Hyundia Motor affiliate Kia Motors confirmed media reports last week with today’s (27 April) announcement it had signed a memorandum of understanding (MOU) with the state government of Andhra Pradesh, India to build a new factory in Anantapur District.

The MOU was signed at a ceremony in the city of Vijayawada.

Construction of the new factory, Kia’s first in India, will cost the automaker US$1.1bn and will start in the final quarter of 2017.

The plant is expected to begin production in the second half of 2019 and produce up to 300,000 units a year.

Parent Hyundai has a 330,000 unit Chennai 1 plant in  Tamil Nadu state, according to the just-auto research database PLDB. It is supplemented by Chennai 2. Hyundai Motor India’s website says it currently has 10 car models across segments – Eon, i10, Grand i10, Elite i20, Active i20, Xcent, Verna, Creta, Elantra, Tucson and Santa Fe – and its plants currently export to 87 countries across Africa, Middle East, Latin America, Australia and Asia Pacific regions.

Kia said it would produce “a strategic compact sedan and compact SUV especially for the Indian market” at its new plant which will occupy around 23m square feet/536 acres and include stamping, welding, painting and assembly. There was no mention of engine casting, machining or assembly.

The site will also be home to numerous supplier companies’ facilities. The automaker noted “the region’s fast-developing supply chain network and skilled labour force were other key reasons for the new investment”.

“We are delighted to announce that Kia’s newest manufacturing facility will be here in Andhra Pradesh,” said Han-Woo Park, president of Kia Motors. “It will enable us to sell cars in the world’s fifth largest market, while providing greater flexibility for our global business. Worldwide demand for Kia cars is growing and this is our latest step towards becoming a leading global car manufacturer.”

“We are delighted to announce that Kia’s newest manufacturing facility will be here in Andhra Pradesh,” said Han-Woo Park, president of Kia Motors. “It will enable us to sell cars in the world’s fifth largest market, while providing greater flexibility for our global business. Worldwide demand for Kia cars is growing and this is our latest step towards becoming a leading global car manufacturer.”

Kia said the new factory would enable it to start selling cars in India “and benefit from further sustainable sales growth, locally and internationally”.

It plans to commence local sales of Indian made cars towards the end of 2019.

Kia said India is the fastest growing major new car market and the fifth largest in the world, with more than 3.3m new cars sold in 2016. Forecasts suggest the country will become the third largest car market by the end of 2020.

just-auto research database QUBE fact: “India’s auto industry has developed a small car manufacturing hub specialism over the past decade or so. For example, Nissan uses India to export its Micra to global markets (a total of nearly 112k exported by Nissan in FY16), while Ford exported some 111k in FY16 of models including its Figo and EcoSport and VW uses India as a hub for exports of its Vento sedan to markets including Mexico. In the domestic market, Suzuki Maruti is the established car market leader with a range of small cars based on old and current Suzuki models which give it a share of the market of just under 50%. Its nearest challenger is Hyundai, but Maruti tends to outsell it three-to-one.”