Production in India
It is expected that Kia Motors’s first Indian factory, which will be the fifth overseas production base for the Korean automaker, will be built in Andhra Pradesh State on India’s southeast coast. Anantapur City will be home to the new factory. If the factory is completed in 2019, Kia's global production capacity will hit 4 million units.
According to foreign and industry sources on February 8, Kia Motors is highly likely to establish a factory in Andhra Pradesh.
Kia Motors has dispatched a due diligence team several times in search of factory sites to establish a factory in India. Areas checked by the team were five states including southern Tamil Nadu state where Hyundai Motor's Chennai factory is located, Gujarat in the northwest, Maharashtra in the midwest, and Karnataka in the south.
Among them, Andhra Pradesh was picked as a strong candidate as the region is close to Hyundai Motor Company's Chennai plant because it has an advantage of being able to utilize roughly100 nearby primary and secondary partner companies. Andhra Pradesh, one of the 31 provinces in India, ranked second in terms of investment environment, following Maharashtra, differentiated itself from other states by offering various incentives to foreign investors in securing land and building infrastructure. Andhra Pradesh has reportedly offered 600 acres of land to Kia Motors.
In Andhra Pradesh, it is predicted that Kia Motors plant will build a factory in Anantapur. Other cities including Tata and Amalabatty in Andhra Pradesh were also considered candidates, but it is said that Kia Motors are having its eye on Anantapur. Anantapur with a population of 300,000 is a relatively short distance (200 km) away from Hyundai Motor’s Chennai Factory, enabling the two Korean automakers to enjoy synergy effects by sharing engines, parts and platforms.
Kia Motors is expected to announce its plan to advance into the Indian market as early as this month and start construction within this year. Its annual production capacity is expected to reach 300,000 units and full-scale plant operation is expected to start in 2019. Once the Indian plant goes into operation, Kia's global production capacity will increase from the current 3.56 million units (including 1.6 million units in Korea and 1.96 million units in overseas countries) to 3.86 million units. Kia Motors plans to have an annual global production capacity for 4 million units by 2020.
Kia Motors’s eleventh-hour variable is US President Donald Trump’s move toward strengthening US protectionism. President Trump’s protective policies are expected to impede the early stabilization of Kia’s Mexican plant, which entered full-fledged operation last year, as protectionist trade has strengthened since the inauguration of the US president. There is also concern that the Korean automaker may delay its entry into India as Kia will face a situation where the automaker needs to review its overseas investment strategy. An industry official said, “Kia will not be able to further delay its entry into India in order to reach Southwest Asia, the Middle East and Africa with great market growth potential at a time when even China's automakers are pushing for the construction of factories in India."