Kia Motors, a subsidiary of the Hyundai Motor Group and also the eighth largest car manufacturer in the world, is all set to step into the Indian market.
With plans of commencing production operations from the middle of CY2019, the company is seeing its ambitions shaping up well, with the construction of its upcoming 300,000 capacity plant in the Anantapur district of Andhra Pradesh going on in full swing.
At the same time, however, Kia Motors India is also readying itself for all the logistical and ancillary support required for the start of operations in the country. As a result, the company conducted its first supplier development event in New Delhi on May 29 and invited over 150-odd automotive vendors from the northern belt. These vendors have been shortlisted by Kia as the prospective suppliers of components for all of its local production in India.
Kia Motors India has roped in Crescendo Worldwide - a Germany-based consulting firm - which specialises in the automotive domain and assists companies in their global expansions. Crescendo will be responsible for scouting for suppliers on the basis of their past credentials and capabilities and then approaching them and shifting the ones most suitable for future business with Kia Motors India.
India holds potential to be global sourcing hub
While some 25 Tier 1 Korean vendors for proprietary parts have already been finalised, the agenda of the meet in New Delhi was to finalise Tier 2 vendors to supply child parts for the bigger assemblies. For a smooth start-off, Kia Motors India is aiming around 45-50 percent of the total vendor count to comprise of Korean suppliers. These companies will set up their bases in a vendor park being developed around Kia Motors’ 536 acre campus in Andhra Pradesh.
The company is targeting close to 80 percent localisation of its components in India initially and also aims to leverage economies of scale. Kia is eventually looking to make India its hub for global procurement and a prime source of parts for its subsidiaries around the world. While metal casting and fabrication parts are on the top of the list to be localised, Kia Motors India will continue to import drivetrain, electronics (including infotainment) and critical engine components directly from Korea for the time being.
The company has deployed Lee Sanghwa as its chief procurement officer in India, who comes with a vast experience of over 26 years within Kia Motors. Sanghwa’s mission is to help expand Kia’s global manufacturing footprint in India with the new plant and to localise components with the help of Indian Tier 1 and Tier 2 automotive component suppliers.
“We are therefore looking to explore partnerships. Our assessment will be based upon quality, management and performance capabilities. We will be finalising suppliers in the coming months with close coordination between our R&D, procurement and quality teams. The RFQ process has begun and the response we get will let us decide whether a particular vendor is cost competitive enough to help make Kia shine in the highly cost competitive Indian market”, said Sanghwa.
After commissioning its first integrated automotive assembly plant in 1973 in Korea, the company has come a long way in the global automotive picture and has been on an expansion spree from a little over the last decade. It has opened a new plant in China (2002), Czechoslovakia (2006), the US (2009), Mexico (2016) and most recently in India (2019). With the Mexican operations also being the latest to have started, Kia is looking for a strategy to source components for Mexico from India.
While the New Delhi event had kickstarted its supplier development activities, the company will be holding a similar event in Pune immediately within the next 15 days, inviting more participants and particularly a larger number of Tier 1 players based out of the western automotive hub. Similar events will later reach Bangalore and Chennai as well.
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