After searching Asia’s third largest car markets for two years and across four states, the unit of Hyundai Motors has selected Andhra Pradesh for its maiden facility for which the renowned Kia Motors of South Korea is likely to invest an amount of INR 10000 crores. If this comes through, it would be one of the biggest foreign investment projects in India.
According to sources that are well aware of the developments, Penukonda that lies in the district of Anantapur in Southern Andhra Pradesh has been selected by a unit from Kia motors and they are soon to commence buying land in order to build the factory. With PM’s Make in India initiative ruling the roost these days, rivalry between the Indian states is soaring. At such a juncture, the selection of AP by Kia motors reiterates the fact that CM Chandrababu Naidu is indeed a business friendly chief minister.
The sources revealed that this upcoming car manufacturing unit is the first of its kind in the state and will comprise of two phases, the cumulative investment for which will amount to $1.6 billion or INR 10300 crores. The investment for the first phase will be about INR 6000 crores. He further added that the initial phase will comprise of a facility that will be capable of producing 3 lakh cars in a year.
The launch of this facility by Kia motors comes at the time when India’s reputation as the hub of manufacturing units is on the steady rise, what with amazing response of the international companies to the Make in India initiative launched by PM Modi.
Last year’s government reports have proved that the FDI equity inflow had increased during the period October 2014 to May 2016 by 46% which amounts to $61.58 billion, thanks to the Make in India campaign.
On 13th April, AP’s Industries and Commerce Department has issued orders to acquire 600 acres of land with a payment INR 10.5 lakhs being made for each acre by terming it as “a special case.”
The State government has given permission to the Anantapur District Collector for acquisition of the land required for this project by using the AP Land Acquisition Rules 2014. With the completion of the first phase, the factory may have a capacity of 3 lakh units per year and it is believed that the first car will roll out of it by the year 2019. According to reliable sources, Andhra Pradesh State Investment Promotion Board and Kia motors are discussing the agreement such that the firm can get the best incentives from this project. It is expected that a formal agreement will soon be signed by the two parties.
When Michael Choo, the General Manager of the Overseas Communication Planning Team for Kia was approached for comments, he stated that he does not have any official comment to make as they have not yet confirmed their future plans about making investments in India.
Anantapur in Southern AP is close to the manufacturing unit of Hyundai India which is based in Sriperumbudur that lies on the outskirts of Chennai and to Tamil Nadu’s automobile ecosystem. It is also close the Bangalore which happens to be the automotive belt of Karnataka.
According to reliable sources, the AP government is quite keen on attracting the largest international car manufacturer to open a unit in the state as this would be encouragement enough for the manufacturers of auto components and ancillaries to open shop, which in turn will help Southern AP to emerge as an automotive hub. He further added that the special economic zone in Chittoor district – Sri City, is already home to Isuzu Motors and two wheeler manufacturers Hero Moto Corp with an investment of INR 800 crores are also in the process of setting up their factory close by.
With the help of Hyundai India’s sourcing arm named Mobis, Kia motors is already in touch with a number of Indian vendors. A person who is a supplier to Hyundai Motors India said that they have been asked to calculate the cost of logistics to Anantapur and then make a quote. He added that though the firm has not yet revealed its RFQ, it is most likely to include small cars, sedans and SUVs.
Another vendor for Hyundai who is also supposedly approached by Kia revealed that the company is discussing a project with a code name SP2 in South Korea with an intention to manufacture an SUV that will have the same architecture as Hyundai Creta and will belong to the same segment.
This vehicle is most likely to hit the roads by 2019. In order to keep a check on the cost, Kia Motors plans to use the same aggregates like body shop and paint shop that are utilized by Hyundai Motors India, given the fact that the upcoming facility is close to the Hyundai manufacturing unit.
A source revealed that since Hyundai Motors India utilizes 90% of its facilities, it may try to utilize the Kia facility as well, in order to get quicker returns on the investments.