[coolkurt]

Kia in talks with Tamil Nadu on possibly shifting $1.1-bn plant from Andhra

Kia Motors is discussing with Tamil Nadu the possibility of moving a $1.1 billion plant out of neighbouring Andhra Pradesh only months after it fully opened, due to policy changes last year, sources close to the talks told Reuters.

Kia inaugurated the Andhra plant, its first in the world's fifth-largest car market, in December after two years of construction. It has an annual capacity of some 300,000 units and created 12,000 direct and indirect jobs.

However, Kia is now in talks with the nearby state of Tamil Nadu, home to many major autoparts suppliers, about potentially relocating the plant, a senior state government official and a second source familiar with the discussions said.

Kia has been troubled by a new Andhra state law on local hiring and by the new state government wanting to review the incentives given out by the previous administration to encourage the company to set up the plant, the second source and a third person with knowledge of the discussions said.

Moving the plant to Tamil Nadu could also help Kia in reducing logistics costs as it would bring it closer to some of its parts suppliers, the second source added.

It was not immediately clear how swiftly Kia could move production lines from a plant in one state to another, or what sort of disruption that would entail.

Source

[tharian]

Apart from policy changes, I always wondered why a car manufacturer would set up a major plant in the middle of no where. That part of the state didn't have anything around to support the plant and everything had to be set up from scratch.

Whereas in Tamil Nadu, it would have been much easier for them with Hyundai already operating for many years, the port close by for imports/exports and many ancillary set ups around.

And it is not a small shop to move over night and it would affect production as well for a product that is in demand.

[John]

AP Govt sending out all the wrong signals
Already the Japanese Govt has advised them caution over moves to renegotiate renewable energy tariff.

[84.monsoon]

I bet it is a scare tactic to make the new government sit up and take notice. In no way would any incentive ot lack thereof justify moving a brand new automobile plat lock stock and barrel elsewhere. The costs of building a new plant, moving equipment and disruption it would casue to the supply chain would be prohibitive.

[dmplog]

But AP government better take notice and do something about it. Otherwise, it will not only lose a major automobile manufacturer but damage reputation as well.

India has precedent where Political situation has forced Industries to relocate their plant in the past. Case in point: Tata Nano plant move from Singur to Sanand.

[locusjag]

Kia had originally wanted to set up shop in Tamil Nadu only. If I remember right, political unrest was brewing in the state at the time that they were scouting for a location. Was it the Sterlite protest or was it the movement against the Salem-Chennai highway? In any case, the overactive extreme fringe elements in TN had scared Kia away...

[avira_tk]

Kia is making the right move, without incentives, there was no reason to invest and set up a greenfield project. AP has no consistency in policy and to top it off, there is harassment of Kia itself and most likely of its suppliers,if the politicians are so brazen to Kia itself.

Chennai has the existing infrastructure to support manufacturing and setting up the plant to cater to domestic and export markets, while the going is good and investment is at all time low, is a good move.

[Sebring]

Kia could look at Bidadi. Toyota is running hugely successful plant operation there. The State is politically stable with no labour unrest.

[Durango Dude]

This looks very similar to the plot of the Tamil Movie 'Sivaji' starring Rajnikanth, where the Govt changes and one has to bribe the new Govt afresh in order to continue. This is horrible to the core and no wonder it's difficult to business in India. I think once the MOU is signed it needs to be honored by successive Govts otherwise there will be a flight of business/capital from India.

[GrammarNazi]

What compels any state govt to be (un/)co-operative is the voter. The state sacrifices the cost of the land to help it's voters get jobs.

If local voters indirectly hold a say in the operations of an private entity, then the entity will be unable to function as per it's sole financial interests, presently as well as in the future.

It's upto Kia to decide based on a cost-benefit analysis, if/how it wants to continue operating with this environment.

It has been seen through the past decades that regionalism has been a factor in all states. It happens to be that TN and Karnataka, the economic mix and culture of the people along the political scenario has developed such that it has struck a balance for the businesses that employ locals as well as "migrants".

[Vulken Auto]

Originally Posted by GrammarNazi

What compels any state govt to be (un/)co-operative is the voter. The state sacrifices the cost of the land to help it's voters get jobs.

If local voters indirectly hold a say in the operations of an private entity, then the entity will be unable to function as per it's sole financial interests, presently as well as in the the economic mix and culture of the people.

Unfortunately this is not the case in AP. The present government has suspended all projects done by previous on grounds of suspicion of corruption. Giving subsidies to an extent where a worker doesnt have to work is what paralysed the system.

[CrAzY dRiVeR]

Originally Posted by Durango Dude

This looks very similar to the plot of the Tamil Movie 'Sivaji' starring Rajnikanth, where the Govt changes and one has to bribe the new Govt afresh in order to continue. This is horrible to the core and no wonder it's difficult to business in India.

There was a controversy already during the Seltos roll-out event where the politicians supposedly threatened Kia officials.

Shifting such a huge plant will be a huge loss of money for Kia. Andhra government should take note because others will also be watching this situation with interest. If one company is made to suffer such a huge loss due to the political situation in the state - future prospects will think twice before making such investments.

[WorkingGuru]

India has already missed the bus all through the last decade, to seem attractive to foreign investors for industrialisation. These few examples are being made an example of exactly the opposite.

Let's say it is agreed that the state government genuinely believes it must investigate if there has been any malpractice by the previous government, but to do so in a destructive manner is detrimental to all parties.

Unless the polity immediately finds a fair way to address this concern of investors looking to establish industries, India will find it almost impossible to lift the masses.

[vrrraju]

This is most unfortunate decision if Kia has to move to TN from Andhra Pradesh. This was one of the flagship projects after Andhra was carved out from Telangana.

It is political vendetta of new AP govt and it has created a very wrong impression in the minds of investors not only for AP but for entire India. Kia is not only moving because of the incentives review but it has been learnt that the incentives that were give to setup ancillary industries were rolled back thus creating a hostile environment for part supplies. The cost of shipment of parts from TN to plant in AP has almost got offset-ed. This will make the production cost of Kia motors unsustainable in long run.

Andhra Pradesh was never an automobile state, so getting a skilled resource will always be challenge, in order to fill the competency gap, it will take at least 3 years if you want to employee local people as per the new policy. Any further expansion at this facility will not be viable also.

It is in the best interest of business and economy, the Central Govt should intervene now and resolve any issues and raise the investor confidence.

[pgsagar]

As much as I like the new CM for certain positive moves benefiting my region, this news would be a big setback for the state's image, which in all honesty was never a great one to start with.

Isuzu cars, also made in AP, have no life tax for sales in AP. This was accorded to by the previous Govt. during whose regime Isuzu set up shop here. But, no such concession to Kia cars in AP. When I spoke to local dealer, he said they tried hard citing Isuzu's case but the new Govt. would have none of it. And, now this?