In an effort to remain competitive and to increase its efficiency, Kia Motors is reportedly now planning to close one of its oldest manufacturing plants in China. The company is reportedly still mulling over the move, which has been seen by some analysts as a valid option if it still wants to remain competitive in the country. Some reports, which cited sources close to the company, have revealed that the suspension of its number one plant in China may be possible given the current state of the automotive industry.
When directly asked about the reported plans, Kia Motors released a statement saying that it is, in fact, reviewing various strategies to ensure its production and sales in China remain competitive. The company neither confirmed nor denied that it was going to close down its plant in Yancheng located within the Jiangsu Province. The company currently operates three factories in Jiangsu Province, which are in partnership with local manufacturers Jiangsu Yueda Investment Co Ltd and Dongfeng Motor Group.
Hyundai Motor Company, the parent company of Kia Motors, has already closed one of its plants in China following a rapid decrease in sales. The same situation now plagues Kia, which has also experienced a rapid decrease in sales. The company's sales numbers fell from 480,000 vehicles in 2012 to only 350,000 cars in 2018.
Analysts believe that both Kia and Hyundai experienced sharp declines in sales due to their failure to adapt to the changing needs of Chinese consumers. Similar to the United States, China has recently seen a much greater demand for larger SUVs and pickup trucks; segments Kia and Hyundai were unable to immediately serve.
According to industry insiders, Kia's Yancheng plant is currently its most inefficient facility and its capacity is way more than what Chinese consumers are demanding. The plant, which was built in 2002, is reportedly only now operating at 40 percent of capacity. The facility was originally designed to produce 890,00 vehicles per year. The Yancheng plant currently has around 6,500 full-time workers. Most of the workers will likely be facing redundancy, which means that they will have to find work elsewhere if the plant is closed.
Some reports have speculated that shutdown of Kia's Yancheng plant may only be temporary. It is reportedly possible that the facility could instead be restructured to produce different kinds of vehicles or other automotive parts. There is, of course, a chance that workers will still retain their jobs, but that is still dependent on what Kia will ultimately decide to protect its bottom line.
