One brand sums up just how big a shake-up the European market has had in 2009: Kia. Trailing Honda by only 6,500 units after the first eight months, the Korean firm is clearly on a roll. Perhaps surprisingly, it is the battered UK market that’s been leading the charge. Kia Motors UK’s new managing director Michael Cole tells Glenn Brooks not only how those sales gains are being made, but also profits.
With Europe-wide sales of only 160,000 vehicles in the first eight months and a 1.7% share of 30 of the EU and EFTA markets, Kia is hardly a household name to car buyers in the region. But thanks to a much-talked about seven-year warranty for its two built-in-Europe models (cee’d and Sportage) and some cleverly tailored incentives to exploit regional scrappage schemes, the brand is one of the big success stories of 2009. Sales in the UK have been so strong in recent months, in fact, that the country is set to overtake even the booming German market for Kia.
Go deeper with GlobalData
Michael, Cole, who until only seven weeks ago had worked for Toyota GB for 15 years, most recently in the position of Operations Director, is clearly excited still by the potential for Kia in the recovering UK market and in Europe in general.
“It’s no secret that we’ve done very well with our Reasons To Be Cheerful ad campaign. I think we’ve struck a chord with UK buyers through this recession. The Picanto, which quickly became our best seller thanks in part to the £4,495 price tag, is still our number one model. It’s safe to say that we’re going to have a record month in September too. As of the end of August, we reached 24,999 sales, only a few thousand less than what Kia sold in what’s a far larger market, Germany. Coming out of September, I’ll think we’ll shake them, and by year-end, we intend to be at 46,000 sales, so we hope to just pip Kia Motors Deutschland.”
To cope with the growth, Kia UK has been actively supporting its franchised dealers and adding ever more outlets to a network that now totals 142 locations. Bottom of the rankings not so long ago, Kia was recently rated as best for dealer standards and advertising and recognised as highly rated for profit return, future profitability, warranty and the support from field staff by the country’s National Franchised Dealers’ Association.
“I know from my time at Toyota, we now have a better return on sales but where they’re definitely stronger is on aftersales and that’s due to the total parc being significantly bigger. So the Toyota network has a much stronger overhead absorption than the Kia network but we’re making good returns off a lower cost base. In fact, we probably have one of the lowest cost bases in the industry.”
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThe dealer network may be profitable, but analysts say Kia UK is putting too much emphasis on one low-priced model, the Picanto. What’s more, until recently, the bigger, Slovakian-made cee’d was the brand’s best seller. Crucially for sustainable growth, this is clearly being addressed. The launch of a facelifted cee’d range is underway, with a particular push into fleets, a segment that makes up 50% of the UK market.
Kia’s strategy to grab what have traditionally been Ford Focus or Vauxhall Astra buyers is a new variant of the cee’d that’s aimed directly at business users and, the brand claims, unique in the segment. Cole believes corporate user-choosers will be attracted by the low CO2 average of 110g/km for this EcoDynamics model version. This is code for an 89bhp diesel engine and what Kia calls Intelligent Stop & Go (ISG). That CO2 number means a 100% company car tax write-down can be claimed in the first year.
“We look like we’ll finish this year with about 3.5% of the retail market and 1.2% of the fleet market. Retail was around 2.2% in 2008 and fleet sales have been flat, so it’s not hard to see where we want to improve. Just on the retail side, though, scrappage has helped us, no doubt about that. Now my view on this is the vast majority of people who’ve bought a car from us have probably never bought a new car before, or if they have, it’s been a long time since they did. I don’t want us to be a cheap brand. These types of buyers can see we’re a high quality and value for money brand.”
On the topic of who the typical scrappage buyer has been in the UK, Cole is adamant that pigeon-holing such a person is wrong. “Nearly 10 million people were able to take advantage of this scheme, so it doesn’t make any sense to say it’s only young families or retirees or whoever else. We certainly saw, and I should add, continue to see, lots of different kinds of buyers, many of whom are new to our brand.”
Cole in under no illusions of the dangers of being seen by consumers as a low-price brand: “We know Chinese brands are coming; it’s not a sustainable position to say we know we’re successful because we sell cheap cars. It would be a misperception, because that’s not what we do.”
Turning to where the next potential growth areas for Kia UK might be, obviously that includes the C-segment where the cee’d is starting to make inroads, as mentioned earlier. But what of larger models? The Magentis sedan is available but just about invisible on UK roads. Does Cole and indeed Kia Europe, intend to bring a more competitive product to the market in the future?
“Yes, in a word. We will have a model to compete with the Insignia and Mondeo before 2012”. When pressed, he admits that the vehicle will be all-new and on sale in Europe in 2011. “We want this car for fleet (sales) in the UK. While there’s still a bit of a blur between the C & D segments, there is still a big market here for a family-sized car, and we want some of those sales.”
It is this concentration on “core products” that is driving the brand’s determination to focus on only major segments across Europe. So while there are “absolutely no plans” for a production version of the excee’d convertible concept from the 2007 Geneva show, the Zilina plant in Slovakia will be building a replacement (codename: SL) for the by then six-year old Sportage in 2010. A year later, the next Rio is due for local launch. While he won’t reveal any other details, Cole states that this model will finally give Kia Europe a similarly sized rival for the Ford Fiesta.
“You know our big weakness is B-segment. This is 30% of the UK market and we currently have probably only 1.5% of the segment. We have to reinvent the Rio for the European market and we will. Once again, if you look at all our recently released models, this won’t be a cheap car and it won’t be a cheaply engineered car. We’ve got a lot of other new product coming too. In fact, by 2012, cee’d and Soul will be our oldest products.”
