UPDATE 1-Kia in talks to open $1.5 bln Mexico plant -local government

Tue Jul 22, 2014 7:02pm EDT

(Adds details, quote from official)

MEXICO CITY, July 22 (Reuters) - South Korean automaker Kia Motors Corp is in talks with Mexico to open a new, $1.5 billion auto plant, officials of the northern state of Nuevo Leon said on Tuesday.

Rolando Zubiran, secretary of economic development in Nuevo Leon, said negotiations on the plant were under way and involved Nuevo Leon, the Mexican federal government and Kia, an affiliate of Hyundai Motor Co.

"It's more than $1.5 billion," Zubiran said, referring to the planned investment. He added that Nuevo Leon hoped the deal would be concluded during the first two weeks of August.

The plant would have an annual capacity of 300,000 cars and be built on the northeastern fringe of the city of Monterrey, according to several people familiar with the matter, who spoke on condition of anonymity.

Zubiran said details were still being discussed.

Sources in South Korea previously told Reuters that the plant will initially begin producing two small cars. The factory could help meet demand in the United States, where Kia has just one plant.

One person familiar with the negotiations said the plant could pave the way for Korea and Mexico to resume stalled bilateral free trade talks.

The Kia plant would be the latest in a series of major investments by global automakers in Mexico in recent months as they take advantage of the country's growing industrial base and tariff-free access to the U.S. market.

Earlier this month, German luxury car maker BMW announced a $1 billion Mexican plant investment. (Reporting by Dave Graham, Hyunjoo Jin, Paul Lienert and Gabriel Stargardter; Editing by Steve Olofsky)

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