Hyundai Motor is planning to use the production facilities of Kia's new plant in India in a bid to ramp up production of new models to be launched in the Indian market.
Hyundai Motor is pushing to share the production facilities of Kia's factory in Anantapur, India that would go live in August. The plant was set up to buttress Kia's fast growth in the Indian market and has an annual production capacity of 300,000 units. Kia plans to mass-produce the compact sport utility vehicle (SUV) Seltos at the plant.
Hyundai wants to secure additional production lines in India because its existing plants in the country cannot meet growing demand for its products. Demand for Hyundai cars has been growing 4 percent to 5 percent a year in the Indian market. Hyundai needs to produce more than 700,000 units each year in India, including those for exports abroad.
Hyundai Motor has Chennai Plants 1 and 2 in Tamil Nadu, India and produces 650,000 to 700,000 units annually. The Indian plants produced about 710,000 units last year. In the first half of this year, they produced 350,000 units, exceeding the output at Hyundai plants in China. Considering that Hyundai is planning to launch additional new models, including electric cars, in India, its production capacity must be increased.
In particular, Hyundai Motor invests more than 300 billion won every year in order to expand its presence in the Indian market. The investment volume is the second largest after that in Korea. This year, the Korean carmaker is considering increasing production of electric vehicles such as the Kona Electric in India.
Hyundai intends to increase production by using existing lines rather than expanding facilities or building new plants. If Hyundai entrusts the production of newly launched cars to a Kia factory in India, the production cost will drop. Kia Motors’ Ananthapur Plant is currently set to produce only one model, the Seltos, so it has some spare facilities. Kia plans to produce four models including the Seltos within two years, but it is hard to produce multiple models on one production line in the short term. So, some remaining part of the production line will be able to roll out Hyundai cars. In the past, Hyundai entrusted production of the Santa Fe DM model to Kia's Georgia plant in the United States.