‘Kia’s move to AP, a de-risking strategy’

The message says politicians demanded a bribe that exceeded 50 pc of the official land cost and that the state has not only lost $1.1 bn in investment from Kia but also allied ancillary investments. 

Auto industry experts and observers, who were privy to this message offered varied perspectives on the sentiment prevailing in the industry. Analyst VG Ramakrishnan, Founding Partner and MD, Avanteum Advisors LLP, says Kia’s decision to plant its foot in AP is part of its “de-risking” strategy. “In a disruptive era, it is prudent for companies to be cautious about cost, culture among other things. This is part of their diversification move as no company would like to put all their eggs in a single basket,” he said, adding the subsidiary of Hyundai-Kia automotive group had a synergistic relationship with its Korean company Hyundai. 

The auto biggies headquartered in South Korea were looking at a similar association in the context of their India presence. With AP going all out in wooing investors through conducive policies, the latest move of Kia had to be seen in the context of how the whole eco-system is emerging. “Today customers demand instant delivery. It is imperative that alternative locations are available for doing business,” Ramakrishnan said, citing the instance of cyclone Vardah when the city had come to a halt. 

However, the editor of a reputed trade magazine associated with the industry says, “MNCs have lost faith in the state machinery owing to corruption and red tape. The top brass of a global auto maker who had set up its second plant in Gujarat recently told me that he didn’t have to spend a Rupee from his pocket and that he had to visit the state only twice – once for submitting the application for the new plant and then for receiving the approval.” 

He adds, “Over the past one decade, TN has lost upwards of Rs 15,000 cr in investments, that eventually ended up in other states. Employment wise – TN lost more than 40,000 jobs to other states.” 

Other observers offer an optimistic perspective. Bhargav TS, Executive Editor, Auto Components India tells us, “Many bureaucrats in the north vouch for investing in the South. The presence of many seaports is an advantage as many auto firms are now looking at turning India into an export hub. For this, they prefer shop floors in vicinity of sea ports that facilitate exports. To add to it, the climate here is quite dry, which works to the advantage of manufacturers who do not have to worry about excess rainfall and the associated damage.”