Mexican standoff looms for Kia

GLOBAL car-maker Hyundai-Kia has banked on Mexico becoming the centre of its small passenger-car production in a decision made prior to the election of the nationalist policies of new US president, Donald Trump.

Now, the new president hints at cross-border trade restrictions that could impact on Australian supply of the just-launched Kia K4 sedan and, later this year, the hatchback.

The latest Kia on the Australian market, the K4 sedan that replaces the longstanding Cerato model, is built at Kia’s factory in Pesqueria in the northern Mexican state of Nuevo Leon.

It is Kia’s only global factory producing the K4 after it closed the Ceed production line in Slovakia and ended Cerato production in South Korea. Mexico supplies the K4, in sedan and later this year as a hatch, to the US, Europe and markets including Australia.

In the latest Reuters report, Mr Trump said that he was thinking of imposing 25 per cent tariffs on Canada and Mexico and that the action could come as early as February 1.

A threat of potential tariffs can affect some Asian manufacturers who have picked Mexico as a low-cost manufacturing hub that is close to the lucrative US market and on major shipping lanes to Europe.

Hyundai-Kia responded to Reuters saying its production in Mexico was part of its long-term, global strategy, adding it was committed to adapting operations to the international environment.

Kia Australia’s CEO Damien Meredith said he was confident the Mexican plant would prove effective in the near- and long term.

“I think the Mexico factory was set up to supply North and Central America and at that time, obviously, the politics of where the factory was built probably wasn’t important,” he said.

He said Mexico would become the hub for a range of products, not necessarily all bound for Australia.

“Mexico and Australia have a free trade agreement which makes exporting easier,” he said.

“Shipping of the K4 will go from Mexico to Korea and then to Australia.”

The Mexican plant will also make the K3 (Rio replacement) for some markets, including the US, while Australia will take the K3 from South Korea.

Audi, Honda, Mazda, Stellantis (Ram), and Volkswagen also have factories in Mexico.