What does the future hold for Kia?

Six out of 10 British car buyers are unaware of the Kia brand, so there is a massive untapped opportunity for future business, according to its UK president and chief executive Paul Philpott.

According to the Korean company’s latest research, awareness of the brand has grown from 25%  over the past five years, which Philpott says is a massive shift forward: “Our brand awareness is growing and we continue to do things like sponsoring, investment and marketing to continue that growth.”

Kia’s latest development is a flagship four-storey dealership facing the A4 and M4 in West London, highly visible to thousands of commuters heading in and out of the capital daily. Kia owns the head lease and the dealership will be operated by Norton Way Group, which already runs the nearby Chiswick Honda and Wimbledon Park Honda.

Over the past three years, almost every dealership in Kia’s network has invested in its ‘red cube’ corporate identity (CI). According to Philpott, the majority of the dealer role is about high street presence: “The new CI identity programme has meant we have a good share of ‘red cubes’ around the country.”

Alongside sponsorship deals such as the Oval cricket sponsorship, Kia spends about £20 million a year on its marketing, across television and digital media.

With brand awareness so important to the manufacturer right now, Philpott expects his dealers to help out by linking with their customers in their local areas via social media and finding other ways of engaging.

“Most customers don’t differentiate between the manufacturer and a dealer, so we have to work together.”

Philpott spoke of where Kia has come from, saying: “I started at Kia in 2007 selling cars for £1 deposit, and it was an import brand until that year. Samsung started as a budget import brand and we are on that same journey.”

Hyundai bought Kia in 1989. In today’s retail market, Kia is ahead of both Hyundai and Citroen. Philpott emphasised that it doesn’t measure itself, in terms of sales, against premium brands.

Just seven years ago, Kia was selling 30,000 cars a year in the UK. In 2015, Kia achieved 42,248 new car registrations by the half-year point, which puts it on its track to hit its target of 80,000 sales by the end of the year.

 

Kia is aiming for 100,000 annual registrations by 2020

It has an aim of 100,000 annual registrations by the end of the decade. That will be achieved by expansion to the range as well as growing demand for existing models.

“The B-SUV segment is very dominant right now. The Venga and Soul models currently cover the missing model, and will sell almost 10,000 cars between them this year. When we come to the B-SUV segment with a dedicated model, we will get it right and we will be a force to be reckoned with.

“It’s a segment that is exploding and we need to be there. We should be in that segment, but to be there now we would have had to have made those decisions three years ago, and three years ago the biggest decision we had to make was where were we going to build our cars because we were at full capacity at every plant,” Philpott said.

Other additions will include a new Optima saloon, which will be revealed at the Frankfurt Motor Show in September, and eventually a sports car. But production capacity must be created first.

“Launching a sports car has to be a global thing. We have seen many which are launched in one market and it just doesn’t work – there’s simply not the volume to make it work to justify the cost.

“We have a Mexican and a Chinese plant coming on stream next year, which will enable range diversification,” Philpott said.

Communications director Steve Kitson added: “Which market do you tell that you can’t have the Sorento you want because we need to free up the plant to build a limited number of sports cars?

“We are not going to give up existing sales over to something that hasn’t yet been tested.”

Despite this, the Kia sports car is coming, with design cues from the GT concept, which was launched four years ago. “We’ve always said as Kia has grown that we needed to get our core models right first, then move onto niche. The new sports car will arrive in dealer showrooms between now and  the end of the decade.”

 

 

 

 

 

 

 

 

 

 

 

 

Kia reaffirmed its commitment to follow demand-led growth.

Philpott said: “Dealers are increasingly asking us for a PHEV, due to the success of the Mitsubishi PHEV. We already have an EV out there, with the Soul, which we brought in in small limited volumes, and it looks like we will overachieve our initial plan of 100 units. Hyundai are already testing a fuel cell, so PHEV is not far away.”

A dedicated hybrid is also coming (code named DE). Kia said that while the recent budget had an impact on low- but not zero-emission cars, it believes the trend towards environmentally friendly vehicles will continue and the dedicated hybrid will remain an important vehicle for the future, especially when looking at non-UK markets. A broader range is “a huge benefit for dealers”, said Philpott.

“But it also brings with it complexity, so we need to work closely with the dealers to make sure they understand what they’re selling. We had 13 dedicated EV specialists for the sale of the EV Soul, which we put through extensive training programme. There will be specialist salesman within the dealership and a specialist technician to work on the vehicles, but we won’t get every dealer selling it over night, because that just won’t work,” Philpott said.

"Yes, our prices have gone up – our average priced car has gone up 25% over the last four years – but quality and technology has also improved"

Paul Philpott

Philpott emphasises the brand has been careful to look at its prices and not price itself out of the market.

“Yes, our prices have gone up, our average priced car has gone up 25% over the last four years, but quality and technology has also improved.

“We’ve also done well with retention. People who paid less for our cars see the improvements and are willing to pay the little bit more for the amount extra they get.

“One question which came up when we launched the Sorento was if Kia was ready to sell models in that price bracket. The KX4 Sorento sells at £41,000, the KX3 at £36,000 – in the first three months, more than 50% of sales are KX3 and KX4 – which shows buyers are prepared to spend £36,000-£41,000 on a Kia.”

Picanto sales are currently down, which Philpott puts down to the fact that the retail A-segment is down 18%, with Kia down 14% in that segment. He emphasised that the new Picanto is coming, but it must get that product right first.

Kia plans to grow fleet sales, but it needs to achieve sustainable growth first, said Philpott, who added that buying fleet business would only damage residual values.

He said he was proud of the journey the brand image has taken and the way it’s developed from being a budget brand to where it is in the mainstream now.

“I also think we can become more differentiated from Hyundai. If Tony (Whitehorn, Hyundai’s UK chief executive) were around this table now, I think he would say Hyundai is the more classic, traditional sort of maker, and Kia is more design driven and sporty.”

The sporty side is has already started to develop, with the launch of the Pro Ceed GT, but with the impending arrival of its dedicated sports car, it can truly embrace its sporty side.

 

Kia dealer network is ‘profitable and positive’

The most recent National Federation of Dealers Association survey put Kia at number two, behind Mercedes, for the question ‘what value do you place on your franchise?’

The Kia dealer network remains profitable and positive, UK president and chief executive Paul Philpott said. 2014 showed 1.6% profitability for dealers, with the average gross profit per Kia dealership being £148,000 – a record for the network.

“The new Sorento in particular was up 40% on quarter two last year, and the Sportage in its last full year will have a record year. I don’t think I’ve ever seen a product in its last year, just before the new look comes around, experience a record year before,” Philpott said.

Kia is currently working with a network of 185 dealers, throughout the UK.  It started the year with 181 and plans to finish the year with 186 or 187.

A new recruit is Brayley Kia in Enfield, which was a long-term open point.

Philpott said the brand has struggled to fill the remaining open points it has: “There are nine open points all together remaining for us. Some of those have proven to be very challenging to fill. We are looking for representation in Chester, Wandsworth, Stratford and a few other more rural points, which just don’t have the same level of volume, in terms of sales.”

Kia is developing a number of digital tools , to be integrated into the dealer experience. Philpott said the manufacturer believes that if you have a good brand, good dealers and a good overall model for the customer, the dealer network works.

“We are all prepared to buy things online. I’d buy a shirt, I’d probably buy a washing machine, but would I buy a house before seeing it? The answer is no. That’s the same with a car. There is always going to be some physical contact between customer and car. We’ve got some very satisfied customers who love the experience they get from our dealers every day.

“Forget virtual drive, it’s not quite the same as driving through traffic, we all want that experience. There are no plans for any Rockar-style sites.”

Paul Philpott

“The dealer model is not broken, so why do something different. Forget virtual drive, we have all played on PlayStation, it’s not quite the same as driving through traffic, we all want that experience, and we all want to be treated in a special way. There are no plans for any Rockar-style sites.”

Some 85% of Kia’s sales are finance-based, with 58% of those on PCP. It launched its PCP model in 2011 and is only now starting to see those agreements and renewal opportunities come to fruition.

“Our customers can generally get into a new car for a similar amount they’ve always paid,” Philpott said.

Kia’s PCP agreements are managed by its own finance company, Kia Motor Finance, a joint venture with Santander. The finance company manages all the agreements and data and gives each dealer a reminder of the customers who they should be contacting.

This makes it easier for dealers to track its turnaround and management of its customers to hopefully get them into a new car. Timing is key with this, dealers have to be hot on getting back in touch with their customer, and “Kia Motor Finance helps a great deal towards this,” Philpott said.