Kia invests $1 billion to build cars in India

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"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.

Speaking on the occasion, Han-Woo Park, President of Kia Motors, said, "We are delighted to announce that Kia's newest manufacturing facility will be here in Andhra Pradesh". Kia will build a brand new manufacturing facility for its India operations in Anantapur, Andhra Pradesh at a cost of a whopping Rs 7050 Crore ($ 1.1 Billion). KIA Motors sells several models, Sportage, Optima, Cadenza, Soul, globally and has manufacturing facilities in Korea and Mexico.

Kia's global production capacity now stands at over 3 million units while Hyundai's is around 5 million vehicles annually. Kia will also export cars from this facility, akin to Hyundai India's business plan. As a result, the carmaker will differentiate itself from Hyundai in all major operational procedures - product, advertisement and dealership network.

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Globally, Hyundai shares parts and vehicle underpinnings with Kia, which it acquired in 1998. "This is our latest step towards becoming a leading global vehicle manufacturer".

More than three million passenger vehicles were sold in India in the financial year ended March 31, almost 10% more than the previous year, according to the Society of Indian Automobile Manufacturers.

Kia will invest $1.1 billion in its manufacturing plant in India. "What is worrisome is the China market", he said.

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Hyundai, along with its smaller affiliate Kia Motors, is the world's fifth-largest automaker.

The plant, which will have a maximum production capacity of 300,000 vehicles a year, will produce a compact sedan and a sport utility vehicle tailored for the Indian market, Kia said in a statement.

With a heavy reliance on sedans and a poor brand image in the world's largest auto market, Hyundai has struggled to compete with local Chinese brands that are armed with affordable SUVs.

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