South Korean car maker Kia Motors said Thursday it will build a new 1.1 billion plant in India, marking its entry into one of the world's fastest growing markets as sales in neighbouring China have sagged.
Kia Motors said in a statement it would manufacture up to 300,000 cars a year at the new factory in the southern state of Andhra Pradesh, starting in late 2019.
Kia and its sister company Hyundai Motor have seen sales in China, the world's biggest car market, hammered by the fallout from a diplomatic spat between Seoul and Beijing over a US missile defence system.
The company plans to produce a compact sedan and compact SUV especially for the Indian market at the new plant.
India is the world's fifth biggest auto market and is growing rapidly. Nearly four million cars were sold there last year and PriceWaterhouseCoopers predicts that will rise to almost seven million by 2022.
"India is a key market and you lose a big opportunity for future growth if you're not here," said Abdul Majeed, partner at PWC.
"Apart from selling to customers in India, global auto makers are also looking at how to use India as base to design and source parts and now Kia is on that journey."
Hyundai Motor is the second largest auto maker in India behind Maruti Suzuki India and analysts expect Kia to use some of Hyundai's existing supply chain network.
Volkswagen was one of the last global auto giants to launch in India in 2010, but has struggled to capture market share.