Hyundai announced last week that it will increase its investment in its Alabama and Georgia plants by 50 percent over the next five years and will consider building a new US plant while Donald Trump is president.
The planned $3.1-billion investment will come mainly in the form of research, development and plant maintenance, Hyundai Motor Group President Chung Jin Haeng told the Associated Press. The company doesn’t usually reveal those kinds of country-specific spending numbers.
There were fewer specifics about plans for a potential new plant. Chung told reporters that the company will “review” that situation if demand for cars rises under Trump.
Alabama Commerce Secretary Greg Canfield said the state stays in regular contact with Hyundai leaders, and based on those conversations he doesn’t think a new plant will be built soon.
“From what we hear, US demand is not to the level where we believe it’s perfect timing for a second plant,” Canfield said. “That’s a huge investment for a company to make, so it’s going to be market-driven.”
Talk of another plant is nothing new. Korea’s Yonhap News Agency reported in March 2015 that Hyundai Motor was “considering” building a second factory near its current one in Montgomery, at roughly the same size. Company leaders at the time denied any such plans were in the works but acknowledged that they were considering all options.
“That’s been on the table for some period of time,” Montgomery Mayor Todd Strange said in 2015. “I know there have been some conversations about that. What we’ve said this whole time is that we’re ready, willing and able whenever they decide to do that.”
Dependent on sedan sales
The sedan-heavy company has continued to set internal sales records but has struggled to hang on to market share as truck and SUV sales take off. Much of the expansion talk over the past few years has centered on adding SUV production capacity.
The Montgomery plant added the Santa Fe Sport to its production line last year, part of a series of changes and upgrades. In all, Hyundai Motor invested $2.1 billion into its US facilities from 2012 to 2016.
“Hyundai Motor Group is always investing and re-investing in the Alabama plant,” Canfield said.
Automotive manufacturers set a new Alabama record by rolling out more than a million vehicles last year, according to figures from the state. And Hyundai produced the most of any in-state plant, building 379,021 vehicles in 2016.
In fact, the Alabama plant produces more cars per hour than the company’s plants in Korea, according to figures from the plant and a report by the Korea Herald. Hyundai Motor Manufacturing Alabama spokesman Robert Burns said there are many reasons for that, including the age of the plants in Korea and efforts to continuously upgrade and streamline the Alabama facility.
“Automation is the biggest contributing factor,” he said.
The company’s unusual announcement comes just days before Trump’s inauguration.
Since Trump won the election, he has badgered auto companies about building their cars in the United States rather than Mexico.
The South Korean automotive conglomerate has not yet drawn public attention from the President-elect, who threatened to impose a border tax on vehicles made in Mexico by Ford Motor Co., General Motors Co. and Toyota.
Automakers have responded to Trump’s threat by affirming their commitment to the US market. Earlier this month, Ford announced it had scrapped plans to build a new $1.6-billion small-car factory in Mexico, while Fiat Chrysler announced a $1-billion investment plan in its two US factories.
Nearly all automakers build small cars in Mexico to take advantage of its lower wages.
Hyundai is not an exception. When Kia’s first Mexico plant launched operations just two months before the November 8 election, the group said about 80 percent of the vehicles assembled there will be exported mainly to the US and other countries. The plant has a capacity to turn out 400,000 cars per year.
That Mexico plant is now “a source of worry” for the carmaker, Chung said, without elaborating why. He said Hyundai does not plan additional investments in Mexico.
He denied that political pressure was behind the company’s announcement of its US investment plan.
“The US market is strategically important for us,” he said. “Success or the failure in the US market is a measure of global success.”
Trump launched a series of tweets around the time of the announcement, first blasting approval rating polls as “rigged,” and then boasting about his work to add jobs and cut spending. A CNN/ORC poll released last week found that Trump had an approval rating of 40 percent, the lowest of any recent president.