Why Mexico is the Right Fit for Kia

Commentary by Doug Donahue

At Entrada Group, we meet often with tier 1 and tier 2 suppliers that are contemplating a Mexican presence, and they often express familiar motivation. First, they feel pressure to be in Mexico from a customer or prospect. Second, they know that once they establish operations, it will expose them to other new opportunity they wouldn’t have otherwise realized.

So the recent story in Automotive News about Kia’s first assembly plant in Mexico (ground is to be broken in Monterrey soon) reminded us that large OEMs and small-to-midsize suppliers share similar motivations for Mexico.

The new Kia plant, which will have a capacity of 300,000 vehicles, will signal an end to a self-imposed moratorium on growth for Kia and its Hyundai affiliate which, combined, rank fifth globally in car sales.

Hyundai and Kia unofficially halted expanded capacity about two years ago, to avoid the quality issues that Toyota faced when it grew too fast in the 2000s.

Kia has just one plant in the US, in Georgia, and it’s operating at full capacity. By expanding in Mexico, Kia and Hyundai will not only be able to increase global production, they will also benefit from the opportunity to use Mexico as a strong global export base (due to the country’s liberal trade policies) and close proximity to the recovering US market.

Source: Automotive News


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