Kia eyes Mexico factory expansion to build EVs, Nuevo León 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 García, governor of the Mexican state Nuevo León, 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 HMG, which controls the Hyundai, Genesis and Kia brands.

Though all three nameplates offer electric vehicles in the U.S. market, none is eligible for the U.S. 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 Mexican governor, García, 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.

García has been vocal in promoting Nuevo León'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 builds its International eMV Series electric medium-duty truck at its Escobedo Assembly Plant, also in Nuevo León.

The Kia plant currently 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 there is "no specific decision made regarding Kia Mexico."

Last month, at Kia's annual CEO Investor Day presentation, 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 Kia will start to produce key EV models in the U.S. beginning 2024.

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

He could be referencing Kia's planned EV3 and EV4, two smaller crossovers that will be built on the auto group's Integrated Modular Architecture (IMA) system, the predecessor to E-GMP.

The IMA product plans will include a so-called eM platform that is designed specifically for passenger EVs. But Hyundai has said IMA will not be ready for market until 2025.

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

A Kia counterpart to Hyundai's 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 Feb. 2022. Through the first four months of this year, EV6 volume slipped 41.6 percent compared with 2022, according to data from the Automotive News Data & Research 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 passengers 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 lease 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 credit; EVs are eligible to receive that amount if their battery is assembled in North America.

Though Kia operates as a separate company from Hyundai, HMG has a history of sharing manufacturing lines, and many of their vehicles — though marketed differently — ride on shared platforms.

HMG last year committed $5.5 billion to constructing 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 compact crossover in the U.S., which rolled off the line early this year. It was eligible for at least a portion of the EV tax credit thanks to domestic assembly of the vehicle itself, but the most recent changes in the IRA limited eligibility to battery assembly and materials sourcing.

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