, something Hyundai refuses to contemplate. Thus, the search for “investment opportunities” outside of a local market set to peak at 1.6 million sales annually through 2020 beginning in 2016, including three sites in China, whose local market could see 33 million to 38 million sales annually by 2020.

If approved, the fourth Chinese factory would be Hyundai’s first major manufacturing capacity investment since opening their third plant in 2012 alongside one in Brazil, both announced prior to the expansion ban in 2010 and 2008, respectively.

That said, Chung could veto any new expansion investment should such plans be presented.