Factory utilization rate dropped 10% from 2 years ago due to a sense of crisis at Hyundai Motor Group's production site

*This content was translated by AI.

Last year, the combined plant utilization rate of Hyundai Motor and Kia plunged by about 10 percentage points compared to two years ago, raising a sense of crisis in the global automobile production site. According to the business report of each company on the 30th, Hyundai Motor and Kia recorded 94.1 percent and 91.6 percent last year, respectively, significantly lower than 106.5 percent and 98.5 percent in 2023 when they were in full operation. The combined average utilization rate of the two companies fell from 103% in 2023 to 93% last year, which is attributed to increased production capacity based on standard working hours, while actual sales and production performance did not support this.

Looking at the detailed indicators, Hyundai's annual production capacity increased from 3.75 million units to 4.09 million units, but the actual production performance decreased by about 150,000 units from 3.99 million units to 3.85 million units, leading the decline in utilization rates. Kia also expanded its production capacity to 3.11 million units, but its production performance remained at 2.85 million units, with the overall utilization rate falling from 94% to 91%. In particular, despite the expansion of production facilities in key markets such as the United States, Hyundai Motor's overall sales volume has reversed, and its utilization rate has fallen in most regions except the United States and Brazil.

Strengthening global protectionism and shrinking consumer sentiment are behind this drop in utilization rates. Analysts say that policy changes to encourage domestic production, such as the U.S. Inflation Reduction Act (IRA) and the European Industrial Acceleration Act (IAA), have adversely affected the demand structure of Korean cars, and combined with concerns over U.S. tariffs and high interest rates have caused a slowdown in demand in the global automobile market. In particular, regional performance deviations were evident, with solid production performance in the North American and Indian markets, but sluggish European markets served as painful errors. Production at Hyundai's Czech and Turkiye plants and Kia's Slovak plants plunged by more than 15% to 19%, respectively, reflecting changes in demand in the European market and weakening competitiveness due to the offensive of low-cost Chinese electric vehicles.

Hyundai Motor Group is strengthening its customized strategies for each region to overcome the growing dependence on certain regions and a sharp drop in sales in non-core markets. In a recent shareholder letter, Hyundai Motor President Jose Munoz announced plans to introduce large-scale new cars to major regions such as 20 types in China, 5 types in Europe, and 26 types in India, and plans to rebound sales through products optimized for the needs of customers in each region. A Hyundai official said it plans to reduce dependence on certain regions and promote global diversification through growth in emerging and Chinese markets in Asia, and narrowing the gap between supply expansion and demand contraction is expected to be a key challenge in the recovery of utilization rates in the future.

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*This content was translated by AI.