Kia Motors Corporation has announced plans to build a second car plant in China’s Jiangsu province at a total cost of $US645 million.

The announcement was officially made at a signing ceremony attended by top Kia executives and Chinese officials in Nanjing, China. The decision to build the plant was based on creating a stronger presence in China that will help Kia claim an increased portion of the large Chinese car market that is predicted to grow to 10 million by 2010.

The new plant that is scheduled to break ground this July will have an estimated annual capacity of 300,000 units and will be ready for production by 2006. The new facility will be built next to Kia’s first China plant in Jiangsu that currently produces 130,000 sedans and recreational vehicles a year. By 2010, the Hyundai-Kia Automotive Group will be able to produce more than five million units, approximately three million in Korea and two million overseas.

The plant will be designed to produce Kia’s complete model range, including small passenger cars between 1,300cc-1,500cc and recreational vehicles, as well as competitive new models which will be introduced through this plant to meet Chinese consumers’ continued increasing demand for new vehicles.

The Kia plant will be accompanied by 40 other Korean suppliers, including Hyundai Mobis, to enhance productivity and reduce production costs. Kia plans to increase local production capacity up to 90%.

In July 2002, Kia Motors established Dongfeng Yueda Kia Motor Co. in China, a joint venture with China’s Dongfeng Motor Co. The company is currently producing compact sedans exclusively for the Chinese market. Dongfeng Yueda Kia Motor accounted for 2.4% of the Chinese vehicle market last year, up from 1.6% in 2002.

The new plant announcement comes at a time when Kia is making inroads in China with its TianLiMa model which sold 7,000 units in February this year. Kia aims to sell 80,000 cars in China during 2004, a 57% increase from last year, with the addition of the Carnival minivan.

Chung Mong-Koo, Chairman of Hyundai-Kia Automotive Group, said: “Based on the mutual trust between the Chinese government and Kia Motors, we want to turn our plant into one of the most competitive car manufacturing facilities not only in China, but in the world.”

Together with Kia’s first European plant in Slovakia announced earlier this year, executives expect this second plant in China to be a key step in the company’s strategy to become a global top five carmaker by 2010.