Kia signed a deal to build India factory

Kia Motors has officially inked a deal to build a factory in India, part of the company’s initiative to break into the country’s notoriously difficult-to-enter car market.

“Kia Motors will build a local manufacturing plant in order to enter the fast-growing Indian car market,” Kia Motors said in a press release Thursday that confirmed past speculation that the company was looking to build a factory there.

Kia Motors will spend $1.1 billion on the project. The amount is slightly smaller than previous reports that the company would invest $1.6 billion in two phases.

The factory, scheduled for completion by the latter half of 2019, will be able to produce as many as 300,000 cars a year. It will largely focus on small sedans and sport utility vehicles tailored to Indian consumers.

As of last year, a total of 4.17 million cars have been produced in India, and 3.37 million of them were sold there, making it the fifth-largest car market in the world.

Still, only 32 out of 1,000 Indians own a car, and its population of 1.3 billion people means the market has substantial room to grow.

Nonetheless, the market remains difficult to enter. The government slaps a 60 percent import tax on completed cars, making it almost impossible to compete in India without opening a local plant.

The site chosen by Kia Motors is about 390 kilometers (240 miles) away from parent company Hyundai Motor’s local factory.

Kia Motors hopes to utilize the distribution channels of Hyundai Motor to gain a competitive edge.

BY CHOI HYUNG-JO [choi.hyungjo@joongang.co.kr]