According to reports by Reuters, South Korean auto-manufacturer Kia Motors is contemplating the possibility of moving it’s $1.1 billion dollar plant to Tamil Nadu. The existing plant in Anantapur is it’s first in India. The 23 million square foot facility opened recently in last December after two years of construction.
At full capacity, the plant could produce 3,00,000 units annually. Kia had earlier announced that the plant would propel growth in India and abroad with exports. It would create 11000 direct jobs and 7000 indirect jobs. It is not yet clear how the proposed will impact the carmaker or the economy.
Reasons for the proposed move
The new State Government that came into power in Andhra Pradesh framed a new law regarding employment regulations and incentives to companies. Here are some of the major points of the law
It is mandatory that 75% of hiring to be localized
Renegotiation of existing contracts with companies currently enjoying incentives
Kia is one of the several companies’ whose contract is to be up for renegotiation. This new law has caused panic amongst foreign investors. Adding to the confusion, reports say that the Modi government is working on a federal law to safeguard foreign investors against sudden policy changes by the state government.
Why Tamil Nadu?
In case the contract negotiations with the state govt of Andhra Pradesh fails, Tamil Nadu is the next best option for Kia. It houses many of the parts suppliers utilized by the Korean company. Kia’s sister company Hyundai has all of it’s car production facilities in Tamil Nadu. Interesting point to note, a Hyundai executive is representing Kia in talks with Tamil Nadu government.
The Andhra Pradesh government has condemned the report and Kia has denied the claims. In the coming weeks, more news is expected to come out which will clear the air surrounding the events.