Chongqing - Beijing Hyundai Auto, a significant participant in the Chinese joint-venture automotive market, has recently initiated the second listing for the transfer of its Chongqing factory recently. The transfer price has been reduced by over 1.1 billion yuan (about USD 150.734 million), equivalent to one-third of its construction cost when it was initially established in 2015.

The official announcement has provided a detailed breakdown of the assets being transferred, including a vast land area of 1.872 million square meters, as well as five major production facilities encompassing stamping, body assembly, painting, final assembly, and engine production, along with various immovable properties and complete vehicle equipment.

Beijing Hyundai Auto Chongqing Factory. (Photo/Sun Yilei)

"Only by launching vehicle models that align with Chinese market demands, reinforcing electrification, and enhancing intelligent features can Beijing Hyundai Auto carve out a solid niche in the fiercely competitive new energy vehicle sector," said Pu Yongjian, Professor of the Department of Finance at School of Economics and Business Administration in Chongqing University in an exclusive interview with Bridging News on October 10.

This transfer initiative has garnered extensive attention as it reflects the efforts of traditional internal combustion engine vehicle manufacturers in adapting to the evolving landscape of China's new energy vehicle market. The ascendancy of China's new energy vehicle market has undeniably altered market dynamics.

Beijing Hyundai Auto aims to achieve comprehensive hybridization of its internal combustion engine vehicles by 2025, with an annual production and sales target of 300,000 hybrid vehicles. They intend to introduce the all-electric brand IONIQ, with plans to unveil an exclusive EV model in 2023, followed by introducing four to five additional pure electric models over the next three years.

While Beijing Hyundai's electrification strategy and the introduction of the new energy vehicle brand IONIQ are commendable initiatives, succeeding in the competitive Chinese market will be pivotal.

A preparatory step for electrification transformation

Professor Pu believes that Beijing Hyundai has faced market positioning issues in the Chinese market, primarily due to a lack of product innovation. He thinks that over the years, their product line has lagged behind and failed to deliver the desired freshness.

Pu Yongjian, Professor of the Department of Finance at the School of Economics and Business Administration at Chongqing University. (Photo/Pu Yongjian)

Chinese consumers increasingly seek larger vehicles with enhanced comfort, luxury, and intelligence. Beijing Hyundai appears to have fallen short of fully satisfying these requirements.

Professor Pu highlights the pivotal role of intelligent features, emphasizing the need for modern vehicles to keep pace with the industry's trend toward greater intelligence, encompassing voice controls, autonomous driving, and advanced audio-visual entertainment systems.

Additionally, the Chinese new energy vehicle market is characterized by rapid development. Domestic new energy vehicle companies are engaged in intense price competition, while the foreign electric vehicle supply chain remains incomplete.

Hence, Beijing Hyundai must find a delicate balance in terms of pricing, quality, and brand development. Professor Pu emphasizes that ultimate success hinges on product pricing and the company's operational strategies.

Professor Pu added that, in reality, the sale of the Chongqing factory may also prove advantageous for Beijing Hyundai in preparing the necessary funds for the forthcoming electrification transformation.

Typically, older idle factories, often situated in prime geographic locations, can provide a financial boost by selling land use rights. This not only aids in financing the electrification shift but also offers a cash flow boost for launching new vehicles. 

Beijing Hyundai is proactively adjusting its strategy to embrace new challenges amid the transformation of the Chinese automotive market. This initiative will determine its future position in the Chinese market and serve as a benchmark for other traditional internal combustion engine vehicle manufacturers. 

With the rise of new energy vehicles, the Chinese automotive market will continue to evolve, demanding constant innovation and adaptability from companies as they gear up to embrace future opportunities.