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Kia to invest $1 billion in Mexico

August 28, 2014
Mexico's President Enrique Pena Nieto, center, talks with KIA Vice Chairman and CEO Hyoung-Keun Lee, left, and the Gov. of Nuevo Leon, Rodrigo Medina, right, during an announcement regarding a new KIA Auto assembly plant to be set up in Mexico, Wednesday, Aug. 27, 2014. KIA announced the construction of a new auto plant in the northern state of Nuevo Leon which is slated to start operating in 2016. (AP Photo/Eduardo Verdugo)

Mexico’s President Enrique Pena Nieto, center, talks with KIA Vice Chairman and CEO Hyoung-Keun Lee, left, and the Gov. of Nuevo Leon, Rodrigo Medina, right, during an announcement regarding a new KIA Auto assembly plant to be set up in Mexico, Wednesday, Aug. 27, 2014. KIA announced the construction of a new auto plant in the northern state of Nuevo Leon which is slated to start operating in 2016. (AP Photo/Eduardo Verdugo)

By Park Jin-hai

Kia Motors, the nation’s second-largest carmaker, said Thursday that it will build a $1 billion production plant in Mexico by 2016.

The carmaker held a signing ceremony involving Kia Vice Chairman Lee Hyoung-Keun, Mexican President Enrique Pena Nieto and Rodrigo Medina, governor of Nuevo Leon, where its plant will be located, according to the carmaker.

The 500-hectare plant will be built in Pesqueria, a city in Nuevo Leon state in the northern part of Mexico.

Once completed, the plant will produce 300,000 compact cars a year.

“We concluded that we need to tap into new markets to meet the increasing demand, as well as fostering a new growth engine for survival,” said an official of the automaker.

With the Mexican plant, Kia Motor’s annual production capacity will grow to 3.37 million.

“Mexico, together with Korea, is one of the nations that made FTAs (free trade agreements) with as many countries. By having production plants there, Kia Motor will be able to export cars to those countries as well paying less tax,” said Shin Chung-kwan, an analysis at KB Investment and Securities.

Kia Motors plans to break ground on the plant next month.

“It will be a breakthrough to enter the South American markets that were hindered with high tariffs, as well as providing the secure supply to the North American market,” said the company official.

“The Mexico plant will lessen the risk exposed from the fluctuation of currency rates,” he added.

Hyundai-Kia Motor’s overseas production accounts for only 44 percent, while its rivals produce nearly 75 percent overseas. More than 85 percent of its sales are made from overseas in the first half of this year