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Hyundai Faces Supply Disruption in China Again | ASHARQ AL-AWSAT English Archive 2005 -2017
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The South Korean and Chinese national flags fly alongside the company flag of Hyundai Motor Co at its plant in Beijing, China, August 30, 2017. Picture taken August 30, 2017. REUTERS/Thomas Peter

Hyundai Motor Co said it had banned production at one of its factories in China Tuesday after a supplier refused to supply parts due to delays in payment.

This is its second such incident in weeks.

Hyundai has seen in China sales slump as a result of the diplomatic tensions between the two nations, in addition to the fierce competition from local brands.

Frayed relations with suppliers to its venture with BAIC Motor Corp Ltd are adding to headaches, Reuters reported.

BAIC is in charge of payments and has been responsible for the delays, according to analysts and supplier sources who are familiar with the matter.

Their joint venture had only just started production again at four China plants on Aug. 30 after a postponement of about a week because one French supplier declined request to provide fuel tanks due to non-payment.

This time, a German firm has refused to provide parts for air intake systems, a representative for Hyundai stated.

Any loss of production from this one factory is unlikely to have a major sales impact on Hyundai. “That is manageable. But if Hyundai’s Chinese partner is refusing to make payments, that’s a different story,” said Ko Tae-bong, an analyst at Hi Investment & Securities, adding that the issue could occur time and time again.

Hyundai stated this week it had appointed a new head for its China operations. Tao Hung Than, who is of Chinese descent, took the helm effective Friday replacing Chang Won-shin, who lasted less than a year in the job, according to Reuters.

Hyundai’s sales from its Chinese factories sharply dropped 64 percent in April-June first quarter, when the automaker posted its smallest quarterly net profit in five years.

Hyundai and BAIC were also due to start operations at a fifth China car factory late last month but the timetable has been pushed back.

Shares in Hyundai fell as much as 2.1 percent to their lowest level in more than four months on Tuesday and have declined 4.9 percent since the first reports of the supply disruptions emerged a week ago.