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Competition in compact car segment likely to heat up with entry of Kia, Daihatsu

The Indian compact car market, which accounts for more than 70% of the total market, could witness major action in the near future with Hyundai’s Kia and Toyota Motors owned Daihatsu planning their entry.

This could happen as early as in 2018-19. It is reliably learnt that while Kia is likely to select Tada in Andhra Pradesh for its manufacturing facility, Daihatsu is in the process of conducting feasibility studies to understand the dynamics affecting the cost structure of operating in India.

Hyundai Moto Corp aims to have a 20% stake of the Indian market by 2020 and for this it needs more models and additional capacity in volumes.

It is learnt that Kia is likely to invest around $500 million to build a factory with a capacity of 300,000 units a year. Hyundai is likely to support Kia with engines and press parts, with the latter doing the painting, body work and assembly in house to keep the cost low.

It is for this reason that Kia is planning to set up operations in Andhra Pradesh which is close to Hyundai’s plant in Sriperumbudur in Tamil Nadu. A spokesperson for the company confirmed that it is continually evaluating potential locations for overseas manufacturing facilities, including India, to secure additional engines for future growth.

Kia has products like Morning and Picanto, which are expected to be suitable for the Indian market.

Daihatsu has been working on a new generation small-car platform for Indonesia, and India is also likely to get the same car. The company has also explored the possibility of bringing in the Terios and Xenia compact utility vehicles.