Mexico just won another large factory deal: Kia Motors Corp. announced at a signing ceremony on Aug. 27 that an investment agreement had been reached with the Mexico government to build a state-of-the-art manufacturing plant in Monterrey, a city located in the northeastern state of Nuevo Leon. The new plant represents an investment of approximately $1 billion. This will be Kia's first manufacturing plant in Mexico, where it will join most of the other major global automakers in Mexico's booming automotive manufacturing industry.
Construction on the Kia Motors Mexico plant is scheduled to commence in late September of 2014. When completed, in the first half of 2016, it will boast an annual production capacity of 300,000 vehicles. That will boost Kia's total global manufacturing capacity to 3.36 million vehicles, including 1.69 million vehicles at domestic Korean plants and 1.68 million at overseas plants. Kia plans to produce a range of yet-to-be confirmed compact models at the new plant.
The highly automated plant will be situated on a 53.8 million sq ft site that will also be home to numerous supplier company facilities.
According to Kia's information, Kia Motors has been evaluating various options for entering new overseas markets to secure future growth for the brand. It is currently one of the world's fastest growing automakers. With 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 of the world where Kia does not have a sales presence.
For Korean automakers to competitively enter the Mexico market, the establishment of local production facilities is pivotal, as Mexico imposes high tariffs on imported cars from Korea, said Kia. Moreover, Mexico is well-known for its skilled, low-cost labor force and numerous free trade agreements (such as NAFTA) with about 40 countries.
Meanwhile, Kia expects the Mexico plant to play a major role in alleviating current global supply issues thanks to its strategic geographic location. Namely, its proximity to the United States will enable the company to better address ongoing supply shortages that have arisen because of the dramatic growth of the Kia brand in the U.S. market. The plant also will be used as a foundation for strengthening the brand's sales presence throughout the entire Central and South American region, while freeing up supply from Kia's domestic plants to address supply shortage issues.
"All of us at Kia Motors are proud to signal a new era for the brand with the announcement of our first manufacturing plant in Mexico," said Hyoung-Keun (Hank) Lee, Vice Chairman of Kia Motors Corp. "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 both to the economic growth of the state of Nuevo Leon and the future development of the Mexican automotive industry."