Kia Motors Corporation plans to build a third manufacturing plant in China in order to meet dramatically increasing local demand and to maintain its positive sales momentum in the Chinese market.
The signing ceremony for the investment MOU (Memorandum of Understanding) to build the new Dongfeng Yueda Kia Plant 3 will be held later today in Yancheng, Jiangsu Province. The event will be attended by more than 50 Chinese government officials and Kia Motors representatives, including Hyundai Motor Group Chairman, Mong-Koo Chung. Dongfeng Yueda Kia (DYK) Motors is a 50/50 joint venture through which Kia Motors manufactures, markets and services vehicles in China.
Upon completion of the plant, which will be able to produce 300,000 units annually, Kia will have increased its production capacity in China from the current 430,000 units at its existing two plants to a total of 730,000 units per year.
Mr. Chung said, “Kia is one of the fastest growing automotive companies in the Chinese market and this would not be possible without the continuous support and cooperation from the governments and citizens of Jiangsu and Yancheng.
“With our third China plant, which we will begin constructing at the end of next year, Kia will be well-positioned to provide its growing Chinese customer base with stylish, safe, reliable and high-quality vehicles while also helping to further develop the local economy and improve people’s lifestyles,” he added.
The new plant will be located just five kilometres from Kia’s second plant in Yancheng’s Economic and Technology Development Zone. The close proximity to the existing facility will enable Kia to utilize the established infrastructure and to create synergies between the plants.
Kia plans to begin construction of the new plant at the end of next year and anticipates completion of the facility and the roll-out of production models in the second half of 2014.
Strategic models developed especially for the Chinese market to reflect local needs and preferences will be built at the new plant, but the specific models have yet to be finalized as Kia continues to study the rapidly transforming Chinese automobile market.
The city of Yanchang will be gifting 1,500,000 m2 of land to Kia and will also provide incentives such as preferential tax rates.
Kia has been one of the best performing foreign brands in China in recent years. Sales of locally-manufactured Kia vehicles reached 101,427 units in 2007, and the company posted a 40% year-on-year increase in 2008, selling 142,008 units after the second DYK plant was put into full operation.
Kia continued its strong growth in 2009, recording a 70% year-on-year increase (241,386 units sold). Last year, Kia posted further strong double-digit growth, reaching 333,028 vehicles sold for 38% year-on-year growth.
So far this year (through the end of October), sales of locally produced vehicles recorded 341,682 units thanks to the introduction of the highly competitive mid-size K5 sedan (known as ‘Optima’ in markets outside of Korea and China) and the sub-compact K2 (a localized version of the all-new Rio).
Kia is confident of reaching its 2011 China sales target for locally-produced vehicles of 430,000 units. Kia enjoyed its highest-ever monthly sales in China in September, with 43,508 vehicles delivered – including 4,001 K5 sedans and 10,478 K2 cars.
Kia’s Chinese market share has also grown dramatically over the past few years – from 2.0% in 2007 (ranking 18th in the industry) to 3.0% in 2010 (13th in the industry). Through September of this year, Kia’s market share reached 3.5%, making it a top-10 auto maker in the Chinese market.
Combined with its sister company Hyundai Motor Co., which has annual capacity in China of 720,000 units, the Group expects to reach sales of around 1,150,000 units in 2011, placing it third in the Chinese market behind VW and GM.
According to a Chinese government policy-making think tank, the State Information Center, next year’s local automotive demand will reach 12.7 million units, which is a 14.2% increase from this year’s anticipated total of 11.1 million. Annual demand is expected to increase to 17.9 million units in 2014 and to 19.6 million units in 2015.
According to these forecasts and the huge production capacity increases being made by major competitors, Kia predicted that its market share in China would drop from the current 3.5% to 2.4% in 2014 if it only operated two plants.
During his visit to Yancheng, Mr. Chung inspected the existing DYK plants to check the quality process of Kia’s new models such as K5 and K2. He commented, “We need to be very active in terms of meeting growing consumer demand in order to maintain our current positive momentum. However, it is also essential that we further increase the emotional appeal of our products and raise our brand awareness in conjunction with establishing a strong local production system.”
“The Chinese market has been the key focus for many global automakers, and this trend has resulted in Chinese customers demanding better cars. So it’s imperative that we capture the hearts of our Chinese customers by giving them an unsurpassed ownership experience.”
