(Agencies)
Updated: 2008-04-22 17:14

South Korea's Hyundai Motor Group is gearing up to win back customers in China with new factories and revamped cars, but analysts say the group still faces a bumpy road in the world's No 2 car market.

Hyundai Motor Co, South Korea's top auto maker, earlier this month opened a new plant and launched the remodeled Eleantra sedan, aimed to suit Chinese customers' taste.

Last December, its affiliate Kia Motors Corp also started mass production at its second factory in Jiangsu province and produced the revamped Cerato sedan.

The steps may help them to lift sales in the country in the short-term, analysts said, but many still doubt if the car makers can cope with cut-throat competition against global and local makers.

"Right now, the overall situation looks OK. But global makers are set to launch a slew of new models and (Hyundai and Kia's) growth momentum may get weaker from the second half," said Kim Jae-woo, an auto analyst at Mirae Asset Securities.

With US and European markets slowing, global auto makers are increasingly relying on emerging countries such as China, where sales are expected to top 10 million vehicles this year.

Hyundai and Kia's sales performance in China has been strong so far in 2008.

Hyundai sold 73,287 vehicles in the first quarter of the year, before opening its second factory in Beijing, 14 percent more than a year ago.

Kia's first quarter unit sales jumped 28 percent to 37,202.

To boost sales further, Hyundai plans to produce the remodelled NF Sonata sedan in November and to make the revamped i30 hatchback next year in China.

Hyundai also will bring the Genesis, its top-end sedan, to China in June and the Chinese unit will produce a locally modified sedan based on the EF Sonata.

Need smaller cars

Other makers are offering smaller cars with better fuel efficiency amid a doubling of oil prices in a little over a year.

On Sunday, Honda Motor Co unveiled the new Fit subcompact for China during the Beijing Auto Show, while Toyota Motor Corp did the same with its rival car Yaris.

The trend is not only for foreign brands. Chinese sports utility vehicle maker Great Wall Motor plans to shift focus to developing smaller cars to grow in its domestic market.

Growth in local makers in China is a major threat to Hyundai and Kia in the country as domestic brands have much stronger price competitiveness.

Hyundai is planning to introduce a $5,000 to $6,000 economy sedan into China perhaps as early as 2010. Some analysts argue the company should also look to make existing smaller models such as the i10 in China.

However, Beijing Hyundai, Hyundai's joint venture with Beijing Automotive Industry Holding, does not plan yet to bring the smaller hatchback, which is being produced in India.

"The i10 is too small here. Such models may sell for 50,000 yuan ($7,144) here, it is difficult to get profit," Noh Jae-man, Beijing Hyundai's president, said.

Noh was upbeat about the company's futures in China with planned new models, and despite analysts doubts, said he remained confident Hyundai and Kia would meet ambitious targets this year.

Hyundai forecasts sales to rise 65 percent to 380,000 units, while Kia aims to sell 250,000 vehicles in China this year, more than double its 2007 sales.

Suh Sung-moon, an analyst at Korea Investment & Securities, is sceptical.

"Their sales in China is reviving, helped by the second factories and new models. But their targets are just a hope."