South Korean automaker Kia is set to commence production and sales of fully electric vehicles in Mexico, managing director Horacio Chavez confirmed on Wednesday.

The company plans a substantial investment of $649 million in the country, an announcement made by Chavez during a press conference alongside President Claudia Sheinbaum.

The electric EV3 model, currently produced in South Korea, will begin manufacturing on August 4 at a Kia plant located in Mexico's Nuevo Leon state, Economy Minister Marcelo Ebrard stated. Chavez clarified the investment's purpose, explaining, "It's an investment made to adjust the production line, so the same plant continues to be used."

President Sheinbaum emphasized the domestic market's importance, noting, "A significant portion is intended for the domestic market," as her administration aims to boost the adoption of electric vehicles across Mexico.

This strategic move by Kia aligns with Mexico's broader efforts to diversify its markets and integrate new technologies, including electric vehicles and batteries, to reduce imports.

Economy Minister Ebrard highlighted this initiative as a response to increasing protectionism from the United States, Mexico's largest trading partner.

This comes after the U.S. proposed in May, during bilateral talks to revise the North American trade agreement, that 50% of the value of North American-built vehicles originate in the United States – a significant departure from current regulations.

In response, automakers like Toyota and General Motors have already announced plans to expand their capacity in the U.S. and relocate some vehicle production.