Kia Motors Corp. is intending to soon break ground on a new site in Monterrey, Mexico, an indication that the carmaker and affiliate Hyundai Motor Co. are lifting a moratorium on capacity growth, two sources privy with the matter told Reuters.
The Monterrey site will have a capacity to build 300,000 vehicles annually and will initially produce two small cars, one of the sources said. The plant is expected to help Kia cater to growing demand in the United States, where the carmaker’s sole plant is already operating at full capacity.
A Kia spokesman remarked that the South Korean carmaker is mulling a number of options to resolve capacity constraints in the US, although it has yet to make a decision.
Around two years ago, Hyundai-Kia chairman Chung Mong-koo unofficially imposed a moratorium on capacity expansion on concerns that the group may face quality issues similar to those that haunted Toyota Motor Corp. when the Japanese carmaker grew in a very fast pace in the 2000s.
Five people privy with the group's plans told Reuters earlier this year that the group was looking to invest in expanding its manufacturing capacity and was conducting feasibility studies in promising markets like Mexico. Hyundai said in March that it had plans to build a new site in Chongqing, China.
Suh Sung-moon, an auto analyst at Korea Investment & Securities, told Reuters that the South Korean carmakers are now more flexible with building new sites since their global production capacity has already reached limits, adding that sans new capacity, the group could lose market share in 2016.
Kia operates a site in Georgia that builds the Optima, the Sorento and the Hyundai Santa Fe. Hyundai operates a plant in Alabama.