South Korea's second largest car maker, Kia motors is to build a $1.2bn (£694.5m) factory in Georgia - its first plant in the US.
Hyundai's Kia Motors is planning further expansion
Kia said 2,500 jobs would be created at the site, where it expects to produce 300,000 vehicles a year by 2009.
The move is part of Kia's wider expansion plan and reflects a general boom among Asian car manufacturers.
Analysts added that the move would also help to offset higher local currency costs in South Korea.
The South Korean won climbed 3.2% compared with the US dollar this year, eating into profits made overseas.
"We need to expand more in the global market in order to escape foreign exchange risks," said Choi Soon-Chul, executive vice president.
Kia, which makes Picanto minis and Rio and Cerato compacts, hopes to increase its US sales by 15% to 350,000 in 2006, and to 800,000 units by 2010.
The new plant in West Point on the border with Alabama, is to receive $410m from Georgia, including land and utilities for the factory.
The site will be close to a new factory opened last year by Kia's parent company Hyundai - South Korea's largest carmaker.
An increasing number of Asian carmakers are opening manufacturing operations in the US, particularly in the South.
Nissan has factories in Mississippi and Tennessee while Japanese carmakers Toyota and Fuji Heavy have announced a tie-up that will include joint production in the US.
Under the plans, announced on Monday, Fuji's Subaru plant in Indiana will produce 100,000 Toyota Camry sedans a year starting in 2007.
The agreement will beef up Toyota's production in the US, which also includes the current construction of a sports utility vehicle production plant in Texas.
Fellow Japanese group Fuji is also expected to set out plans for production at an Indiana-based plant.
In contrast, US motor giants Ford and General Motors have been struggling to stay afloat as they face huge losses.
One of the biggest problems for GM has been the huge expense of healthcare and pensions benefits.
The South has less strict union and labour rules - arguably making hiring workers cheaper than in Detroit, the car industry's traditional centre.
GM, which lost $8.6bn last year, has unveiled a range of cost-cutting measures, including cutting 30,000 jobs, closing 12 North American factories by 2008 and reducing its chief executive's pay by half. Ford also decided to slash up to 30,000 jobs as part of its efficiency drive.