Kia Motors Ignites Its Strategies to Enter Overseas Markets

Kia Motors is putting together a plan to enter overseas markets as its export to Europe and China have been picking up rapidly. The company is building large-scale production lines overseas. Production capacity at of local factories under construction in Europe and China is between 450,000 to 550,000 units per year, which is nearly half of the current annual capacity of 1 million units.

At an investors’ conference held yesterday at the Korea Stock Exchange in Yeouido, Seoul, Gu Tae-hwan, Vice President of Kia`s corporate finance, said, “Kia Motors will take the place of Hyundai Motors Company in building production lines in European countries,” and added, “We are seeking proper factory sites in Eastern Europe, such as the Czech Republic and Slovakia, and planning to select the best possible site by the year-end so that construction can begin in the second half of next year.”

“Production capacity of European factories will be between 200,000 to 300,00 units each year,” said Vice President Gu, adding, “Which models will be produced and who among Kia and Hyundai will sell the vehicles is yet to be determined.” This implies that there still are many variables at play, such as only Hyundai car models can be produced or Hyundai and Kia can pursue joint investment in the plan.

Kia Motors plans to expand the output capacity of its Chinese factory by 250,000 units. The production capacity at its factory in Yenchung, Jangsui Province, China, will be increased by 100,000 units by 2006, while a secondary production line will be set up in the same province with an annual output capacity of 200,000 units.

“Building a factory in Europe that can produce 300,000 units per year will require 1 trillion won,” said Sejong Securities Analyst Yong Dae-in. He went on to say, “Whether Kia can raise this amount of capital is still very much in doubt.”

Kia Motor Company announced yesterday that car sales for the fist half of this year increased 4.3% to 437,000 units compared with the same period last year, which is attributable to rising exports. As a result, Kia`s revenue for the first half of this year reached 6.4182 trillion won, a 13.6% increase. The automaker`s operating income and net income posted in at 351.9 billion and 328.0 billion won, respectively, which is an increase of 14.8% and 17.4% year-on-year, respectively.

Yet obstacles remain, as a possible production disruption lie ahead because the labor union at Kia is demanding “an agreement in advance between unionists from both Hyundai and Kia in developing new car models.” The labor union made the demand at the eighth negotiation meeting with management yesterday. Daewoo Securities Analyst Cho Yong-jun said, “Kia Motors is concentrating on Chinese markets where its car sales are picking up,” adding, “If Kia, like Hyundai, allows its unionists to intervene in the procedure of moving factories offshore, it would be a significant constraint on Kia in its bid to enter foreign car markets.”

Na-Yeon Lee Jung-Eun Lee larosa@donga.com lightee@donga.com