Mexican officials and Kia finally made a deal to end the dispute around the automaker’s first plant in the state of Nuevo Leon.
Kia announced nearly 2 years ago it planned to build a new factory in Mexico, in the northern state of Nuevo Leon, and to invest at least 1 billion dollars in this new manufacturing facility. However, the local government has been demanding that the South Korean automaker should renegotiate some of the incentives it received at that time, under the previous state administration. The officials have argued that the company was granted too many amenities, such as not paying income taxes for 20 years.
And this week, both sides have reached an agreement, a deal that would cut the incentives from 28 percent of the amount invested by Kia and its suppliers to 10.5 percent and would eliminate an income tax rebate. Kia has also promised to buy more auto parts from local companies. According to a statement from Nuevo Leon’s government, the deal also eliminated other incentives, such as paying for a party to inaugurate the plant, as well as committing the state government to provide water and electricity services.
Kia’s Mexico plant has started to build cars there in mid-May, on a site that has a production capacity of 300,000 vehicles per year and aims to meet the demand from North America and South America markets. Its sister company Hyundai also reportedly plans to move some of its output from South Korea to Kia’s new facility starting next year.