Kia mulls $1b EV expansion of Mexico plant

Hyundai Motor Group’s Kia Motors is in talks to expand the production lines at its Mexico plant as part of efforts to bolster responsiveness to US subsidies for electric vehicles, according to company officials and local authorities on Tuesday.

“We are not building a new plant but (we are) considering transferring some of the production lines for EVs,” a Kia official told The Korea Herald. “The move is part of our response to the Inflation Reduction Act in the US. But the exact schedule has not yet been decided.”

The comment comes after Samuel Garcia, governor of Nuevo Leon, the northern border state of Mexico, made a surprise announcement on his Twitter earlier in the day, saying “Nuevo Leon is being strengthened as a electro-mobility hub: Kia once again bets on Nuevo Leon with an investment to expand its plant and produce two Kia car models.”

The governor visited Seoul this week to attend a business forum, during which he is believed to have held a meeting with Kia officials.

He didn’t reveal the specific names of the new EV models to be produced in Mexico but posted several photos of Kia’s upcoming EV9 large-sized electric SUV along with his announcement.

He noted the investment size for the Kia plant could reach $1 billion. The Kia official declined to confirm the amount.

Kia currently operates a production plant on a 3.35 million square-meter site in Pesqueria, a town in Nuevo Leon. Completed in 2016, the plant has a production capacity of 400,000 vehicles per year. Currently, the plant produces Kia’s two compact sedans -- K3 and Pride.

Nuevo Leon, located on the US-Mexico border, is considered to be an industrial capital of Mexico. Some 2,600 companies, including 270 Korean firms, are located there, employing 600,000 workers.

Companies have been increasingly investing in the state, hoping to take advantage of the IRA which offers hefty tax cuts for locally-produced EVs and their parts.

In February, Tesla also announced a new $5 billion plan to build a new EV plant there.

Mexico is a nascent but fast-growing EV market benefiting directly from free trade agreements with the US and other subsidiary programs. In the overall car market, Kia is one of the top five-selling carmakers there with a market share of about 5 percent, while Hyundai is ranked at number 10.

Hyundai is also beefing up efforts to produce EVs in North America, with plans to build its first EV-only plant in the US state of Georgia and make it operational by the end of 2024.