South Korean Automakers Kia And Hyundai Hold Back On US Manufacturing Investment While Expanding In China

Like its competitors, the Korean duo Hyundai Motor Co. (KRX:005380) and Kia Motors Corp. (KRX:000270) have their sights set on grabbing greater shares of China’s ballooning auto market by expanding local production.

Meanwhile, neither has committed to expanding production in the U.S., and Hyundai has even put on hold its aforementioned plans to open a factory in Alabama or Georgia.

Speaking to reporters in Seoul on Friday, Hsueh Yung-hsing, Hyundai’s vice chairman, said the company is considering its fourth production facility in China after opening its third facility near Beijing last summer.

"We expect our capacity in China to become constrained by 2015 and 2016 ... and are considering a plant with a capacity of 300,000," the executive said, according to Reuters.

If the company moves forward on the plan, it would mark a turnaround from previous comments by Hyundai Chairman Chung Mong-koo, who has said recently his company would not be expanding production globally anytime soon.

Kia, which has a unique symbiotic relationship with Hyundai (they're technically two separate companies, but they work together closely on engineering and product testing), is speeding up construction of its third auto plant in China. Kia now expects the plant in Jiangsu province to be completed by February rather than the second half of next year as previously announced.

The two companies are trying to get 10 percent of the Chinese auto market by 2016, or about 2 million cars per year. Once the Kia plant is completed, the two companies will have a total China production capacity of 1.8 million vehicles.

Meanwhile, despite the need to expand capacity in the United States in order to maintain growth in the world’s second-largest auto market, they are holding back for the time being as they focus on the Chinese market.

Hyundai works with China’s Beijing Automotive Group, while Kia works with Dongfeng Motor Corp.