Kia Motors inks MoU with Andhra

The queue of foreign automakers lining up for a slice of the Indian car market is growing. Kia Motors, an affiliate of Korean auto giant Hyundai, has announced investments of over $1.1 billion for setting up a greenfield factory in Andhra Pradesh.

The Andhra government, however, pegged the total investment by the Korean auto giant at $2 billion, possibly taking into account investments proposed by the company's suppliers.

Kia -which recorded global sales of 3 million vehicles last year (Hyundai sold 4.9 million) -will start selling cars from 2019, starting with a compact SUV and a mini sedan. However, the company has no plans to share dealership with Hyundai, even though there may be synergies at the back-end and sharing of some of the component suppliers.

The company signed an MoU with the Andhra Pradesh government for the facility to be set up in the Anantapur district. This will have an annual production capacity of 3 lakh units.

Kia is the latest entrant to make a dash for the high-potential Indian car market which is forecasted to emerge as the third largest (after the US and China) in the world by 2020

Construction of Kia's manufacturing facility will commence in the last quarter of this calendar year and the plant will occupy an area of around 23 million square feet, incorporating facilities for stamping, welding, painting and assembly . Kia said the site will also be home to many suppliers' facilities.

Sources said Hyundai, which is manufacturing at near-peak levels at its plant near Chennai, may produce some of its cars at Kia's plant in the initial phase.

Kia's plant, however, is not close to Hyundai's facility . The distance between the two factories will be around 350 kms.

Kia has been eyeing the Indian market for many years, but had earlier refrained from making investments.

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