Kia eyes Mexico factory expansion to build EVs, Nuevo Leon governor says

Kia may be planning to expand its assembly plant in northeast Mexico to build future electric vehicles as Hyundai Motor Group maneuvers to become the No. 3 global EV maker.

According to a Facebook post by Samuel Garcia, governor of the Mexican state Nuevo Leon, company officials have expressed interest in investing $1 billion to upgrade their existing factory near Monterrey to produce new EVs.

Getting Kia's Mexico plant into the EV and batteries business would speed up the localization of its product line in North America, a crucial step for Hyundai Motor Group, which controls the Hyundai, Genesis and Kia brands.

Though all three brands offer EVs in the U.S. market, they are not eligible for the federal government's $7,500 EV tax credit under the Inflation Reduction Act because their batteries are imported and the materials used are sourced outside of North America.

The Korean automaker has made efforts to navigate the complex barriers of the new tax credit rules, including lobbying U.S. officials, but its situation has not changed.

The Nuevo Leon governor is traveling in Korea this week for the 2023 Korea-LAC Future Cooperation Forum, hosted by Korea's Ministry of Foreign Affairs. In addition to representatives from Latin American countries, officials from Korea's business and government circles are in attendance, according to a release from the Ministry's office.

Garcia has been vocal in promoting Nuevo Leon's position as a high-tech manufacturing center, calling it a "strategic place to invest."

The northeastern Mexico state also will be home to a future $5 billion Tesla Gigafactory, the company's third outside of the U.S. Trucking giant Navistar also builds International eMV Series electric medium-duty trucks at its Escobedo Assembly Plant in Nuevo Leon.

The Kia plant now builds the Rio and Forte small sedans. When asked about the potential new investment for EVs there, a Kia spokesperson said the company is "constantly analyzing new opportunities around the world," but no decision has been made regarding Kia Mexico.

At Kia's annual CEO Investor Day presentation last month, Kia CEO Ho Sung Song said that by 2027, the automaker will have a lineup of 15 EVs globally, up from its previous target of 14. Song also said that Kia will produce key EV models in the U.S. beginning in 2024.

Though Garcia did not reveal in his Facebook post which EV models the Kia plant might build, he said there will be two of them.

That could be a reference to Kia's planned EV3 and EV4, two smaller crossovers that will be built on the group's Integrated Modular Architecture, the successor to its Electric Global Modular Platform.

Integrated Modular Architecture product plans include a so-called eM platform designed for passenger EVs. But Hyundai has said this architecture will not be ready for market until 2025.

Kia also is expected to reveal the EV5 in 2025. The electric crossover will be similar in size to the Sportage, which is Kia's top-selling U.S. vehicle. The EV5 is expected to evoke the boxy, more upright styling of the brand's new seven-passenger EV9 crossover.

A Kia counterpart to the Hyundai Ioniq 6 electric sedan, on sale now, also is expected. But the timing of its arrival and what it will be called are still unknowns, according to analysts.

Changes in the EV tax credit rule already have impacted sales of Kia's EV6 compact crossover, which is imported from South Korea and went on sale in February 2022. Through the first four months of this year, EV6 volume slipped 41 percent compared with 2022, according to data from the Automotive News Research & Data Center.

To spur interest, Kia sales chief Eric Watson told Automotive News it will lean on a provision in the EV tax rules that allows automakers to pass the $7,500 incentive to customers as a discount off the capitalized cost if they opt to lease the EV instead of purchasing it.

Kia said this week that the rear-wheel-drive variant of its EV6 Wind would cost lessees just $499 per month over the course of 36 months, with $4,999 due at inception plus a $7,500 lease "bonus."

The company also said it would give buyers $3,750 toward a down payment on a financed EV6 Wind. That figure represents half of the $7,500 tax credit, which EVs are eligible to receive if their battery is assembled in North America.

Though Kia operates as a separate company from Hyundai, Hyundai Motor Group has a history of sharing manufacturing lines, and many of its vehicles — while marketed differently — ride on shared platforms.

Last year, Hyundai Motor Group committed $5.5 billion to construct an EV and battery plant outside of Savannah, Ga., referred to as the Metaplant, to build six EVs across the Hyundai, Kia and Genesis brands. But that factory will not open until January 2025, and company officials have said the necessary EV batteries won't be ready until 2026.

Hyundai also spent $300 million upgrading its plant in Montgomery, Ala., to build the Genesis Electrified GV70 in the U.S., with the compact crossover rolling off the line this year. The GV70 was eligible for at least a portion of the EV tax credit thanks to its domestic assembly, but the most recent changes in the Inflation Reduction Act limit eligibility to battery assembly and materials sourcing.

Kia will re-invest in its West Point, Ga., factory so it can bring assembly of its forthcoming three-row EV9 to the U.S., but the electric crossover still will not qualify based on the new rule.