Barely months after KIA Motors became fully operational in Andhra Pradesh, the automobile firm is in talks with Tamil Nadu on the possibility of shifting its USD 1.1 billion plant out of the Telugu state, reported Reuters.
Two sources, a government official and another unnamed source, told Reuters that KIA was in talks with Tamil Nadu about a potential relocation. Tamil Nadu has major auto parts suppliers and moving base to the state would mean reduced logistics cost while sourcing auto parts.
The government official told Reuters that KIA was facing problems in Andhra Pradesh and that the talks were "preliminary negotiations", more clarity is expected at a secretary-level meeting next week.
However, KIA in a statement to Reuters said that the firm has a long commitment to the Indian market and intends to fully utilise its facility at Andhra Pradesh before considering further expansion. The firm meanwhile has said it has no plans to shift its current facility in Andhra Pradesh.
The firm is reportedly troubled over the state's new job policy to give 75% reservations to locals and on the YSRCP governmentâ€™s plan to review incentives given by the previous government led by TDP to set up the plant in Andhra Pradesh, reported Reuters.
The Korean firmâ€™s sister company in India, Hyundai Motor Co, is representing the firm in talks with officials.
The automobile firm started operations in Penukonda in Anantapur only in December 2019 after beginning construction of its 23 million square foot facility in 2017, its plant has an annual capacity of 3,00,000 units and claims to have created 12,000 direct and indirect jobs. At present, KIA has launched an SUV model Seltos in the Indian market.
KIA had taken two years to zero in on Andhra Pradesh to set up its manufacturing unit at Anantapur, a rain deficit and drought-prone district in the state. While the automobile firm had promised to give jobs to the locals, the then state government led by N Chandrababu Naidu in an effort to built an automobile friendly ecosystem in the district had given Kia quite a few concessions.
The Korean firm was assured with water supply in the drought-prone area by linking Godavari and Krishna with the Pattiseema lift irrigation project. The aim was to bring water to the Gandikota reservoir which would then be diverted to KIA's manufacturing plant. State Goods and Service Tax was also waived for 22 years to attract the firm to the state.