Hyundai considers contract manufacturing to cut costs

SEOUL — Hyundai Motor on Monday conducted due diligence on a contract car manufacturing plant site for possible investment, as the South Korean firm seeks ways to cut costs and conserve capital to develop new technologies such as electric vehicles.

The move follows Hyundai’s announcement on Friday that it had submitted a letter of intent to consider investing in the plant proposed by the city of Gwangju in the southwest of the country.

Contract manufacturing has been largely used by electronics industry — Apple Inc. outsources production of the bulk of iPhones and other devices to Taiwan’s Foxconn — and established automakers are gradually embracing contractors too in a bid to save costs.

Canadian auto parts supplier Magna International Inc. produces BMW and other cars, and Hyundai’s affiliate Kia Motors outsources the production of its Picanto mini car.

But Hyundai’s investment, if finalized, would mark a rare expansion by major automakers into contract manufacturing.

“Even though the investment is confirmed, we are considering outsourcing and securing supplies of an economical new car by investing in a non-controlling stake without participating in the management of the new corporation,” Hyundai said in a statement.

The Joonang Ilbo daily reported last week that the city of Gwangju government is looking to build the plant by 2020 at the earliest and keep annual wages at 40 million won ($37,380), or roughly half that of Hyundai Motor.



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