Kia is to build a new US$1bn factory in Mexico to build a range of “yet to be confirmed compact models” for North and South American markets.
Production at the plant in the north eastern state of Nuevo León is slated to begin in the first half of 2016, with capacity reaching 300,000 vehicles a year. Unnamed sources told Reuters the Forte compact would be one of the models built there and it is understood that Soul and the next generation Sportage crossover would also be logical choices.
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Kia said the additional capacity would help address supply shortage in the US where the brand has been growing rapidly. Sales reached 535,179 last year, up from 300,063 vehicles in 2009 and 2014 volume was 7% ahead year on year to the end of July at 349,722.
The company said it will also use Nuevo León as a base to expand its presence in Central and South America (parent Hyundai has two plants in Brazil) with the additional capacity freeing up capacity in South Korea to support growing demand globally. Vehicles built in its home market accounted for 57% of Kia’s global sales last year, compared with 38% for sister company Hyundai.
Carmakers are finding Mexico an attractive production hub thanks to its free trade agreements with more than 40 other countries (including Brazil) while low labour rates help mitigate fine profit margins on small cars in the US. Mazda, Nissan and Honda have either established production or announced plans to build small cars there.
The new plant could also pave the way for Kia to start selling cars in Mexico where it currently does not do so because of high tariffs on imported cars from South Korea. The company said: “With its strong growth forecasts for new vehicle demand, Mexico was chosen as the site for Kia’s next overseas plant given that it is one of the few remaining major markets in the world in which Kia does not have a sales presence.”
Kia already has a US assembly plant in Georgia which produces the larger Optima and Sorento models alongside Hyundai’s Santa Fe SUV.
