Kia Plans Major Factory in China

SEOUL, South Korea May 13, 2004; The AP reported that South Korea's second-largest carmaker, Kia Motors Corp., said Thursday that it will build a US$645 million car-making plant in China's eastern province of Jiangsu by 2006.

"The decision to build the plant was based on creating a stronger presence in China that will help claim an increased portion of the large Chinese car market that is predicted to grow to 10 million by 2010," Kia said.

Kia said it will break ground in July for the new plant -- its second in China -- which will eventually produce 300,000 cars annually.

The company had said in December that it would double annual production capacity at its existing Chinese plant to 100,000 vehicles by the end of June. The plant is operated by Dongfeng Yeuda Kia Motor Co., established in 2002 as a joint venture with China's Dongfeng Motor Co.

Dongfeng Yueda Kia Motor increased its share of the Chinese auto market to 2.4 percent last year, from 1.6 percent in 2002.

Kia's announcement came a day after its sister company, South Korean No. 1 carmaker Hyundai Motor Co., said it was drastically curtailing its 4-year-old partnership with DaimlerChrysler AG.

DaimlerChrysler decided to sell its 10.5 percent stake in Hyundai and scrap plans to build a joint engine-making factory and truck-making venture. But they will continue to jointly develop car engines and procure auto parts. The German carmaker will also keep providing bus engines to Hyundai.

The relationship began to fall apart amid DaimlerChrysler's plans to build Mercedes-Benz cars in China in partnership with Beijing Automotive Industry Holding Co.