Kia Motors is planning a new factory in China with annual capacity of 400,000 units, ramping up production to tap the booming local car market, the company said on Monday, according to the Reuters news agency.

"400,000 units a year by 2005 is the plan," Wang Liping, planning department manager at Dongfeng Yueda Kia Automotive Co Ltd, told Reuters, adding: "Chinese car makers are increasing in scale and we're following that trend."

The news agency said the official China Daily quoted company president Chung Dal-Ok as saying the joint venture will invest $US600 million in a new plant at an undecided location to meet this target.

Kia Motors, an affiliate of South Korea's Hyundai Motor, already builds cars in a joint venture with Dongfeng Motors Co. and Jiangsu Yueda Investment Co. in the eastern province of Jiangsu, near China's financial hub Shanghai, Reuters noted.

The existing facility, in Yancheng, aims to roll out 50,000 cars this year and 100,000 next year, Wang told Reuters, though declining to confirm the investment figure for the new factory.

Reuters said Hyundai Motor has a joint venture in China's capital with Beijing Automotive Industry Holdings which started operations at the end of 2002 and has a capacity of 50,000 units a year, expected to rise to 300,000 by 2005.

Reuters noted that foreign car makers have announced plans to more than double production in China over the next four years, raising fears of a margin-sapping glut, but they hope economic growth of 8% a year will absorb the additional output.