Hyundai says scraps low-cost model plan in China

SEOUL (Reuters) - Hyundai Motor Co (005380.KS: Quote, Profile, Research), South Korea's top automaker, said on Wednesday it had scrapped a plan to launch a low-cost sedan in China as the model would not be profitable amid rising raw material prices.

Hyundai, which together with affiliate Kia Motors Corp (000270.KS: Quote, Profile, Research) is the world's No.5 automaker, plans to introduce a new compact sedan to the China market instead of the initially planned $5,000 to $6,000 economy sedan, a company spokesman said.

The company had planned to sell the low-cost sedan in China from 2010 to compete with sub entry-level cars from global and local makers in the world's No.2 auto market.

"We will not produce such a cheap car in China. We could not make a profit on the car on rising commodity prices and it could damage our brand image," Hyundai spokesman Jake Jang said by telephone.

Automakers are examining different means such as price hikes to secure profits as their production expenses climb on higher raw material costs.

The newly planned sedan, codenamed "RC," with a 1.4 or 1.6-liter engine, would be bigger than the sub-compact Accent and smaller than the compact Elantra, Jang said.

Beijing Hyundai Motor Co, a 50-50 joint venture between Hyundai and Beijing Automotive Industry Holding, plans to produce more than 100,000 units of the model per year from 2010, Jang said.

He declined to discuss the price range of the new sedan.

The retail price of the Accent in China starts at 71,800 yuan ($10,520) and the Elantra starts at 89,000 yuan, Jang said.