Andhra Pradesh denies reports of Kia moving plant to TN

Reacting to the report of Kia Motors intending to shift its production base to Tamil Nadu, Andhra Pradesh government issued a statement denying the possibility, adding that its relationship with the Korean carmaker is strong. TN officials also maintained that they have not been approached by any officials from Kia to discuss moving the $1.1 bn plant to Tamil Nadu.

When contacted, a top official in TN said, “There are only three channels for the investors to invest in Tamil Nadu. One, they can reach us through the Tamil Nadu Industrial Guidance Bureau, or secondly via the nodal officer handling the global investments or a third route is the state Industries Department Secretary. But no one from Kia has approached the state. There has been no discussion or even an informal meeting in this regard,” the official said.

The talk of such a move has brought to the fore the reason for Kia’s original decision to opt for Andhra Pradesh instead of auto hotspot TN. According to a person with direct knowledge of the proceedings, it was the company’s ’universal policy’ rather than the ecosystem of the state that led to the “loss” of the prestigious project.

In September 2016, Kia’s global president HW Park had cited in an official communique that its universal policy was the reason that prevented the auto behemoth to flag its presence in TN. According to the contents of the letter, portions of which were read out to DT Next, “Kia had even declared TN as a promising state.” But owing to sister concern Hyundai (which holds a 43% stake in Kia), the first Korean car brand already operating in the state, it was not possible to have Kia’s presence in the same location. Be it China or Europe, Kia’s global policy specifies that two sister firms can’t compete in two provinces.

Park who took charge as President of Kia after his stint at Hyundai as its MD-CEO is said to have considered Chennai as his “home” and hence mooted the idea of having Kia’s plant in the state, given that it had an existing infrastructure, availability of ready talent pool and investor-friendly policies. For Park, a five-year plus time spent in carving the growth trajectory of Hyundai was enough to make him see potential in TN. However, the Kia Board took a decision not to adopt the change, the letter said, which went on to add that Chennai would continue to be the destination for growth and expansion of Hyundai.

A bureaucrat who was involved in the auto sector said shifting the plant to TN is not a viable option as the cost of dismantling followed by reinstallation would be humongous. “For setting up Hyundai’s plant, a special civil foundation was laid. The shifting of heavy machinery, presses, paint shop and assembly line is not at all easy,” the source added.

Two people in the auto business, speaking to this newspaper, on condition of anonymity, speculated that it could have been a discussion arising from some teething troubles that Kia faced in Andhra.

“It is only a natural instinct and human behaviour to sound on an alternative plan of action, when faced with tough time,” said one of them.