Hyundai Motor Co. is weighing options to make its new luxury Genesis vehicles in China as a way of overcoming import tariffs that add 25 percent to the price tag. The tariffs perceivably inhibit the company's ability to compete with locally build BMWs and Audis.
Hyundai's chief marketing officer, Cho Won-Hong, said that the biggest South Korean automaker should still reach an agreement with local partners. According to China Daily, BAIC Group currently builds the Sonata and Elantra in collaboration with Hyundai, although Cho would not specify whether the two companies were in discussions for the Genesis production.
Cho said, "China has a high tariff and that makes our vehicles more expensive than competitors, which makes it difficult to be profitable. There are a lot of issues that need to be solved before we could go in. But we will definitely go in."
Hyundai is looking for ways to change its China business after sales of its reputable mid-market lineup fell last year for the first time since 2007 due to economic decline. One way is to tap into the luxury sector as cuts in sales taxes and imminent restrictions on vehicle registration trigger buyers to splurge on the most expensive car they can afford.
A report from Bloomberg quoted the chief executive officer of Midas International Asset Management in Seoul, Heo Pil-seok: "Hyundai has no choice. It's difficult to expect quantitative growth in the auto market, so companies have to promote luxury models and brands to bring up the profits."
China is the biggest Hyundai market, accounting for 21 percent of sales in 2015. The United States accounted for 15 percent only out of the company's 4.96 million cars sold in 2015.
The company's deliveries in China dropped 5.1 percent for 2015 to 1.06 million units due to an economy likely growing at its slowest pace since 1990.
Global luxury brands like BMW AG and Volkswagen AG manufacture in China to cut down on the import tariffs.