[Net Zero Frontline] Eco-Friendly Vehicle Advance Base, Hyundai Motor Czech Factory

Hyundai Motor's Czech Plant Boasts High Labor Flexibility and Productivity... Leading Manufacturer
Only Overseas Plant Producing Electric Vehicle (Kona)
Average Production Time per Car Only 16.8 Hours Due to Advanced Equipment and Standardized Processes

Carbon neutrality is a common agenda for countries worldwide. In particular, the European Union (EU) took the lead when Ursula von der Leyen, President of the European Commission, declared the continent's '2050 net-zero' goal in December 2019, the first of its kind globally. In April last year, the EU agreed on a climate law to raise the 2030 greenhouse gas reduction target from 40% to 55% compared to 1990 levels, and the same year, the 'Fit for 55' package was introduced, containing 13 specific policy proposals including stricter CO₂ regulations for automobiles. The automotive industry was hit hardest as the EU took its first steps. Their common stance is that sufficient preparation time is needed to meet regulatory targets. However, it is clear that vehicles emitting carbon dioxide will not be welcomed anywhere around 2035. Opportunities arise from crises. We must closely examine the current state of 'net-zero hotspot' Europe and learn what we can. Over four installments, we aim to vividly report on the efforts our companies are making to achieve carbon neutrality in the heart of Europe.

[Nosovice (Czech Republic) = Asia Economy Reporter Kim Hyewon] Driving about 300 km northeast from Prague, the capital of the Czech Republic, to Nosovice reveals a quaint rural village scene. The small, underdeveloped town of about 1,000 people began to gain vitality around the mid-2000s when news spread that Hyundai Motor Company would build a complete vehicle manufacturing plant there. The automotive industry accounts for 21% of the Czech manufacturing sector, making expectations high. Hyundai Motor Group Chairman Chung Euisun visited the site in 2009, when the plant was completed, for the first time with the title of 'Vice Chairman,' emphasizing that the Czech plant would serve as a forward base for the European market.

Visiting the plant area last November to commemorate the 15th anniversary of Hyundai Motor Czech Production Corporation's establishment, the site resembled a 'Hyundai kingdom.' From the yard at the plant entrance (the shipping waiting area) to dozens of partner companies that entered alongside Hyundai Motor Group affiliates such as Hyundai Transys, Hyundai Mobis, and Hyundai Glovis, a vast town was formed. Local pride was strong among Czech employees who chose to work at Hyundai rather than the beloved national company ?koda. Baek Cheolseung, head of Hyundai Motor Czech Production Corporation, introduced, "Many local employees have been with us for over 15 years since the corporation's establishment," adding, "The vast cabbage fields have gradually become a landmark growing together with the local community."

◆ "65 units per hour" with cumulative production nearing 4 million units = Among Hyundai's overseas production bases, the Czech plant stands out as a 'record maker.' It dominates the top ranks in key management indicators such as Hours Per Vehicle (HPV), production scheduling efficiency, and production pass rate. Last year, the Czech plant's HPV was about 16.8, meaning it took an average of 16.8 hours to produce one complete vehicle. In comparison, domestic plants have an HPV of around 28 to 30. The production scheduling efficiency, which measures output when 100 workers are assigned to the assembly line, improved by 3% compared to the previous year. While Korean plants have this figure in the 50% range, the Czech plant reaches 80-90%. The plant's hourly production (UPH) was 57 units last year, and this year the target has been raised to 65 units. Baek, the head of the corporation, said, "Backorders are approaching 100,000 units," and "We have set the annual production target at about 320,000 units." When the cumulative production surpasses 4 million units around the second half of this year, it will mark another record.

Inside the plant, unlike older domestic facilities, the layout was notably clean and the flow simple, possibly due to the adoption of a plaza-style standardized process. Starting from the stamping (press) process where steel plates are cut and shaped to form the body, to the welding process where panels are assembled and welded, robotic arms engraved with 'HYUNDAI' were busily operating. Two 5,400-ton presses from Hyundai Rotem and 385 yellow robots made by Hyundai Heavy Industries played a significant role in quality control. The painting process, where cleanliness is vital, was off-limits. However, Lee Changgi, head of production at the Czech plant, explained that the direct pass rate (yield rate) from painting to assembly lines was in the 96% range, the highest among Hyundai's overseas plants.

At the mixed-model assembly line, the plant's main models?Tucson, i30, and Kona EV?displayed their colorful appearances along the line. Battery packs, modularized from electric vehicle battery cells supplied by SK On in Hungary, were being attached under the Kona body. Vehicles passed quickly on the conveyor belt every 63 seconds, and the local employees, wearing masks tightly, focused solely on their tasks, which felt somewhat unfamiliar. Unlike domestic plants, the female workforce ratio exceeds 15%, mainly assigned to lines requiring delicate hands but less physical labor. This reflects high productivity and labor flexibility. After assembly, vehicles undergo rigorous testing. All produced vehicles are inspected at a 3.3 km road test track located on one side of the plant. The production pass rate for new cars passing through the inspection line is about 96%, higher than the domestic rate of around 90%.

Local employees working at Hyundai Motor's Czech factory are assembling parts while wearing masks. Three to four people work together on each vehicle, focusing intently on the assembly process as cars continuously move along the conveyor belt.

◆ Vehicles, plant, and equipment all equipped with eco-friendly and new technologies = Hyundai Motor Czech plant is the only overseas production base manufacturing eco-friendly vehicles. It secured the Kona EV volume with difficulty and has been producing it in-house since March 2020. Procuring the electric vehicle's core component, the battery, locally is a significant advantage in terms of price competitiveness. Producing the high-performance 'N' brand vehicles based on the i30 is also a point of pride, as production is impossible without advanced equipment technology and testing environments. The 3D scanning technology first introduced at the Czech plant is expected to be sequentially adopted at other overseas plants, as headquarters judged it advantageous for quality control.

The present and future of the Czech plant lie in 'eco-friendliness.' The plant aims to play a pivotal role in producing strategic models based on eco-friendly vehicles in global markets, including the advanced European market. Baek, the head of the corporation, said, "We will establish a full lineup production system for eco-friendly vehicles, including electric vehicles, and gradually transition to an intelligent smart factory," adding, "We are especially focusing on strengthening the capabilities of local employees in electrification." The Czech plant is also the first place to realize Hyundai Motor Group's blueprint, which declared carbon neutrality completion by 2045. Hyundai plans to make all models sold in the European market battery electric vehicles and hydrogen electric vehicles by 2035, regionally.

Great success in vehicle semiconductor supply operation... Hyundai Motor reverses market share

Some employees of Hyundai Motor Czech Production Corporation camped out in tents near the plant yard last year, enduring an unusual hardship. The reason was simple: to ship even one more vehicle faster and deliver it to customers. For example, if they secured even a small quantity of camera-related parts affected by the vehicle semiconductor shortage, they would immediately assemble and inspect the vehicle on-site and transport it as quickly as possible. This strategy was based on the calculation that it would save time compared to waiting to secure all 30,000 parts before starting vehicle production. They even went as far as pleading with competitors, saying, "If you can't make it now anyway, sell it to us."

The background behind Hyundai Motor Czech Production Corporation overtaking Volkswagen to rank second in the Czech market sales last year lies in this vehicle semiconductor 'supply operation.' Amid the global vehicle semiconductor shortage that struck the automotive industry last year, Hyundai and Kia were the only ones to expand their market share in the Czech market.

According to the Czech Car Importers Association (SDA), Hyundai's cumulative sales in the Czech market from January to November last year were 18,514 units, ranking second in market share. This was a one-rank rise from third place during the same period the previous year. The Czech automotive market is dominated by the 'national company' ?koda, which holds a dominant first place with a market share in the 30% range, so global companies effectively compete from second place onward. Hyundai expanded the gap with Volkswagen (8.30%), which was second in 2019, to 1.41 percentage points. Toyota (4.90%) and Kia (4.77%) followed. Kia also rose two ranks compared to the same period last year (7th place).

The strong performance of Hyundai and Kia in the Czech Republic, a significant sales market, led to an increase in their overall market share in Europe. According to the European Automobile Manufacturers Association (ACEA), Hyundai Motor Group's new car sales from January to November last year increased by 23% year-on-year to 943,433 units. Among the top five automotive groups, Hyundai Motor Group was the only one to record double-digit growth compared to the previous year. The first-place Volkswagen Group (-0.5%) and third-place Renault Group (-10.9%) shrank, while second-place Stellantis (0.8%) and fifth-place BMW Group (4%) remained flat.

The Hyundai Motor Czech plant was a completely different world from Korea, where new cars could not be produced in sufficient quantities due to the vehicle semiconductor shortage, causing customers to wait anxiously. The Hyundai-exclusive shipping yard, capable of holding 8,600 vehicles, was filled with fresh new cars produced at the Czech plant. About 1,200 to 1,300 units are shipped daily, with 35% transported by train and 65% by truck through the railway loading yard within the plant premises.

New cars made here were sold in 72 countries worldwide last year, excluding the Middle East and North America. The number of export countries is increasing annually and is expected to grow further. The main market is Western Europe.

The Kona electric vehicle (EV) produced at Hyundai Motor's Czech factory is undergoing an inspection process. The Czech factory is the only overseas location where Hyundai produces electric vehicles outside of Korea.

Nosovice (Czech Republic) = Reporter Kim Hyewon