Kia Motors will invest $1.1 billion in Andhra Pradesh’s Anantapur district to build its first manufacturing facility in India
Kia Motors Corp., a unit of South Korean Auto firm Hyundai Motor Co., on Thursday said that it will invest $1.1 billion in Andhra Pradesh to build its first manufacturing facility in India, marking its entry into the market that is touted to be the third-largest for passenger vehicles by 2020.
Kia signed a memorandum of understanding (MoU) with the Andhra Pradesh government on Thursday in this regard.
The company will also start selling a compact sedan and a compact SUV from 2019. The compact sedan segment has witnessed a decline in sales—automakers such as Maruti Suzuki India Ltd and Hyundai Motor India Ltd are set to introduce new models to reinvigorate sales.
The segment, owing to significant demand from the taxi market, is expected to grow, according to Abdul Majeed, partner and national auto practice leader at Pricewaterhouse Coopers.
“It depends if Kia would look to differentiate its product (sedan) from the taxi segment. The compact SUV (sports utility vehicles) segment, however, will continue to grow in the years to come as more first time buyers will look to buy them,” Majeed said.
Sales of passenger vehicles in India during the fiscal year ended 31 March crossed three million for the first time ever, growing at the fastest rate in six years, largely on the back of demand for SUVs, according to data released by industry lobby group Society of Indian Automobile Manufacturers (Siam). Sales of utility vehicles grew 30% to 7.61 lakh units.
According to Vishnu Mathur, director general, Siam, decline in sales in the compact sedan segment is also a result of Indians’ growing affinity towards small SUVs.
“I would say the traditional segmentation of the industry is blurring since there are products of different shape and size available in the market in the similar price range,” Mathur said.
Kia, apart from its sister firm Hyundai, will pose significant challenge for market leader Maruti Suzuki.
The new manufacturing facility will be built in Anantapur district, Andhra Pradesh.
“Construction of the new manufacturing facility, Kia Motors’ first in India and representing approximately a US$1.1 billion investment, will commence in the final quarter of 2017. The manufacturing facility is expected to begin production in the second half of 2019 and produce up to approximately 300,000 units each year,” the company said in a statement.
Kia plans to produce a compact sedan and a compact SUV especially for the Indian market at the new plant, which will include facilities for stamping, welding, painting and assembly. The site will also be home to numerous supplier companies’ facilities, the company said.
“It (the plant) will enable us to sell cars in the world’s fifth largest market, while providing greater flexibility for our global business. Worldwide demand for Kia cars is growing and this is our latest step towards becoming a leading global car manufacturer,” Han-Woo Park, president of Kia Motors, said in the statement.
Kia plans to start sales operations in India towards the end of 2019, once mass production begins in Anantapur. “Furthermore, the region’s fast-developing supply chain network and skilled labour force were other key reasons for the new investment by Kia Motors,” it said.