Hyundai's €500 million Russia plant on schedule

Hyundai Motor Manufacturing Russia, a wholly-owned subsidiary of South Korea's Hyundai Motor Company, held a test operation for its stamping line yesterday, confirming that all plans are on-schedule for the automaker's sixth overseas manufacturing base. The company is set to launch its fully-fledged automotive forge-and-press unit at its assembly plant in September, as part of its efforts to strengthen its footprint in the country as the Korean automaker is banking on a continued renewal of consumer confidence in Russia and will start test production by the end of May.

The Hyundai Motor Manufacturing Russia stamping unit, which consists of four consecutive presses with combined punching power of 5,100 tons, is the first to be built by a foreign automaker in Russia.

The stamping equipment was produced by Rotem, the South Korean subsidiary of Hyundai and was delivered in February.

About 100 dignitaries, suppliers and media members attended the test operation ceremony, including the Governor of St Petersburg, Valentina Matvienko, Korea's Ambassador to Russia, and Hyundai Motor Co. Vice Chairman Shin Jong-Woon.

HMMR is the first foreign plant in the Russian Federation to install a stamping line.

"We will stick to the basics to stay focused on producing safe, high-quality cars for our Russian consumers. We are confident HMMR will meet - and exceed - consumers' needs and today's test operation is where it all begins," said Ahn Joo-Soo, general director of HMMR.

"The facility can now be justifiably called innovative because the new equipment will enable a high degree of localisation, while maintaining quality standards."

Hyundai Motor made the decision to construct the approximately €500 million plant according to a full production cycle, starting from pressing blank steel and stamping body parts to welding, painting and assembly. Having a stamping shop will help HMMR securing car components at the earliest stages of production. Today's test involved four stamping presses with an aggregate capacity of 5,100 tons.

Company spokesman Yulia Tikhonova said that the company has invested more than $30 million in the forging unit, which is expected to fully meet the plant's production demands. The entire production facility is expected to cost the Korean automaker more than $626 million.

Hyundai is hoping to reach the initial production capacity of 100,000 cars per year within a few months. Production on the plant started in June 2008, and its eventual capacity is targeted at 150,000 vehicles.

As car sales slumped in 2009, Hyundai pursued aggressive incentive campaigns in Russia, including opening the Hyundai Finance company to offer low-rate auto loans to consumers as well as a 15 per cent rebate for car parts and servicing of Hyundai vehicles that are more than three years old.

In another effort to boost flagging sales, the Korean automaker recently offered up to $3,300 in discounts to Russian consumers on the Hyundai NF Sonata.

Hyundai sold a total of 74,607 vehicles in Russia in 2009, becoming the number-three foreign brand after Ford and General Motors. In the first two months of this year, Hyundai sold 11,821 units in Russia, accounting for 10.4 per cent of the imported car market.

The opening of HMMR is on-schedule to begin in September, while production is planned to begin in January next year. At the end of 2011, the company aims to reach the plant's maximum production capacity of 100,000 cars a year, with prospects of further increasing the amount to 150,000 units.