Kia Motors to start Mexico output in first-half of 2016

Kia Motors expects to start production at its first Mexico factory in the first half of this year as planned, despite local government calls for a change to an investment deal reached with the South Korean company.

The new government in the Mexican state of Nuevo León is demanding Kia renegotiate some of the incentives promised in the 2014 deal, citing the state's difficult financial situation, Kia said.

"The investment contract between the company and the Nuevo León state government was done through a legitimate procedure, and we expect the state government to respect the contract and faithfully abide by it," the South Korean automaker said in a statement on Wednesday.

A person familiar with the matter told Reuters that South Korean President Park Geun-hye may address the issue during talks with her Mexican counterpart early next month.

Kia aims to start the output of its Forte compact at the factory on May 15 as scheduled, the person said, declining to be identified due to the sensitivity of the matter.

The carmaker in 2014 announced the US$1 billion project to build the Mexico plant, with a capacity of 300,000 vehicles a year. It will cater to demand from North America and South America.

Affiliate Hyundai Motors also plans to build its Accent small car at the Kia factory next year, two people familiar with the matter previously told Reuters.