South Korea’s second largest automaker Kia Motors Corp. is close to signing a deal to build its first auto-making plant in India, sources said.

Indian news outlets reported Kia was mulling to build a factory in Andra Pradesh that would cost the company about 103 billion rupees ($1.6 billion).

The report comes at a time when Korean auto makers are facing growing business risks in the world’s two biggest auto markets - China due to softening demand and the United States from trade protectionism.

Indian daily newspaper The Economic Times reported that Kia Motors has chosen Penukonda in Anantapur district in southern Andra Pradesh to set up its first Indian factory. The report quoted two unnamed sources who said the Korean carmaker would invest around total 103 billion rupees to construct the plant in two phases, with the first phase of investment amounting to about 60 billion rupees. The plant is reported to churn out 300,000 vehicles a year from 2019.

An official from Kia admitted that the company has been studying the option and negotiating with Indian state governments, but denied of reaching a decision on the location or investment scale. Kia shares that rose to 35,200 won during the day closed at 34,700 won on Tuesday, down 0.72 percent or 250 won from the previous session.

Kia has been visiting India in search of a factory location since last year and could sign a deal as early as this month, local sources said.

India, the world’s second populated market with burgeoning demand in motor vehicles due to improvement in living standards, poses as appealing alternative to the U.S. and China where trade barriers have been increasing to promote domestic automakers.

The auto market in India expanded 7.6 percent from 2.75 million units in 2015 to above 2.96 million units in 2016.

Its sister company and the Korea’s largest carmaker Hyundai Motor Co. is already operating two assembly lines in Chennai in Tamil Nadu that have a combined production capacity of 650,000 units per annum. If Kia establishes a factory capable of churning out 300,000 units a year, the two automakers would be able to secure a production capacity of 1 million units in India.

By Woo Je-yoon and Park Chang-young

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