Hyundai to go ahead with eco cars

Hyundai cars are displayed during the second media day of the 79th Geneva Car Show at the Palexpo in Geneva March 4, 2009.

GOYANG, South Korea (Reuters) - Hyundai Motor Group, the world's No. 5 automaker, will go ahead with plans to develop environment-friendly cars despite the segment's low profitability and an industry downturn, a senior executive said on Thursday.

Yang Woong-chul, president of the group's auto research & development division, also said the group saw almost "no problem" to its business from the won currency's recovery trend. A weaker won has helped Hyundai and other South Korean automakers by enhancing price competitiveness and boosting profits from overseas markets.

"It is difficult to get profits from those kinds of cars. But we have to go that way eventually so will go ahead with our eco-friendly model plans," Yang said in an interview with Reuters on the sidelines of the Seoul Motor Show.

The group usually allocates 5 percent of sales for R&D and spends 20-30 percent of that budget on environment-friendly models such as hybrid cars, said Yang, who is in charge of auto technology for South Korea's top two car makers -- Hyundai Motor Co and Kia Motors Corp.

Hyundai plans to start mass production of hybrid cars next year and to begin mass production of plug-in hybrids from late 2012.

"The technology has been perfectly proved, but we need time to set up the infrastructure for the models," Yang said.

The remarks came as General Motors Corp has asked for $2.6 billion in low interest government loans to support the development of three new hybrid vehicles, confirming that it intends to move ahead with production of variants of the all-electric Chvrolet Volt.

Hyundai has unveiled the Elantra LPI, a hybrid version of the popular compact car, which will be powered by liquid petroleum gas (LPG) and lithium polymer batteries. South Korea's LG Chem, which is set to supply battery packs to the Volt, will be the sole provider of batteries for the Hyundai hybrid.

NO WON WORRIES

The recent rise in the won is unlikely to pose any threat to the group as it has not made plans based on the currency's weakness, Yang said.

"We do not rely on foreign exchange rates. So there will be almost no problems for our business from the won's recovery trend," he said.

The South Korean currency had risen about 16 percent by Wednesday since March 6, when it hit an 11-year low, and is seen recovering further as worries about the global financial crisis ease.

Yang said he expected global car demand to "slightly" recover on rising appetite for smaller cars and helped by developing markets, but declined to comment on the timing of a rebound.

(Editing by Jonathan Hopfner)