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imageSEOUL: Hyundai Motor Co is planning to build the new version of its Accent small car at a Mexican plant owned by sister company Kia Motors, two people familiar with the matter said, shifting some output of lower-margin vehicles out of high-cost South Korea.

The Accent would be the first car made by Hyundai in Mexico, which has wooed other automakers thanks to its cheap labour and proximity to the US market. The Kia Mexican factory is set to begin operating in May.

Hyundai plans to start production of the new Accent in Mexico in July 2017 and build 20,000 of them that year, one person with direct knowledge of the matter said, adding that it aims to lift that number to 76,000 in 2018 and then to 100,000 the year after.

It will also continue to make the Accent in South Korea and may build a new subcompact sport utility vehicle in its home market to make up for likely production declines and to tap the fast-growing and higher margin segment, he said.

Kia also plans to build its Rio subcompact at the Mexican factory, in addition to its Forte compact, he added.

The sources declined to be identified because they were not authorised to speak on the matter publicly.

In an emailed response to Reuters' inquiries, Hyundai said it is considering building Hyundai vehicles at Kia's Mexican factory but nothing has been decided.

Hyundai also said it is considering introducing subcompact SUV models in South Korea, the United States and Europe.

Copyright Reuters, 2016

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