Kia Motors Corp. will announce plans Wednesday to construct an assembly plant in Mexico, its first in the country, according to two sources with knowledge of the matter.
A senior automotive industry source in Mexico City told Automotive News that Kia will unveil plans to build an assembly plant in the Monterrey area of northern Mexico at a news conference hosted by Mexico President Enrique Peña Nieto on Wednesday morning.
The announcement will be made at the offices of Mexico's economy ministry, the person said.
Another source briefed on the plans said the plant is scheduled to begin operating in 2016.
Bloomberg News reported plans for the plant and Wednesday’s expected announcement earlier Tuesday.
A spokesman for Kia Motors America declined to comment, deferring to a Kia spokesman in South Korea, who was unavailable for immediate comment.
Previous news reports have said Kia will invest at least $1.5 billion in the plant, which will have annual production capacity for 300,000 vehicles.
A production base in Mexico would likely bolster Kia’s ability to supply vehicles to the U.S. market, where its sales and those of corporate sibling Hyundai Motor America have been curbed by limited capacity worldwide over the past two years.
Kia and Hyundai assembly plants in Georgia and Alabama are also operating at or above their official capacity.
It’s unclear what vehicles Kia plans to produce in Mexico. The company assembles the midsize Optima sedan and midsize Sorento crossover at a factory in West Point, Ga.
Automakers are increasingly using Mexico as a hub for small-car output. The country’s lower labor rates help pad the typically thin profit margins of small cars sold in the U.S.
Mazda Motor Corp., Nissan Motor Corp. and Honda Motor Co., for example, have either begun production or announced plans to build small cars in the country.
If Kia follows suit, the Forte compact, Soul subcompact or Rio subcompact could be among the possibilities to be built south of the border.
The plant also signals a more aggressive strategy at the Hyundai Motor Group, which includes Hyundai, Kia, parts supplier Hyundai Mobis and several other affiliated companies.
For the last several years, the group has had an unofficial moratorium on new car factories. Hyundai Motor Group boss Chung Mong-koo has put a priority on improving quality and brand reputation over sales growth following Toyota’s recall crisis, which made the Korean group wary of growing too fast.
Kia signaled the cautious approach was easing in July when a company spokesman confirmed that it was evaluating Mexico as a potential site for its next overseas assembly site “to secure future growth for the brand…and to better cope with the ongoing supply shortage in the Americas region.”
In addition to lower labor costs, Mexico’s numerous free-trade agreements make it a potent base for exports.
Newly announced or just-opened plants will add an estimated 1.5 million units of vehicle production capacity in Mexico by 2019, Automotive News reported last month.
Stephen Downer contributed to this story from Mexico City.