SEOUL, Oct. 20 (Korea Bizwire) — SsangYong Motor Co. said Friday it will reconsider its plan to build a factory in China through a partnership with a local company due to regulations and lower demand for South Korean vehicles.
As China has taken measures against South Korean products in apparent retaliation against the deployment of an advanced U.S. anti-missile system, called THAAD, sales of cars have fallen sharply in the world’s biggest automobile market this year.
“We have been seeking to build a manufacturing facility in Xi’an (northwest China) in a joint venture with a local carmaker which is wholly owned by Xi’an Province. But we will reconsider the plan due to poor sales and new regulations,” SsangYong Motor President Choi Jong-sik said in a lunch meeting with reporters.
In October, the maker of the Tivoli compact and flagship G4 Rexton SUV said it signed a letter of intent with Shaanxi Automobile Group to conduct a feasibility study on building a plant in China.
Korean carmakers, represented by Hyundai Motor Co. and its affiliate Kia Motors Corp., have suffered sharp declines in sales in China this year due to bilateral political tensions over the deployment of an advanced U.S. anti-missile system, called THAAD, in South Korea.
Seoul and Washington has argued the THAAD system is purely aimed at deterring missile threats from North Korea. But Beijing has opposed the system that it says could spy on its military.
In other obstacles, the chief executive pointed out that a new Chinese law that takes effect in April bans a foreign manufacturer from getting a license for local production even if it sets up a joint venture with a local partner.
Moreover, the license for local vehicle production is allowed when an all-electric car is also produced in the assembly lines.
The biggest concern for the carmaker, however, is weak demand for its vehicles, the president said, adding its 250,000-unit-a-year plant rolls out only 150,000 units a year.
In the January-September period, SsangYong Motor sold a total of 106,651 vehicles, down 4.5 percent from 111,683 a year earlier.
Indian carmaker Mahindra & Mahindra Ltd. owns a 72.85-percent stake in SsangYong Motor.