Hyundai Motor Co. has announced it will build its fourth plant in China for approximately 1 trillion won ($926.48 million), according to Reuters.
Production will start in early 2016 in its first major overseas expansion in over two years.
Hyundai and Kia Motors Corp are hoping the Chongqing facility will "protect their share of the world's biggest car market," according to Reuters.
"Considering China's future demand growth outlook, we need to build a new plant to maintain our stable market share of 10 percent in China," Hyundai said in a statement this week, according to Reuters.
Analysts believe Hyundai or Kia will shift its focus to adding production facilities in the United States, China and other countries to address a capacity shortage.
More production plants would also help the companies defend market share against rivals like General Motors, Volkswagen, and Nissan Motor.
"They are expected to build more plants in China to keep up with market growth," said Ko Tae-bong, an auto analyst at Hi Investment & Securities, according to Reuters. "I also carefully expect Hyundai to build a new plant in the United States as it is physically impossible to further expand production due to capacity constraints."
Group chairman Chung Mong-koo will reportedly sign a preliminary deal this week with the government of Chongqing city, in southwestern China, according to the automaker.
Hyundai already has three plants in Beijing.
The new plant will increase Hyundai and Kia's total China capacity to 2.3 million vehicles a year. Analysts has previously predicted two million by the end of 2014.
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