April 18, 2017 6:27 pm JST

Kia Motors plans new Indian plant to capture growing market

Automaker plans to produce 300,000 vehicles a year in India by 2019

KIM JAEWON, Nikkei staff writer

© Reuters

SEOUL -- Kia Motors is planning to build its first production lines in India by 2019, aiming to produce 300,000 small vehicles a year, as part of its global strategy to meet rising demand from the fast-growing market.

South Korea's second-largest automaker is in final talks with the southeastern provincial government of Andhra Pradesh to set up its first facility in the country, according to the Economic Times of India.

Kia says it is considering investments in India to expand its overseas production lines, although nothing has been decided yet. The company so far has been running offshore plants in four countries: U.S., China, Slovakia and Mexico.

Analysts say it is natural for Kia to move into Asia's third-largest car market, deemed to be the next major battleground for global automakers. The Indian government expects auto sales in the country to rise to 9.4 million in 2026 from 3.4 million in 2016.

"Considering that the Indian market is growing fast, we believe it is highly likely that Kia would reach the Indian market," said Kang Seong-jin, an analyst at KB Securities. "In the short-term, Kia seems to produce small cars for Indian and European markets. In the long-term, the company may want to focus on rising demand in the Indian market."

India has been a key overseas production center for Hyundai Motor, Kia's bigger affiliate, since 1998 when the company built its first production line with a capacity of 300,000 vehicles per year in the southeastern port city of Chennai. In 2008, the company added its second plant which can produce 350,000 cars a year.

Hyundai said it sold 497,000 cars in India last year, up 8% from a year ago. It had the second-largest market share in the country's auto market in 2016 with 16.8%, only behind Maruti Suzuki India, an affiliate of Japan's Suzuki Motor, which had a 47.6% share, according to data from the Society of Indian Automobile Manufacturers.

Kia shares dropped 0.7% to end at 34,700 won, just above its one-year low of 34,350 won marked on April 13. By comparison, the benchmark Kospi index inched up 0.13% to 2,148.46. Hyundai Motor shares fell by 2.1% to 141,000 won, extending a downward trend established after it hit a one-year high of 171,000 won on March 21.

Asia300

Kia Motors Corp.

South Korea

Market(Ticker): KRX(000270)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 14,135.97M
Shares: 405.36M
Asia300

Hyundai Motor Co., Ltd.

South Korea

Market(Ticker): KRX(005380)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 39,665.55M
Shares: 285.47M
Asia300

Maruti Suzuki India Ltd.

India

Market(Ticker): BOM(532500)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 32,063.20M
Shares: 302.08M

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