Hyundai Motor on Tuesday said it would build small cars in a new plant being built by subsidiary Kia Motors as record-breaking oil prices increase demand for such cars.

The automaker had been expected to build trucks or SUVs at the new Kia plant. A Hyundai plant, opened a couple of years ago in Alabama, was built to produce the Sonata sedan and more recently added the Santa Fe SUV.

Reuters noted that Hyundai Motor currently sells the Hyundai-branded Elantra and Kia Spectra small cars in the US, still the world’s top car market, but both are made in South Korea.

“We have plans to have the Georgia plant produce small cars. We might have Hyundai products produced at the Georgia plant if the platform is common,” Kim Dong-jin, Hyundai’s vice chairman, was quoted as saying by a company spokeswoman, according to the news agency.

Reuters said Kim was referring to Kia’s first US factory, which is expected to be completed by late 2009.

“The market environment changed rapidly, like higher oil prices, environmental issues. We have a strong presence in the small-car segment,” Kim also said, according to the spokeswoman.

The group recently halted plans to produce a pickup truck at Kia’s US factory amid concerns that surging oil prices will hit demand for the fuel-slurping vehicles.

Nissan recently decided to outsource its next US market full size Titan truck to Chrysler, rather than building it itself, as it does with the current model. Honda also builds a smaller pickup, called Ridgeline, in Ohio.

Hyundai Motor’s Alabama plant is producing 300,000 cars a year and Kia’s Georgia facility will have the same capacity, according to Reuters.

just-auto understands the Santa Fe – previously shipped from Korea – was added to the Hyundai plant’s output after sales of its Sonata did not meet expectations in a slowing US market.

Earlier this month, a Hyundai Motor Group official said Kia was considering manufacturing an SUV at its first US factory, Reuters added.

Kia also has a factory here in Europe. The Slovakian facility has just built its 200,000th Ceed, a wide-ranging model line designed specifically for the continent.

Kia opens Georgia training facility