Kia Motors in dilemma over entry into India

By Lee Hyo-sik

Park Han-woo Kia Motors CEO

Kia Motors is in dilemma over its plan to build a plant in India as it faces a range of difficulties in setting up a presence in one of the world’s fastest growing automobile markets.

Kia officials say it is a must for Korea’s second-largest carmaker to produce vehicles inside the South Asian nation because the Indian government imposes more than 60 percent tariffs on imported vehicles. This high import tariffs make it virtually impossible for Kia to bring cars, assembled in Korea and elsewhere, into India because it cannot compete pricewise.

However, as much as the company wants to operate a plant in India, it is grappling with a host of obstacles. Kia hasn’t been able to secure appropriate sites or capable manpower, not to mention that it has to deal with “high-handed,” “uncooperative” Indian bureaucrats in order to break ground.

Kia Motors CEO Park Han-woo told reporters Wednesday that it will take quite a long time for the carmaker to construct a plant in the world’s second-most populous nation.

“Kia cannot export cars to India (because of high import tariffs) so it has to build a plant there,” Park said. “But there aren’t many appropriate sites in India where we can build and operate am automobile plant. We don’t have many talented people either who can carry forward the project. So it will take a considerable amount of time.”

The CEO said he recently visited India to inspect possible factory sites, adding that the company has not yet finalized where it would build the envisioned plant.

Kia is reportedly considering the southern state of Andhra Pradesh, which is adjacent to two Hyundai Motor plants in Chennai in the state of Tamil Nadu.

“I worked in India for 10 years. From my experience, it is hard to say what can be done and what cannot be done,” the CEO said, suggesting that things are highly unpredictable in the South Asian nation. “Although we would like to begin constructing the plant as soon as possible, we will not rush.”

Park, who held senior positions at Hyundai Motor’s India office from 2003 through 2012, is largely credited for Hyundai’s rise to becoming the country’s second-largest automaker.

An industry official said Kia has to make inroads into India in order to capitalize on the world’s fifth-largest automobile market. “Indian consumers are extremely sensitive to prices and drive mostly low-priced, small-size sedans. The automaker simply cannot compete unless it produces cars there,” the official said.

Kia currently operates plants in the United States, China, Slovakia and Mexico, which accounts for 46 percent of its production volumes. If the envisioned Indian plant, which will likely produce 300,000 cars annually, materializes, the carmaker will make more than half of its vehicles outside Korea.

Hyundai Motor produces about 64 percent of its vehicles at overseas plants across in seven countries.