Kia Motors likely to set up their manufacturing plant in Andhra Pradesh

24 2016 shows a Volkswagen vehicle parked before the German carmaker's dealership in Gangnam southern Seoul

Earlier reports have indicated that the South Korean automaker has finalized the southern state of Andhra Pradesh to set up its first manufacturing facility in the country.

Kia is set to build its first auto factory in India at a cost of W1 trillion, industry sources said on Monday (US$1=W1,138).

Kia Motors' bigger sister affiliate Hyundai Motor Co. entered the Indian subcontinent in 1998.

"The vehicle manufacturing facility, a first for Andhra Pradesh, will involve two phases with a cumulative investment of $1.6 billion, or Rs 10,300 crore, with first phase of investment amounting to about Rs 6,000 crore", said one of the persons mentioned above. The first phase will put in place a production capacity of 3 lakh units a year.

Kia will reportedly sign an investment agreement with the Indian state of Andhra Pradesh late this month. Kia will use Hyundai's existing vendors for parts that it will source from India. India, the world's second populated market with burgeoning demand in motor vehicles due to improvement in living standards, poses as appealing alternative to the USA and China where trade barriers have been increasing to promote domestic automakers. For years, the automaker has been seeking to make inroads in India to tap into one of the fast-growing auto markets in the world. This location is fairly close to Hyundai's production facility in Sriperumbudur, near Chennai. Kia's Indian entry is also expected to boost the automaker's slowed overseas sales in its major markets, the United States and China. If Kia establishes a factory capable of churning out 300,000 units a year, the two automakers would be able to secure a production capacity of 1 million units in India.

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