March 6, 2019 / 12:24 PM / 3 months ago

UPDATE 2-Hyundai may suspend production at one of its Chinese plants as slowdown bites

* Hyundai conducting production review

* Joint venture operates five plants in China

* China car sales contracted for first time since 1990s last year (Adds detail, background, Hyundai statement)

By Hyunjoo Jin

SEOUL, March 6 (Reuters) - Hyundai Motor Co is considering plans to suspend production at its oldest plant in China, the South Korean carmaker said on Wednesday, as it reels from tumbling sales and massive overcapacity in its biggest market.

The move by Hyundai, which together with affiliate Kia Motors was the No.3 automaker in China until 2016, highlights the reversal of fortunes of China's auto industry.

"Hyundai Motor is reviewing production to enhance competitiveness and profitability," it said in a statement, adding that the plan includes "suspension, not closure of Plant 1 in Beijing".

The company, which has three manufacturing plants in the city, said that it has yet to decide when a suspension would start. However, the Korea Economic Daily newspaper reported that suspension could start as early as next month.

All of Hyundai's five factories in China are operated by its Chinese joint venture with BAIC Motor Corp, at which about 2,000 employees have taken voluntary retirement or transferred to other factories, the statement said.

A BAIC spokesperson was not immediately available to comment.

OVERCAPACITY

China's auto industry has been slowing after a period of strong growth, hit by a weakening economy and the fallout of trade frictions with the United States. China's car sales contracted for the first time since the 1990s last year and Hyundai's sales in China amounted to only half its total production capacity in the country.

For Hyundai, troubles have been exacerbated by a diplomatic row between Seoul and Beijing that hit demand for South Korean products in China.

A lack of attractive models and strong branding also makes Hyundai vulnerable to competition from both Chinese and global carmakers, analysts and dealers have said.

Hyundai will start to produce its new ix25 SUV at its latest plant in Chongqing from September, according to an internal document seen by Reuters.

The current ix25 is made at the Plant 1 factory built in 2002. The model is Hyundai's second-biggest selling SUV, with sales reaching more than 75,000 last year, company data showed.

Hyundai Motor CEO Lee Won-hee last week said the company was considering cutting capacity in China, sources said.

Reporting by Hyunjoo Jin Additional reporting by Norihiko Shirouzu and Yilei Sun in BEIJNIG and Hayoung Choi in Seoul Editing by Louise Heavens and David Goodman

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