South Korean automobile major Kia Motors Corp on Thursday signed a deal with the Andhra Pradesh government to invest $1.1 billion (Rs 7,000 crore approximately) for its manufacturing facility at Anantapur district. This marks the entry of Kia, which happens to be a sister firm of Hyundai Motor, into the India market.

In a statement, Han-Woo Park, president of Kia Motors, said, “The plant will enable us to sell cars in the world’s fifth largest market, while providing greater flexibility for our global business.”

Construction for the facility will start by the end of this year. The company will also start selling compact sedans and compact sports utility vehicles from 2019. “The manufacturing facility is expected to begin production in the second half of 2019 and produce up to approximately 300,000 units each year,” said the company. Besides this, the plant will also offer facilities for stamping, welding, painting and assembly of auto parts, according to Business Standard.

India is touted to become the third-largest market for passenger vehicles by 2020, according to Mint. However, there has been a decline in the demand for compact sedan. Vishnu Mathur, the director general of Society of Indian Automobile Manufacturers, told Mint, that this drop in sales figure was because of the growing affinity for small SUVs. But, Abdul Majeed, partner and national auto practice leader at Pricewaterhouse Coopers, believes that this segment will witness tremendous growth because of a rising demand in the taxi market. “It depends if Kia would look to differentiate its product [sedans] from the taxi segment,” he told the daily.

The deal comes at a time when Kia Motors posted a 19% drop in first-quarter net profit, reported Reuters. The firm, which manufactures over three million vehicles a year at 14 different locations in five countries, reported a sharp decline in its sales in China. “The fall in consumer sentiment in China is stemming from a political issue, a situation which is beyond the control of an individual firm and is difficult to be resolved within the short term,” Han Chun-soo, Kia’s chief financial officer, had said.