Hyundai plans small SUV for Gwangju plant

The first vehicle Hyundai Motor will manufacture at Gwangju’s new city-owned factory will likely be all-new compact SUV, according to the city government and the carmaker.

Hyundai Motor will only have a 20 percent stake in the factory, which is scheduled to open in 2020, so the success of the venture to the automaker will not hinge on its investment but rather on whether the car sells well. Hyundai Motor is likely to commission an SUV because of growing demand for the vehicles.

The automaker is currently looking at two possible platforms to base the new small SUV on.

The SUV could be based on the platform of the Kia Morning compact. The other option is basing the new vehicle on the i20 Active, which is sold in the European market. The i20 Active is a hatchback with a ride height 20 millimeters (0.78 inches) higher than previous i20 models, and it has an engine capacity of 998 cubic centimeters, which Hyundai is planning to use for the new SUV. The new SUV’s name will likely be Leonis.

Other automakers are keeping a close eye on the vehicle that the new plant will make, especially as the local automotive market has been shrinking.

Last year, 1.55 million vehicles were sold in Korea, which is a 2.4-percent drop compared to 2016. The release of a new vehicle from the Gwangju plant is expected to raise the stakes in an already competitive market due to the reduced wages Hyundai will pay workers at the city-owned plant. The labor costs at the Gwangju plant will be lower than other automotive plants in Korea as the annual salary of its employees will average around 40 million won ($37,400). The average annual salary for Korea’s five automotive companies was 92 million won in 2016.

The companies most likely to be affected by Hyundai Motor’s new vehicle are Ssangyong Motor and GM Korea.

Ssangyong Motor’s Tivoli is a compact SUV that has been a major success for the automaker. Ssangyong’s sold 170,000 Tivolis since it launched the vehicle in January 2015. GM Korea’s compact Spark model is another potential competitor.

One of the biggest reasons that the Gwangju plant is likely to produce a SUV for Hyundai Motor is due to the automaker’s agreements with its labor union.

Under the deal between Hyundai Motor and its labor union, the automaker needs to get the approval of the union to produce existing models at a plant that Hyundai Motor doesn’t own.

If Hyundai manufactures a new model at the Gwangju plant, it won’t have to get its union’s approval.

Hyundai Motor’s labor union is strongly opposed to the company’s plan to produce a new vehicle at the Gwangju plant.

“If Hyundai Motor continues to push forward with its plan to invest in the new plant, we will fully oppose the decision,” the automaker’s union said in a statement released on Friday. “We demand an immediate withdrawal.”

Hyundai Motor’s union has argued that the new plant will provide jobs that are neither regular nor an irregular and will lower the wages of the company’s permanent employees.

The union argued that the decision will decrease the job security of Hyundai employees and also speed up the automaker’s management crisis.

Gwangju’s new auto plant will likely receive a total of 500 billion won in investment and have a production capacity of about 100,000 cars a year. It is expected to provide jobs to around 12,000 people directly and indirectly.

BY YUN JUNG-MIN, MOON HEE-CHEOL [lee.hojeong@joongang.co.kr]