The Hyundai Motor Group announced its plan to make huge investments to the tune of KRW81 trillion over a 4-year period from 2015 till 2018. It will invest 85% of this amount (KRW68,900 billion) in the automotive segment, its main business, equivalent to an annual average investment of KRW17,200 billion. It is 74% of the annual average investment of the Volkswagen Group over the next 5 years, i.e. KRW23,300 billion. Considering that the Volkswagen Group’s sales were 1.3 times those of the Hyundai Motor Group last year and it is highly likely to be the No. 1 seller in the world this year, it is a huge amount.
Out of KRW38 trillion earmarked for the automotive segment, overseas investments are estimated to be more than KRW11 trillion, and it seems that this money will be invested in Plants No. 4 and 5 of Hyundai Motor Company China, expansion of Plant No. 3 of Kia Motors China, and a new plant in Mexico plant. The amount to be invested locally is estimated to be KRW27 trillion, amd out of this amount, most of KRW16 trillion, except for the investment for establishment of the global business center, is scheduled to be injected into the construction of the engine and transmission plant.
Out of KRW31 trillion to be invested in the automotive R&D, more than KRW26 trillion will be invested in Korea, and most of it will be invested in the next-generation powertrain, electrically powered vehicles and their core parts, autonomous driving technology and their core parts, automotive IT, and development of automotive semiconductors. More than KRW4 trillion will be invested overseas, and injected into development of strategic cars for key overseas markets.
This investment will increase the overseas production capacity of the Hyundai Motor Group by more than 1.05 million from 4.45 million cars to more than 5.5 million cars in 2017. As a result, its domestic and overseas production capacity will increase from 7.8 million cars to more than 8.85 million in 2017, and the proportion of overseas production will increase from 57% to more than 61%.
In Korea, the engine and transmission production capacity will increase by more than 1.05 million units. In addition, the Hyundai Motor Group’s environment-friendly car lineup, including electric vehicles, hybrid cars and fuel cell vehicles, will be greatly expanded, and the release of smart cars and autonomous vehicles with various state-of-the-art safety and convenience devices will be further accelerated.
The Hyundai Motor Group’s investments are expected to complete the advance industrial structure ahead of schedule. They will increase the production of futuristic cars like electrically powered vehicles and autonomous vehicles and their core parts in Korea, and the proportion of high-value-added products will increase, and the demands for high-caliber manpower will increase. In this case, parts makers may become global parts manufacturers based on high-value-added products. The low productivity and high wages of domestic plants will become less likely to weaken its export competitiveness. However, the demands for low-level manpower may stagnate or decrease. Accordingly, it is high time for the industrial policy to be quickly changed so that the expected benefits of the advanced industrial structure will be maximized and the side effects will be minimized.
Lee Seong-shin, CEO of BMR Consulting samleesr@gobmr.com