Hyundai Motor to manufacture BAIC’s Arcfox EVs in China

BEIJING -- Hyundai Motor Co. is set to manufacture electric vehicles of Arcfox, a Chinese EV brand owned by BAIC Motor Corp., as the leading South Korean carmaker works to revive its ailing business in the world’s largest automobile market.

Hyundai and BAIC have agreed to produce Arcfox EVs at a plant of Beijing Hyundai Motor Co., the 50-50 joint venture between the two companies, while discussing details, according to industry sources in Seoul and Beijing on Wednesday. Arcfox will mark the first foreign brand manufactured by Hyundai.

“The cooperation suggests Hyundai has yet to give up the Chinese market,” said one of the sources. “Hyundai is trying to rebuild a bridgehead for expansion in the country by establishing an EV production line.”

Hyundai’s market share in China dropped to less than 1% last year, falling from a peak of some 7% in its heyday there, as the company sold only 254,000 units compared to total automakers’ sales of 26.9 million vehicles on the mainland. Beijing Hyundai suffered an operating loss of 800 billion won ($597.7 million) in 2022.

The maker of the Santa Fe sport utility vehicle has been struggling there since 2017 as customers on the mainland avoided the company’s cars amid a diplomatic row between Beijing and Seoul over South Korea’s deployment of a US-led Terminal High Altitude Area Defense (THAAD) anti-missile system.

Local drivers also shunned Hyundai as it sold only electrified versions of existing internal combustion engine cars, not models based on dedicated EV platforms.

RECKLESS TO COMPETE AGAINST LOCAL EV MAKERS WITH OWN BRAND

The South Korean carmaker had planned to introduce its IONIQ models, dedicated EVs built on Hyundai Motor Group’s platforms for the clean vehicles, to China to regain strength in the world’s largest market for the eco-friendly automobiles.

The company reportedly scrapped the plan based on a judgment that it is reckless to compete against dominant Chinese EV manufacturers such as BYD Co. with its own brand.

So, Hyundai turned to JV partner BAIC to discuss manufacturing Arcfox EVs.

“The production is a step to ease the financial difficulties,” said another source in Beijing, adding the company plans to build its first EV production line there.

Arcfox was established in 2017 by the Chinese automotive giant BAIC as a premium EV brand. The Arcfox Alpha S·HI is equipped with Huawei’s self-driving system. BAIC is aggressively pushing to expand its share in the Chinese EV market by slashing the prices of Arcfox’s models by 13.8% this year.

TO IMPROVE RUNS AT CHINESE PLANTS

Hyundai is likely to handle model design, production and quality control for Arcfox’s EVs at its No. 3 plant in Beijing.

The production is expected to help the company raise runs at its plants in China, which are currently operating at less than 50%.

Hyundai, which had operated five factories on the mainland to manufacture up to 1.6 million cars a year, put its plant in Chongqing plant up for sale. It already sold one of the factories in Beijing to Li Auto, a Chinese EV maker, formerly known as Lixiang Automotive, in 2021.

“We will improve production efficiency of the remaining plants and increase exports to emerging markets through global model production,” said Hyundai CEO Chang Jae-hoon at the company’s 2023 CEO Investor Day forum in June.

Hyundai has started showing recovery signs in China. It produced and sold 157,000 units in the first eight months, up 9% from a year earlier, as it focused on sales of higher profitability SUVs.

Write to Ji-Hoon Lee and Sungsu Bae at lizi@hankyung.com
 

Jongwoo Cheon edited this article.