Korean vendors to set up $1billion supply chain for Kia Motors in Andhra Pradesh

Korean vendors to set up $1billion supply chain for Kia Motors in Andhra Pradesh

Singapore: A Korean consortia of auto component manufacturers are set to make approximately $1 billion investment in a supply chain for an integrated plant being set up by Kia Motors in Andhra Pradesh, according to a investment transaction lawyer involved in the project.

The Koreans consortia is in the final stage of discussions with Andhra Pradesh government for setting up a vendor eco-system to support the Kia integrated plant, said Advocate TM Kumar of IPN Associates LLP, which is helping Kia in implementing the $1.1 billion plant.

“Kia’s $1.1 billion investment is progressing with land levelling of 600-acre site for the plant,” said Kumar, who is working on automotive industries in India through the Hong Kong office of an international law firm, Ashurst.

The vendor-based supply chain will be set up in two phases, similar to Hyundai Motors’ 80-vendor support in Tamil Nadu. Both Hyundai and Kia are international brands of South Korean conglomerate Hyundai Group. Hyundai had developed its own vendor supply chain over the years to keep final car manufacturing cost down and competitive in the Indian market.

Eighty per cent of some 2,000 components in each Hyundai car are made by the Tamil Nadu based vendors as part of its indigenisation programme. Kia’s first car will roll out end of 2019 with over 50 per cent of the components made by the supply chain vendors in Andhra Pradesh. “The supply chain will have 18 vendors with over 9,000 employees,” said Kumar, an investment transaction lawyer.

Speaking at the Institute of South Asian Studies’ symposium yesterday, Kumar elaborated to the need to indigenise car manufacturing with locally made components for such imports would be expensive and raise costs.

Hyundai now produces 672,000 cars a year from Tamil Nadu while KIA aims to produce 300,000 cars a year from Andhra Pradesh, starting with 100,000 units in the first year.