China Hyundai dealers seek up to $135 million compensation, say automaker reduced supply

By Jake Spring

BEIJING (Reuters) – A group of Hyundai Motor Co <005380.KS> dealers in China is seeking 800 million-900 million yuan ($120 million-135 million) in compensation from the South Korean automaker, saying Hyundai has cut the flow of models it exports to them, resulting in dealership losses and closures.

The group’s leader, Wang Rongzhen, told Reuters on Wednesday that the automaker has scaled back the range of models it supplies to dealers in Hyundai imports in China, only consistently supplying one model, while steadily increasing car manufacturing in China.

“We sell cars, if you don’t give us cars, naturally we won’t be able to go on, we’ll close,” Wang said in an interview, estimating import dealers are losing between 3 million and 10 million yuan a year each. The group seeking compensation represents 30 of the roughly 40 remaining imported Hyundai dealers in the country.

The Hyundai row is brewing as car dealers in China, sure-fire moneymakers for decades, have had a troubled transition to slower growth in the world’s biggest auto market in the last two years. Many dealers are looking to manufacturers for support in soaking up losses: Germany’s BMW AG agreed to pay out $820 million to cash-strapped dealers in early 2015. (http://reut.rs/29ZvKCc)

According to the China Auto Dealers Chamber of Commerce, which is helping to organize the dealers, Hyundai’s import-only dealer network has already halved in size since 2014.

Hyundai said in a statement earlier this week it is keeping communications open in an effort to find “an amicable solution” with the import-only dealers, noting that import dealers account for less than 1 percent of its sales in China.

The automaker sold about 1.1 million passenger vehicles in China in 2015. It didn’t immediately comment on Wednesday on the amount Wang said his group was seeking in compensation.

Wang said that the group of dealers has been meeting informally with Hyundai executives on and off since last month.

Currently, only the Velostar hatchback coupe is consistently available to Hyundai import dealers in China, Wang said, with the Genesis luxury sedan and a large version of the Sante Fe sport-utility vehicle being supplied irregularly.

Hyundai has said the dealers can apply to become vendors of cars made in China by Beijing Hyundai, its joint venture with domestic automaker BAIC Motor Corp <1958.HK>, but no import dealership has successfully done so, Wang said.

Sales for Hyundai overall in China fell early this year because of its aging product portfolio but have rebounded since April, driven by the redesigned Elantra sedan. The company plans to finish building its fourth and fifth plant in China by next year.

(Reporting by Jake Spring in BEIJING; Additional reporting by Hyunjoo Jin in SEOUL; Editing by Kenneth Maxwell)