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Mexican Auto Investment Boom Attracts Korean Suppliers

Karla Salinas | 19.01.2015

The push to invest in Mexico’s flourishing auto industry has brought Korean auto parts makers to northern Mexico to supply Kia Motors Co. , which is building a large assembly plant in the border state of Nuevo León.

The push to invest in Mexico’s flourishing auto industry has brought Korean auto parts makers to northern Mexico to supply Kia Motors Co. , which is building a large assembly plant in the border state of Nuevo León.

The chief executives of 11 component manufacturers, most of them subsidiaries of Hyundai Motor Co. of which Kia is also an affiliate, signed agreements with state officials in the state capital Monterrey for investments worth about $1.5 billion.

The parts suppliers, which will make everything from headlamps and brakes to transmissions and engines, will set up operations within Kia’s 1,700-acre manufacturing compound in Pesquería, a now-booming, one-time ranch town near Monterrey’s international airport.

The suppliers alone are expected to employ nearly 9,000 people, state officials said.

The largest investment will be made by Hyundai Mobis , South Korea’s largest auto parts maker, which is putting in about $418 million. Hyundai Wia Corp. will invest about $370 million in another plant.

Kia, which is investing $1 billion in its Pesquería plant, intends to begin producing in May 2016, raising output quickly to 400,000 vehicles annually, said Rolando Zubirán, economic development secretary for Nuevo León.

That is equivalent to 13% of Mexico’s 2014 auto production of 3.2 million cars and light trucks. The Korean company, which has been producing crossover vehicles and sedans since 2009 at its first North American plant in rural West Point, Ga., said the Mexican plant was needed to meet rising regional demand.

Kia announced its Mexico investment in late August, joining earlier announcements by and alliance of Renault-Nissan and Daimler, and Germany’s BMW to build luxury SUVs in Mexico, mostly for export. Audi, a division of Volkswagen AG , will begin producing its own luxury SUV s next year at a new plant in southeastern Puebla state. Both Honda and Mazda began producing compact vehicles in early 2014 at new factories in central Mexico.

About 90% of Kia’s Mexico output will be exported, mostly to the U.S., Mr. Zubirán said in an interview. But Kia also plans to market vehicles in Mexico, where drivers have favored the kind of modestly priced products the Korean company specializes in, the official added.

Kia is the first auto assembly plant to set up in Nuevo León, Mexico’s premier industrial center that produces about a third of the auto parts made in the country, state officials say.

Kia’s factory is going up a few miles from a new complex, owned by Ternium and Nippon Steel & Sumitomo Metal Corp. , that produces galvanized steel and other specialized metal for automotive uses.

Mexican industry officials predict Mexico’s auto output will reach an annual 5 million by the end of this decade.

More than four of every five vehicles produced in Mexico are exported, mostly to the U.S. Mexico’s domestic automotive market remains hobbled by low incomes and the yearly importation of hundreds of thousands of used U.S. vehicles, industry officials say.

Source: The Wall Street Journal by DUDLEY ALTHAUS 

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