Hyundai is at a Standstill with Korea Production as Coronavirus Causes Parts Shortage

Hyundai Motor said it will cease production in South Korea, its biggest manufacturing base. They are the first major automaker to do so outside of China due to the lack of supply and parts resulting from the coronavirus outbreak. Hyundai has seven factories in South Korea, providing for the local market as well as the U.S, Europe, Middle East and other countries. Hyundai’s production in South Korea accounts for about 40 percent of its global business.

The cease of production follows a shortage in wiring harnesses that Hyundai uses mainly in its cars distributed in China.

Kyungshin and Yura Corporation are the two main suppliers who will be affected. They have both noted they are trying to increase production at their factories to reimburse Hyundai for any short supply in China.  They both also plan to resume production at their Chinese factories after Feb. 9.

“Hyundai and Kia may be more affected as they tend to import more parts from China than other global automakers,” a representative from the company said.  Hyundai has grown to be more and more reliant on China as there was built a huge production capacity in the country several years ago when its business was booming there.  According to trade data it shows South Korea imported $1.56 billion worth of auto parts from China in 2019 versus $1.47 billion in 2018. Japanese trading house Mitsui & Co has also warned that due to the virus outbreak may slow down manufacturing activities in automobiles and other sectors.

Other global automakers, including Tesla, Ford, PSA Group Nissan and Honda, have already halted their production efforts in China this week along with government guidelines. The flu-like virus has killed over 420 people and has spread to about 24 countries. Many fear for global economic growth and a downslide in markets, with Shanghai’s stock index losing about $400 billion in market value.

Hyundai’s decision to freeze assembly lines could delay its recovery form a sales slump. The automaker recently had  its best quarterly profit in over two years and said it projected for higher profit margins. They expect more sales of SUVs such as the Palisade and Kona. The production of the Palisade has been stopped by Hyundai due to a shortage of components from China. Hyundai’s South Korean factories are expected to restart Feb.11 or Feb 12, a union official said. “Hyundai Motor will closely monitor developments in China and take all necessary measures to ensure the prompt normalization of its operations,” the automaker said.