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KIA Motors

Presentation · August 2018

DOI: 10.13140/RG.2.2.13964.82562

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 8/2/2018

K.Vamsi Krishna, K.Sandeep Reddy

(PGQSCM 14th batch, NICMAR, Hyderabad)

Prof B.Ravinder
(Asst.Professor, NICMAR, Hyderabad)

2nd INDUSTRY ACADEMIA CONFERENCE ON CONSTRUCTION MANAGEMENT

(IACCM) - 2018

Industries play a vital role in the development of a country’s

economy by providing employment opportunities either through
manufacturing or service oriented. Due to the bifurcation of Andhra
Pradesh, AP’s industrial policy, presence of natural resources, industrial
corridors, and allowing of FDI’s into Indian economy, which encourages
huge industrial growth in the state. Due to the achievable growth of Sri city
(Chennai-Bangalore industrial corridor) Govt of AP searched a new
industrial zone for Automobile manufacturing on Hyderabad-Bangalore
highway N.H-44 at Penukonda, Ananthapur district. Kia motors (Korean
leading Automobile company) is investing a huge sum of 2 billion USD
which creates an employment to 10000 people. Due to this industry
tremendous changes are seen in and around Penukonda on Agricultural,
Non-agricultural, house rents, Employment opportunities have increased
etc..,

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Andhra Pradesh Industrial Infrastructure Corporation Ltd (APIIC) was

incorporated on 26-Sep-1973 with an objective of providing industrial
infrastructure through the development of industrial areas, so far APIIC
developed more than 300 industrial parks with an extent of about 1,21,655
acres. In part of this initiative, APIIC identified a single piece 592 Acres of land in
Erramanchi village, Penukonda mandal, Anantapur District to establish a
Automobile industry.

Penukonda is a town in the Anantapur district of Andhrapradesh. During

the British rule, buildings like court, collectorate Office, Jail, Thasildhar office
etc.., were constructed for their administration. To promote tourism AP Govt
constructed Kumbhakarna park over 5 acres with a Gigantic sleeping statue of
142 feet X 32 feet .

Out of total population in town,10424 were engaged in work activities.

90.99 % of workers describe their work as Main Work (Employment or Earning
more than 6 Months) while 9.01 % were involved in Marginal activity providing
livelihood for less than 6 months. 608 were cultivators (owner or co-owner) while
2407 were Agricultural laborer.

In 2011, literacy rate of Penukonda was 75.13% (Male literacy stands

82.93 %, female literacy rate was 67.16 %2) compared to 67.02 % of Andhra
Pradesh.

1. To study the impact of automobile industry on employment opportunities

2. To study the impact of automobile industry on real estate business
3. To study the impact of automobile industry on hotel industry business
4. To study the impact of automobile industry on agriculture lands cost
5. To study the impact of automobile industry on housing rental values
6. To study the impact of automobile industry on new building constructions

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Hypothesis-I

H0: There is no significant role of Automobile industry in employment opportunities
generation.

H1: There is significant role of Automobile industry in employment opportunities
generation
Hypothesis-II

H0: There is no significant role of Automobile industry on real estate business.

H1: There is significant role of Automobile industry on real estate business.
Hypothesis-III

H0: There is no significant role of Automobile industry on hotel industry business.

H1: There is significant role of Automobile industry on hotel industry business
Hypothesis-IV

H0: There is no significant role of Automobile industry on agriculture lands cost.

H1: There is significant role of Automobile industry on agriculture lands cost.
Hypothesis-V

H0: There is no significant role of Automobile industry on housing rental values.

H1: There is significant role of Automobile industry on housing rental values
Hypothesis-VI

H0: There is no significant role of Automobile industry on new building constructions.

H1: There is significant role of Automobile industry on new building constructions

Qualitative research methodology has been adopted to

understand the impact of the Kia motors establishment in
Penukonda mandal, Andhra Pradesh.

To collect the data a random sample size of 25 considered and the
responses are recorded by using the personal interviews as well as
personal observations.

The same data was interpreted to understand the impact of KIA
Motors in real estate business and supporting services especially
cab/driver services.

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Table 1: Salient features

S.no Details Description

1 Location Erramanchi Village, Penukonda Mandal
2 Latitude & Longitude- 1) 14° 9’ 33.39” N, 77° 36’ 37.84” E
Coordinates 2) 14°1’'19.44” N, 77° 37’ 25.35” E
3) 14° 9’ 50.70”N, 77° 37’ 53.54” E
4) 14° 9’ 5.43” N, 77° 37’ 06.25” E
3 Average altitude 497 m
(M.S.L)
4 Temperature In summer – 29°C to 40°C; In winter – 25°C to 15 °C

5 Extent of land 239.58 Ha (592 acres)

6 Road Connectivity NH - 44 Connecting Anantapur-Bengaluru

SH-48 connecting Penukonda–Pavagada-7.1 km

7 Rail Connectivity Makkajipalli – 2.8 km & Penukonda – 9.2 km

8 Airport Puttaparthi – 35.0 km; Bengaluru – 137.0 km

9 Sea Port Krishnapattnam – 354 km

10 Water source Gollapalli reservoir

11 Seismic zone This area falls in Seismic Zone II (low risk/least active)

Fig.1 KIA MOTORS INDIA project location in Penukonda

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Andhra Pradesh has a rich source of Man Power (Semi-skilled and skilled)
Making it an idealistic destination for manufacturing sectors.

Having large number of Sea Ports, Airports , Road & Railway network
(Table 1).

After the post Bifurcation, Govt of AP is aggressively promoting industrial
development through attractive industrial policies, incentives and campaign
through Global summits.

Due to demand in Automobile sector, Government of Andhra Pradesh
initiated development of the industrial park in Ananthapur due to plenty of
uncultivated land available which attract investors from the neighboring
states.

Near by other industries depicted in Fig.2.

Availability of water and electrical power is as per Table 4

Fig.2: Industries nearby KIA Motors

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According to Department of Industrial Policy and Promotion (DIPP),

Foreign Direct Investment (FDI) worth of 18.413 billion US$ is attracted by
this Industry during April 2000 to December 2017.

Now Government of India opens 100 % FDI’s in Automobile sector as part
to encourage Make in India initiative.

INDIA’S biggest FDI (2 Billion USD) as KIA MOTORS, is a Proposed
Development as in the part of overall Hyderabad- Bengaluru Highway.

Other investments around KIA Motors-

KIA Motors which is a Manufacturing plant it requires many Automobile
Products to Assemble and Manufacture a CAR. For that 16 Vendor
Companies are going to set up their plants around KIA Motors with an
Investment of 737 Million USD3 to manufacture car parts like Seat, Sheets,
Modules, Tiers, Body parts, Doors, Bumpers, Headlights, Crosh pad,
Weather strips, Seat frame, AirCleaners, Tubes,Door frames Etc..,(refer to
table 1)

Table 2: KIA Motors vendor companies investments, Employment, Manufacturing Products

S.n KIA Vendor companies Investment Million Employment Manufacturing product

o USD
1 Hyundai mobis Company limited 43.7 436 Modules
2 Hyundai Dymos 148 812 Seat, Manual transmission
3 Hyundai steel company 37.8 91 Sheets
4 Hyundai Glovis Co Ltd 101.5 1135 Consolidation centre, tyre
wheel Assembly, vehicle
processing centre
5 Sung woo hitech Company Ltd 84.7 850 Body parts, Assembly
6 Saehan industries Ltd 95 520 Body parts, Assembly
7 Siyon Ehuwa Ltd 78.9 562 Door trim, Bumper
8 NVH Korea Inc 48 503 Head lighting
9 Hyundai materials Corporation 8.3 127 Scrap
10 Pharesia korea Ltd 9 250 Crash pad
11 S.L Corporation 30 345 Lighting
12 Hwaseung R&A Company Ltd 16.4 225 Weather strips
13 Deachang seat company Ltd 9.7 255 Seat frame
14 Inzi Controls Company Limited 6 84 Air cleaner
15 Bhooguk Industries Company Ltd 4.8 213 Tube Assembly
16 Vuong Company Ltd 15.2 175 Door frame
737 Million USD 6583

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Table 3: Land utilization

S.No Land Utilization Area Of Extent
1 Industrial Plots 363 Acres
2 Utility Centre 30 Acres
3 Support Services 51.6 Acres
4 Roads 53.9 Acres
5 Green Belt 51.8 Acres
6 Open Space 16.3 Acres
7 Diversion Canal 25.4 Acres
Total Area of Land 592 Acres

Table 4: Requirements of water and electrical power supply

Water supply Electrical power supply

Water supply is 3.5 million liters/day out of The power supply will be drawn from
this 2.5 Million/liters/day will be treated existing nearest 132/33 kV Sub-station from
waste water from CETP. Boksampalli & Suburayinapalli Substations.
Average water demand for Employees 65 33/11 kV substation is proposed for project
liters/ capacity/day site
Average water demand 10kl /Acre/day

Land with clear registration

BC reserved Lands which are not having clear registration

Out of the above most lands are barren lands

Government of Andhra Pradesh is Compensated to farmers with

RS.10,50,000/ Acre.

Mango tree, Teak tree, Babul tree, Coconut tree are evaluated by the
Forest department While Vegetables plants And flowering plant are
evaluated by the Horticulture department.

No extra compensation is given for Electric poles, Flat lands, Agricultural
wells etc..,

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535.5 Acres as Main project @ 6 lack/ acre (Rs.6.00 Lakh per acre in deferred
payment with 25% in June 2017, another 25% by July 2017 & rest by January 2019)

36 acres of land @ Rs.6.00 Lakh per acre in deferred payment mode for Township.

11.20 Acres as Training centre for 1lack/acre (Rs.1.00 Lakh per acre in deferred
payment with 25% in May 2017, another 25% by June 2017 and rest by June 2018).

30 acres of land @ Rs.6.00 Lakh per acre for Truck Terminal in deferred payment .

50 acres of land @ Rs.6.00 Lakh per acre for Railway siding in deferred
payment . It was also agreed to take up the matter of railway siding with Central
Government.

Environment Forest, Science & Technology Department (EFS&T) agreed to the

proposed restriction of total 10 KM radius
 Notifying 2 KM radius as a prohibition zone for Highly Polluting Industries
(Red and Orange Category Industries )
 8 KM radius as a restricted zone to allow restricted activity (allowing only
green and white category industries). Red category industries restricted within
10KMS.

Training Centre is proposed to train their employees, in it Government Andhra

Pradesh contributes Rs.10,000/ person for 2000 Employees for 1 time training cost.

Refund of output on SGST for 20 years

Refund of output on SGST on Spare parts sale for 20 years

Soft Loan incentive for Input SGST for services accrued to the State @0.1 %
interest per annum payable from 21st year to 40th year for 20 years.

Soft Loan of Road Tax for 20 years with Interest rate of 0.1% per annum payable
from 21st year to 40th year.

Power Supply @ Rs.3.00 per unit for the Project, Training Centre and Truck
Terminal for 20 years and the power cost reimbursement will be so regulated to ensure
that power supply is made available to the company at a fixed cost of Rs.3.00 per
Kwh/unit over a period of 20 years or 100% of the Eligible Fixed Assets, whichever is
less

Reimbursement of fixed Water Supply cost @ Rs.35 per ton/KL for the Project,
Training Centre and Truck Terminal and reimbursement of water tax (if any) for 20
years or 100% of the Eligible Fixed Assets, whichever is less.

NOTE- All the above will be applied from Date of Commencement of Commercial Production.

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From the study the following points are noted

Hypothesis-I
There is significant role of Automobile industry in employment opportunities generation.
Hence, Null hypothesis is rejected and alternate hypothesis is considered

For the families who lost their lands during land acquisition process as
1 job/1 family with respective to their Qualification but no written Agreement is
given by the Collector.

Table 5: KIA Motors Impact on Car drivers salary

Prior to Kia motors Proposal Post Kia motors Proposal

Driver Rs.400 to Rs.500 per day (i.e. But Rs.12,000 to 15,000/ Month (i.e. If
regularly irregular) driver is familiar with english
language)
Rs.15, 000 and above / Month (i.e. If
driver is excellent with english
language)

Hypothesis-II
There is significant role of Automobile industry on real estate business. Hence, Null
hypothesis is rejected and alternate hypothesis is considered

Table 6: KIA Motors Impact on open plots lands (1cent = 48.4 SQ.YDS)
Location Prior to Kia motors Proposal Post Kia motors Proposal
(Cost in Rs. Per cent) (Cost in Rs. Per cent)
Main Bazaar 18 to 23 lakh 30 to 35 lakh
Main Roads 7 to 10 lakh 12 to 15 lakh
Main Areas 6 to 8 lakh 8 to 10 lakh
Other Areas 4 to 6 lakh 5 to 7 lakh
Town Outskirts 2 to 2.5 lakh 3.5 to 5 lakh

Hypothesis-III
There is significant role of Automobile industry on hotel industry business. Hence, Null
hypothesis is rejected and alternate hypothesis is considered.

Table 7: KIA Motors impact on new restaurant/hotel/store construction

S.No New-Restaurants New- Guest House
1 Kangnam Korean Restaurant Rainbow Korean guesthouse
2 Yewon Restaurant Moojigae Guest house
3 Saet byul Korean Restaurant Shinwoo Guesthouse
4 Seoul store

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Hypothesis-IV
There is significant role of Automobile industry on agriculture lands cost. Hence, Null
hypothesis is rejected and alternate hypothesis is considered.

Table 8: KIA Motors impact on agricultural lands

Land Location Prior to Kia motors Proposal Post Kia motors Proposal (Cost
(Cost in Rs. Per Acre) in Rs. Per Acre)

Around Erramanchi 7 lakh to 8 lakh Not for sale

(Proposed KIA Motors)
Near Erramanchi Abutting to 11 lakh to 12 lakh 1.5 crore to 2 crore
NH-44
Near Penukonda Abutting to 15 lakh to 20 lakh 2 crore and above
NH-44
10 kms away to Penukonda 5 lakh to 10 lakh 40 lakh to 45 lakh
Abutting to SH-96

Hypothesis-V
There is significant role of Automobile industry on housing rental values, Hence, Null
hypothesis is rejected and alternate hypothesis is considered.

Table 9: KIA Motors impact on house rents

Type Prior to Kia motors Post Kia motors Proposal Post Kia motors
Proposal (Rent in Rs. Per (Rent in Rs. Per Month) Proposal (Lease Rent in
Month) Rs. Per Month)
1 BHK (New) Rs.4,000/- to Rs.6,000/- Rs.5,000/- to Rs.9,000/- Expressed Not interested
House
2BHK (New) Rs.6,000/- to Rs.10,000/- Rs.12,000/- to Rs.18,000/- 20,000 to Rs. 25,000
House
3 BHK (New) Rs.13,000/-to Rs.15,000/- Rs.25,000/- and above 30,000 to Rs. 32,000
House
1 BHK (Old) Rs.2,000/- to Rs.3,500/- Rs.3,000/- to Rs.5,000/- Expressed Not interested
House
2BHK ( Old ) Rs.5,000/- to Rs.6,000/- Rs.6,000/- to Rs.8,000/- Expressed Not interested
House

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Hypothesis-VI
There is significant role of Automobile industry on new building constructions. Hence,
Null hypothesis is rejected and alternate hypothesis is considered.

Table 10: KIA Motors impact on new constructions

Permitted for Constructed to
Approval for only G+2 floors Constructed to G+4 & G + 5 floors

Approval for only G+1 Constructed for G+4

Table 11: List of Findings from this Research

S.NO Table No Findings

1 Table 5 It is observed that, there is increase in salaries of cab
drivers, depending up on their level of
communication in English language.

2 Table 6,8 Rate of open land has drastically increased.

3 Table 7 New restaurants & Guest houses have been

constructed.

4 Table 9 It is clear that there is increase in rental value.

5 Table 10 It is understood that people are willing to invest in

building construction to facilitate present & future
Kia motors employees, even by deviating by the bye
laws/approved plans of local Governing body.

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Government attracts companies for their establishment in their states to

create employment opportunities.

In our opinion it is found to be true that, because of KIA Motors
establishment, large employment has been created and also supporting
services will find the employment opportunity and it is not limited to above
mentioned categories.

1. http://www.apiic.in/aboutus.html
2. http://www.census2011.co.in/data/village/595435-penukonda-
andhra-pradesh.html
3.http://epaper.andhrajyothy.com/1586165/Andhra-
Pradesh/20.03.2018#page/11/1

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