Kia’s billion-dollar move to Mexico

KIA is set to launch itself into the massive Mexican market having just signed a $US1 billion ($A1.07 billion) agreement with the country’s government to establish a state-of-the-art plant producing 300,000 vehicles annually, including a range of compact models.

The output will bring Kia’s total global manufacturing capacity to 3.37 million vehicles a year with 1.69 million produced by South Korean plants and 1.68 million from overseas factories.

Kia Motors Mexico will be built in Monterrey in the northeastern state of Nuevo León and construction on the highly automated plant, covering five million square metres, is due to begin in September with completion expected in 2016.

Kia said Mexico was chosen as the location for the plant because it is one of the few countries in which the Korean car-maker doesn’t have a sales presence.

Producing vehicles in Mexico will also ensure the company avoids the high tariffs imposed on Korean-made cars and will help lower costs due to the skilled, low-cost labour.

The Mexican plant will allow Kia to provide cars to the United States, taking advantage of the NAFTA agreement.

Kia also hopes to use Mexico’s geographic location in a bid to also boost it sales presence in Central and South America.

As for the new compact range of vehicles to come from the plant, it is unlikely any will come here as Kia Australia sources its vehicles out of Korea and Slovakia.

The creation of the Mexican plant, however, could indirectly benefit Australia by easing the supply pressure on Korea.

The agreement was signed on Wednesday at a ceremony in Mexico City attended by Mexico’s president and a delegation of Korean executives led by vice-chairman of Kia Motors Corp Hyoung-Keun (Hank) Lee. Mr Lee said the plant signaled a new era for the car-maker.

“All of us at Kia Motors are proud to signal in a new era for the brand with the announcement of our first manufacturing plant in Mexico,” Mr Lee said.

“We are committed to producing world-class quality vehicles here in Mexico that feature industry-leading styling and high-tech convenience and safety features that customers have come to expect from Kia, while making significant contributions to both the economic growth of the State of Nuevo León and the future development of the Mexican automotive industry.”

Kia joins a number of global car-makers with manufacturing operations in Mexico, with Volkswagen and Audi setting up shop several years ago.