Kia to invest $1.1 billion to build its first India factory

Posted April 28, 2017

The construction of the new facility, Kia Motors' first in India and representing approximately $1.1-billion investment, will commence in the final quarter of 2017.

Kia Motors Corporation is Korea's oldest manufacturer of motor vehicles.

Reuters reported in February that Kia was close to finalising Andhra Pradesh as the site for its first Indian factory, with production scheduled to start in 2019.

"Hyundai Motor's profitability for Q1 2017 weakened moderately year-on-year, mainly owing to sluggish growth in auto shipments, continued intense competition in the global auto market and provision expenses related to its recall", Moody's Vice President and Senior Credit Officer Yoo Wan-hee said in a statement.

The plant, Kia's first in India, will come up in Penugonda in Anantapur district and produce three lakh cars a year. But it is said that Andhra Pradesh government has offered them better incentives and facilities to bring it here. Earlier this month, Hyundai and Kia recalled 1.4 million cars in U.S., Canada and South Korea due to possible engine failures.

Kia Motors is lining up around United States dollars 1.1 billion (over Rs 7,000 crore) to set up a manufacturing plant in India where it plans to roll out a compact SUV and a compact sedan by 2019-end. Spread over 563 acres, it will also be home to numerous supplier companies' facilities.

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.

India is the world's fifth biggest auto market and is growing rapidly.

Its retail sales slumped 14 percent in the first quarter in China, a market where it has been struggling for some time now. The country is expected to emerge as the third biggest market in the world by 2020, with annual volume of five million units.

The auto firm sold a total of 641,686 units worldwide, including domestic sales, down 6.2 percent on-year in the cited period.

"It depends if Kia would look to differentiate its product (sedan) from the taxi segment". Bhargava says the Indian market has the potential to grow to up to ten mn units annually in the coming years and no other country can offer such an opportunity.