Kia Investing $1 Billion in Mexico

By Doug Donahue
Kia announced in late August they had reached an investment agreement with the Mexican government to build a state-of-the-art manufacturing facility in Monterrey. The $1 Billion investment is Kia’s first manufacturing plant in Mexico, with construction scheduled to begin later this month.

When the plant is completed in the first half of 2016, annual production capacity of 300,000 vehicles is expected, boosting Kia’s total global manufacturing capacity to over 3.3 million vehicles. The site of the plant, which is expected to occupy nearly 54 million square feet, will also be home to numerous supplier companies.

The site selection is interesting from two big-picture standpoints. First, as illustrated in Plastics Today, a major reason Kia chose Mexico was due to the country’s strategic proximity to the US. This will allow the Korean OEM to better address ongoing supply shortages that have arisen due to Kia’s dramatic growth in the U.S. market. The plant also gives Kia a new hub from which to service the entire Central and South American region, while freeing up supply from Kia’s domestic plants to address supply shortage issues.

Big Investment Despite Security Reputation
The second interesting component is less obvious to outsiders, but equally noteworthy. Mexican and international media spend a lot of time covering the security situation in Monterrey, a city that had a poor reputation due to a lot of cartel activity there. As recently as three years ago a manufacturing executive from Europe who we spoke with said he wouldn’t even consider that region due to safety concerns. He wasn’t alone in his reticence.

Yet the city of Monterrey has done a great job of late, both in minimizing the violence and in conveying a more positive image. They deserve credit for turning around the reputation in the area. Furthermore, Kia’s willingness to invest $1 Billion in the area speaks volumes about how much the situation has improved. It also demonstrates that security alone isn’t the only decision factor manufacturers need to consider. Overall operating costs, labor availability, wages, infrastructure and other factors all carry weight when determining where in Mexico to set up operations.

Source: Plastics Today

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