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Kia to Build Production Plant in Mexico

June 4, 2014

Kia Motors Corp. is about to follow other automakers across the border. According to an Automotive News report, Kia is looking to build a new assembly plant in Mexico.

Sources familiar to Kia’s plans say that the new plant will be erected in Monterrey and will have a capacity of 300,000 units. The Mexican plant, which will initially assemble two small cars, will allow the automaker to boost its supply for the U.S. market. Kia currently has a single, full capacity plant in the United States.

The revelation of this plan suggests that Kia, along with affiliate Hyundai Motor Co., has finally decided to increase capacity. Chung Mong-koo, chairman and CEO of Hyundai and Kia, stopped new capacity growth for both automakers two years ago. He sought not to expand both South Korean companies to save them from the fate of Toyota Motor Corp., which grew immensely in the 2000s but was plagued with quality problems as a result.

Kia has yet to make a confirmation regarding its plans to build a new factory in Mexico, but a company spokesman did say that the automaker is exploring its options on how to properly address capacity limitations in the U.S. Meanwhile, the spokesman did not say whether Chung did give the green light to resume the building of new factories.

According to company insiders, Hyundai and Kia are again considering to boost production capacity, and that the automakers conducted feasibility studies in growing markets, including Mexico. In March, Hyundai announced that it intended to build a new factory in Chongqing, China.

According to analyst Suh Sung-moon from Korea Investment & Securities, both automakers are now more acquiescent to expanding as their existing plants have reached maximum manufacturing capacity limits. The analyst said that if the duo—which is in fifth place in terms of global auto sales—did not build new plants, they could lose market share in the near future.

Kia has a manufacturing plant in Georgia, which assembles its mid-sized Optima sedan as well as the Sorento SUV. This factory also produces the Hyundai Santa Fe SUV. Hyundai also has one plant located in Alabama. According to company executives, both facilities are already running at full capacity and could no longer keep up with growing demand in the U.S.

The assembly plant in Monterrey would be Kia’s first facility in Mexico. One of the sources said that manufacturing would start 21 months after the facility’s groundbreaking.

Photo credit: Ian Muttoo/ Flickr/ CC BY-SA

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