Political Blackmail? China Forcing Hyundai To Build Additional Assembly Plants On Mainland

The official groundbreaking ceremony for Hyundai’s fourth Chinese assembly plant held April 3 reflected the country’s new hardline stance with foreign automakers.

The troubled history of the $1 billion project in Cangzhou is well known. Hyundai had applied for permission to build its fourth plant in Chongqing in southwest China, a potentially lucrative market with just 54 passenger vehicles per 100,000 residents, compared with 240 per 100,000 in the Beijing region where Cangzhou is located.

Hyundai had hoped to break ground for the Chongqing plant in June 2014. But the Chinese National Government and Reform Commission, which has central authority, insisted Hyundai also invest in Cangzhou in Hebei Province, 135 miles (217 km) south of Hyundai’s three existing plants in Beijing.

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TheSteve - 4/14/2015 10:59:16 AM

+2 Boost

You know the Golden Rule? He who has the gold, makes the rules.

Lexus used to be viewed as the bad guy for dictating to parts manufacturers how and what they'd produce, and how much they'll charge. China is an economic giant, and as long as someone want a piece of that market, the Chinese government has them over barrel.

carsnyc - 4/14/2015 1:04:45 PM

+1 Boost

As long as quality does not deteriorate because of the cheaper labor, then I don't think this is necessarily a bad thing. If Hyundai wants a bigger piece of such huge market then contribute at least a bit in the form of labor and wages.

TheSteve - 4/14/2015 1:41:28 PM

+1 Boost

Just some history:

In the 1960s, the phrase "made in Japan" meant cheap, shoddily made products. They had an industrious workforce with low wages, and that lured wester business to make products there. You can always train people to raise the quality of their goods and services. The lure of low wages was irresistible.

Over time, the quality of Japan's goods increased, and so did their factory wages. Remember when "made in Taiwan" meant inexpensive and low-quality products. Well, the lure of low wages inspired Western businesses to go there and repeat the cycle.

Today, China and Mexico are the bastions of cheap labor, and that lure is irresistible to Western business. European, US, and Canadian companies have built production facilities there. Even noteworthy Japanese companies (e.g., Denon audio products) and other Asia/Pacific enterprises have shifted some of their production there.

The difference now, with China, is that we're dealing with a powerful, centralized, communist-ish government that controls all aspects of dealing with the country, including business. They not only have the cheap labor workforce the West desires, but also a huge, multi-billion strong population of potential consumers, which the West desires (yeah, most of which are too poor *today* to afford Western goods). We've never dealt with this scenario. It'll be different than what we've known in the past, for sure.