Kia Forms JV to Build Third Plant in China

Kia forms a joint venture with two Chinese partners to build a vehicle-manufacturing plant near its two existing facilities in Yangcheng, Jiangsu province.

With annual capacity of 300,000 vehicles, the new plant will increase Kia’s total production capacity in China to 730,000 units.

Production line at Kia Plant 2 in Yancheng.

Kia owns 50% of the JV, called Dongfeng Yueda Kia Automobile. Its Chinese partners are Dongfeng Motor and Jiangsu Yueda Auto Works.

“We are not disclosing cost information, but construction will begin at the end of next year, with a start of mass production in the second quarter of 2014,” a Kia spokesman tells WardsAuto.

“The vehicles that will be produced have not been finalized. But we believe production will focus on the Chinese consumption base, and we don’t believe the new plant will be involved in exports.”

The spokesman indicates the China-specific vehicles destined for the new plant could include the Kia K5 D-segment sedan that shares a platform with sister company Hyundai’s Sonata, as well as the K2-branded China version of the Kia Rio subcompact.

“Both of these vehicles are very popular in China,” the spokesman notes. “The Kia K5 is sold as the Optima in other markets, including the U.S.

The K2 is quite different from the Rio and has lines like the highly stylized K5.”

The K2, produced in Yangcheng, made its global debut in April at the 2011 Shanghai auto show. It is sold in both China and Russia, but the Russian version is not made in China.

Chinese sales of the K5, built in Yangcheng, launched in March. The K5 also is manufactured in Hwasung, Korea, and in Oskemen, Zazakhstan, for the Russian market.

It is produced as the Optima for the North American market in West Point, GA.

Hyundai Motor Group projects combined Kia and Hyundai sales in China this year will reach 1.15 million units, making it China’s third-largest foreign-affiliated auto maker behind Volkswagen and GM China.

Hyundai has 720,000 units of capacity at its Beijing Hyundai production complex in Beijing.

Kia’s JV’s new plant will be located just three miles (5 km) from the two existing Dongfeng Yueda Kia plants within the Yangcheng Economic and Technology Development Zone.

The city is granting tax incentives to the partners and is providing a 371-acre (150-ha) site.

Kia supplies its Chinese plants with body stampings produced in Korea, so the new factory will boost Korea’s exports. Chinese steel generally lacks the exterior-body-panel quality needed for Hyundai-Kia vehicles, some analysts say.