Hyundai to take on Nissan with China-only car

Business Day - South Korean carmaker Hyundai is planning to launch a car made just for China in early 2014 as it tries to regain momentum in the world's biggest car market, where it lost market share during the first half of this year.

According to two individuals with direct knowledge of the car, Hyundai is shrinking the mid-size Sonata sedan to create a "Sonata-lite".

The intent is to create a more affordable smaller car that is still roomy and upscale enough for Chinese middle-class buyers trying to trade up, by replacing their first cars, which tend to be small vehicles.

"With the car, we're trying to cope with a shift in China's marketplace," one of the individuals said.

As income grows in China, people are more interested in driving larger cars, he said.

But bigger cars come with bigger price tags and some car buyers cannot afford to jump from a low-priced compact, which costs about $15,500 for a global brand, to a Sonata sedan, which starts at about $26,200 and goes up to $39,200 for the top-end model.

Hyundai developed the car from the ground up, modifying existing technology, and purportedly has no plans to sell it elsewhere.

Frank Ahrens, a Hyundai spokesman in Seoul, confirmed the company plans "to produce a new model sized between the Sonata and the Elantra", but declined to provide details.

Hyundai's chief financial officer, Lee Won-hee, said during an earnings call last week that a new plant Hyundai is preparing to open in Beijing is slated to produce a car slotted between its Elantra compact and the Sonata. "The segment is seeing demand grow rapidly," Lee said.

The car's price tag has not been decided, but one clue can be found in the choice of engine.

The car is likely to be powered by a 1.8l engine, as well as possibly a 1.6l turbo-charged engine — both the kind of engines typically used in smaller cars. In fact, the new car pulls many of its key components from the Elantra, Reuters was told. The Sonata, which is more expensive than the Elantra, is powered by 2l and 2.4l engines in China.

With the new car, Hyundai is emulating a strategy that rival Nissan Motor used to create a hit with its Sylphy car, which Nissan developed by morphing the Tiida, a compact car, into a bigger car. Nissan recently launched the redesigned Sylphy, which starts at $18,700, and is aiming to sell about 200,000 of them a year.

One of the individuals said Hyundai's new China-only car has been designed to compete with the Sylphy.

"We're very wary of Nissan because it is performing spectacularly recently," he said. "Ours will be better than the Sylphy."

Hyundai is eager for a new hit in China. The company is gaining market share rapidly in the US and Europe, and until recently had been a stellar performer in China too.

Hyundai is the fourth-best-selling passenger car brand in China so far this year, behind Volkswagen, Nissan and Toyota, according to research firm LMC Automotive.

But its market share dipped to 5.65% at the end of the first half of this year, down from 5.89% at the end of last year, according to LMC. Volkswagen, GM, Toyota Motor and Nissan all gained ground, posting faster sales growth.