Hyundai's investment plan is aimed at meeting its production goal of 600,000 units per year in China.
General Motors said last week it would invest over £1.6bn in the next three years to more than double capacity.
Beijing-Hyundai Automotive Co, Hyundai's 50:50 joint venture with Beijing Automotive Industry Holdings, has a plant in Beijing with an annual capacity of 60,000 units currently.
"Beijing-Hyundai posted a net profit of £138m last year and the sales outlook in China is bright," says a Hyundai spokesman.
"We will inject an additional £408m including £73m reinvestment from the Chinese venture."
Construction would begin around the end of this year and completion is due in 2007.