Mexico plans to settle plant dispute with Kia image

The Mexican government has disputed the previous agreement with Kia over automaker’s first plant in the country, but the disagreements are soon to end, local officials declared.

Many automakers up North intend to bypass the high-costs involved in building low-margin cars, planning to shift some of their outputs in some more-affordable regions. Ford, General Motors Co and Fiat Chrysler are among the companies planning to move some of their smaller cars production from North America to Mexico. However, labor costs are also high in South Korea, prompting Hyundai and Kia to build cars in Mexico as well. In August 2014, Kia revealed its plans to build a new factory in the central American country and to invest at least 1 billion dollars in the new manufacturing facility.

However, the government in the northern state of Nuevo Leon has been demanding that Kia renegotiate some of the incentives it received at that time, under the previous state administration. The local officials have argued that the South Korean automaker was granted too many amenities, such as not paying income taxes for 20 years. However, the state government said it had some productive talks on the matter this week with Kia and it hopes the company would give a positive response in a week about what has been proposed, without giving further details over the meeting.

Kia’s Mexico plant has a production capacity of 300,000 vehicles a year and it plans to meet the demand from North America and South America markets. Its sister company Hyundai has also reportedly said it will move some of its output from South Korea to Kia’s new facility starting next year.

Via Reuters