Kia announces plans for $1.5B auto plant in Mexico

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Kia Motors will open a $1.5-billion auto plant in northern Mexico in 2016, with the capacity to build 300,000 vehicles annually, Mexican President Enrique Pena Nieto announced Wednesday.

The factory will be built in the city of Pesqueria in the border state of Nuevo Leon.

“It is the first investment by the Korean auto industry in our country,” Pena Nieto said, noting that parts of the country have enjoyed a boom in automotive production financed by U.S. and Japanese firms.

“We celebrate that KIA Motors has decided to join in the success story that we Mexicans are writing,” he added.

Despite homicides, kidnappings and extortion of businesses that plague the country, Pena Nieto said Mexico is a good place to invest and predicted that the auto industry will be at the forefront of economic expansion.

Auto production grew 7.5 percent from January to July this year compared with the same period last year, and exports 11.2 percent, Pena Nieto said. The vast majority of cars produced in Mexico are exported, mostly to the U.S.

Brands like Honda, Mazda, Volkswagen, Nissan, General Motors and Ford all assemble vehicles in Mexico for the American market. In June, Mercedes-Benz and Nissan announced a joint $1.4-billion plant that would be online by 2017, and BMW revealed plans in July for a $1-billion plant.

Automakers have been lured to Mexico by an increasingly skilled workforce, lower wages than in the U.S., and favorable export rules. While Mexico currently accounts for 18 percent of North American automotive production, that figure is expected to rise to 25 percnet by 2020, according to IHS Automotive.