Kia Motors Co. says it will invest $1.1 billion in India to build its first plant in the world's fifth-largest auto market.
"Through the construction of a factory in India, Kia Motors will pioneer India's auto market, which is under the spotlight as the next growth market".
"The Chinese market in the first quarter was hard due to Kia's conflict with local dealers and the ongoing political issue that dropped consumer demand", Han Chun-soo, Kia's chief financial officer, said during a conference call after the automaker's first-quarter earnings report.
"We are delighted to announce that Kia's newest manufacturing facility will be here in Andhra Pradesh", said Han-Woo Park, president of Kia Motors. The company sold a total of 641,686 units worldwide in the first quarter, down 6.2 percent from the same period a year ago with sales in China and the USA where the company's outdated volume models are sold dropping 35.6 percent and 12.7 percent, respectively. The plant will have an annual production capacity of 3,00,000 units.
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The company has said it will locally manufacture Kia cars for India, and two compact models will lead that for starters. Strong demand for its new Grandeur sedan and Genesis G80 at home also contributed to earnings.
The announcement came after Kia and Hyundai Motor suffered a March sales slump in China, their biggest market, and sharply cut production in the wake of Seoul's decision to deploy a U.S. anti-missile system, which angered China. With Kia Motors' entry into India, the Hyundai Group as a whole will naturally eye a larger share of this market.
The company plans to produce a "strategic" compact sedan and a compact SUV, especially for the Indian market, at the new plant. Forecasts suggest the country will become the third-largest auto market globally by the end of 2020.
Hyundai's net income will likely weaken moderately in 2017 owing to sluggish sales in China, the ratings firm said. It also plans to rev up its sales overseas with new Niro plug-in hybrid vehicle model, sport utility vehicle K2 Cross and compact sedan Pegasus tailored for the Chinese market which are to be launched within the first half of this year.