A fire at the Anjeon Industry plant that supplies engine valves to Hyundai Motor and Kia has put new-car deliveries on emergency footing. Following DONGHEE AUTO CO.'s decision to halt production of Kia's small cars Morning and Ray, sales outlets are also advising that new deliveries of Hyundai Motor's compact sedan Avante could become difficult. The disruption is hitting small cars with lower demand first.
According to the auto industry on the 25th, DONGHEE AUTO CO. will partially suspend production of the Morning and Ray starting on the 27th, and fully halt production from Apr. 1 to 11. DONGHEE AUTO CO. is a joint venture between Kia and parts maker Donghee Holdings. It began with the Morning in 2004 and now contract-manufactures Kia's small cars up to the Ray.
The suspension follows a fire on the 20th at Anjeon Industry's Daejeon plant, which supplies engine valves to Hyundai Motor and Kia. Engine valves are essential auto parts that control fuel injection into the cylinder and exhaust gas discharge.
The Avante, dubbed the "people's sedan," is also widely expected to face significant delays in new deliveries due to the fire. A Hyundai Motor salesperson said, "Until last month, the delivery time for the Avante gasoline and hybrid was one month, but starting this month it has stretched to three months," adding, "Headquarters has not yet sent an official notice saying parts cannot be procured due to the fire, but if you don't sign this month, deliveries could be pushed back significantly because of the fire's impact." Some inside and outside Hyundai Motor expect Avante production at the Ulsan plant to be halted as early as this week.
By contrast, popular models such as the midsize sedan Sonata, the compact sport-utility vehicle (SUV) Tucson, and the midsize SUV Santa Fe are relatively unaffected by the fire. A Hyundai Motor salesperson said, "We have Sonata inventory, so discounts are possible," while another said, "Popular SUVs like the Tucson and Santa Fe are available for immediate delivery, so there's no need to worry about the fire's impact."
An industry source said, "Demand for small and compact cars isn't what it used to be, so we don't build them in advance," adding, "For midsize and larger sedans or SUVs, popularity is strong, so supply is often secured even before orders." DONGHEE AUTO CO. is said to have halted production because the remaining engine valve inventory in Korea has been allocated first to mid- to large-size cars.
However, if this situation persists, production of mid- to large-size cars could also be disrupted. Hyundai Motor and Kia are reportedly reviewing plans to bring surplus engine valves from overseas plants to Korea to delay any production stoppage as long as possible.
But in that case, the engine valves would have to be shipped by sea, which would take considerable time. An industry source said, "The lines won't stop today or tomorrow, but if this continues, production disruptions will intensify starting in early April."
A Hyundai Motor and Kia representative said, "We currently hold a certain level of inventory domestically and overseas, and we are coordinating with partners to prevent production disruptions," adding, "We are reviewing and pursuing various response measures, including using existing inventory and alternative sourcing within the supply chain."