Hyundai Motor Group this week announced plans to invest $3.1 billion the U.S. over the next five years, a move that could either mean a new factory or increased production at existing plants in the South, including in one run by sister company Kia Motors in Georgia.
An explosion of Korean investment has created thousands of jobs in the state in recent years, mainly as auto suppliers have set up shop between the Kia plant in West Point and the Hyundai factory down Interstate 85 in Montgomery, Ala. Kia’s came on line in 2009 and now is at full capacity, making 360,000 cars per year.
Hyundai Motor President Chung Jin-haeng announced the investment plan in Seoul Tuesday, revealing that the company was considering a new American plant and may make its Genesis luxury sedans or a U.S.-focused sport-utility vehicle here, Bloomberg reported.
Reached by Global Atlanta, a spokesman for Kia Motors America Inc. at its headquarters in California said it’s too early to say whether the investment would come in the form of a greenfield plant or upgrades to existing facilities.
James Bell, director of corporate communications, relayed the following statement from the company:
Many factors, including market demand, internal and external business environment, models for local production and location need to be considered in the decision-making process for a new plant investment. The decision on which company, Hyundai or Kia, will build another U.S. plant will be finalized once these issues are fully reviewed by the group.
He added that there is as of yet no breakdown as to how much of the $3.1 billion would be allocated to Kia versus Hyundai.
The announcement of a new investment comes as the models produced in Georgia — the Sorento crossover utility vehicle and the Optima sedan — have seen declines despite the company’s record sales in the U.S. market for 2016.
Optima sales were down 22 percent, while Sorentos inched down 1 percent last year.
Mr. Bell hinted that the Optima’s woes could be linked to a sluggish sedan market overall: “Where certain models maybe have not exceeded expectations, a lot of that is connected to what the market is embracing.”
That said, he was optimistic about Kia’s overall performance and new models like the Niro hybrid crossover and the high-powered Stinger sport sedan, which competes more at the level of premium marks like BMW and Audi, he said.
“We think that there’s a real shift happening when it comes to brand equity with Kia,” Mr. Bell said of the company’s 3.4 percent uptick in U.S. sales to 645,818 vehicles, led once again by the Soul compact, which is imported to the U.S. from Korea.
Hyundai’s announcement of a new U.S. investment hit the press just before Donald J. Trump’s inauguration as the new American president. Mr. Trump has famously threatened to slap a 35 percent tariff on cars imported from Mexico and has taken credit for decisions by General Motors and Ford to shift production to the United States from Mexico, creating or saving thousands of jobs. Experts say the relationship between the new president’s threats and these decisions isn’t clear cut.
Kia set up a plant last May in the Mexican state of Nuevo Leon that currently makes the company’s Forte sedan for export to the U.S. and other markets. Mexico has a broad range of free-trade agreements that give auto makers flexibility as they sell to multiple markets including the European Union and the United States.
During the campaign, Mr. Trump also slammed the Korea-U.S. free-trade agreement, which he said increased the bilateral trade deficit and caused American job losses.
Mr. Bell of Kia didn’t comment on the Korea trade deal, which has phased out most automotive tariffs between the two countries since it was enacted in 2009. But he noted that Kia’s Mexican plant didn’t displace any U.S. jobs.
“We’re treating it very separately,” he said.
Like many U.S. automakers, Kia is taking a wait-and-see approach on the prospect of new tariffs under the new administration.
Last fiscal year ending June 30, 2016, the Georgia Department of Economic Development worked on 13 Korean investment projects, more than from any other country. The state has an office to recruit companies in Seoul.