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Kia reaping rewards of smaller segment focus

Micro master: The Kia Picanto has had a strong year for sales, bucking the trend of a rapidly- decreasing micro car segment.

Success in micro, light, small car segments helps Kia grow sales in 2017

21 Oct 2017

KIA Australia has gone against the grain by focusing on increasing sales in the diminishing passenger car segment, which has helped contribute to a 30.8 per cent increase in total vehicle sales, year-on-year.

Speaking to GoAuto at the launch of the updated Sorento SUV, Kia Motors Australia (KMAu) chief operating officer Damien Meredith said that building its presence in the smaller segments has helped the company’s growth.

“We’ve focused very heavily on passenger cars when a lot of other manufacturers have been leaving that scene, and I think that if you look at the micro, light, small segments, they’re still hundreds of thousands of cars (per year),” he said.

“Yeah, it is going down, it’s going down on average five-to-seven per cent per year, but our view is that we can be strong in those combined segments, and that gives us a strong foundation.”

So far in 2017, sales in the micro, light and small car segments have dropped by 27.2 per cent, 10.0 per cent and 3.7 per cent, respectively.

Yet in that period, every vehicle that Kia offers in those areas has increased in sales, with Mr Meredith saying Kia’s heavy lifters in those segments are critical to helping the brand succeed.

“Our strategy is simple – we want to continue to grow in our passenger segment with Picanto, Rio and Cerato.

“We believe that Stinger will give us incremental business and the volume of vehicles that are being sold in the SUV segment continues to grow, and we’ve been a part of that with Sportage and Sorento.”

The Picanto has found 2499 homes, up 148.2 per cent on its 2016 numbers, however it did not arrive in Australian showrooms until April last year.

Its 2499 sales are more than double that of competitor, the Mitsubishi Mirage, and KMAu general manager media and corporate communications Kevin Hepworth said the formula for success was simple.

“Good product, better value,” he said.

“With the launch of the second car (in May this year), because it’s got a lot more kit in it, and the price has gone up only marginally, about $500 or $600, it’s got all your connectivity that everyone demands, its still got the auto, it’s still a driveaway price, and it’s just a very, very good little car.”

The two-variant range is priced at $14,190 plus on-roads for the five-speed manual, or $15,690 driveaway for the automatic.

Kia’s seven-year, unlimited kilometre warranty was also flagged as a key reason for value-conscious buyers to align with the brand.

“When you’ve got a car like that and you’ve got a seven-year warranty, you’ve got seven-year roadside assist, and you’ve got the capped-price servicing, so if you’re buying a car in that market you’re price conscious, and all that gives you a confidence and a sense of peace of mind for that car.”

Kia’s offering in the light car segment, the Rio hatch, has seen a 4.3 per cent rise in sales over 2016, after receiving an update in January.

Despite its rise, the Rio has not matched the sales growth of its stablemates, many of which have grown by double digits.

Mr Meredith attributed its slower growth to a couple of factors.

“One is that we’ve stopped being super aggressive with our pricing with that car,” he said.

“The second thing is with the new model when that was launched in the January/February period, we’ve continued to focus on private sales rather than fleet sales, so that being the case we’re relatively happy with what’s happened with Rio sales, but they’re the two major reasons why it hasn’t had double-digit growth, because we haven’t been as aggressive in regards to our pricing strategy, or with our fleet sales.”

Another area of criticism for the Rio is its four-speed automatic transmission, with Mr Meredith saying that Kia would “very seriously” consider a change for the Rio’s eventual mid-life update.

Kia’s best-selling model is the Cerato, which has recorded a 50.3 per cent rise so far this year in a segment that has dropped 3.7 per cent.

Tallying 14,671 sales, it is the fourth best-selling model in the small car segment, behind the Toyota Corolla, Mazda3 and Hyundai i30.

Speaking to GoAuto last month, Mr Meredith said that the decision to stay with a $19,990 driveaway price afforded “clear air around that price point”, where other manufacturers had moved away from the low sticker price.

Mr Hepworth added: “The $19,990 driveaway for the Cerato auto, that’s been unchanged for that entry-level car since the day it was launched.

“It hasn’t been a ‘this month it’s this price, this month it’s that price’. And that consistency, along with the other benefits which is the seven-year warranty, it just gives people confidence that this month you don’t have to rush into a decision, because next month it will be exactly the same.

“And that really is a confidence of purchase.”

Kia has also had success with its other small car offering, the low-volume boxy Soul hatch which has seen a 255.4 per cent sales increase to 231 units, up from 65 last year.

Kia’s SUV offerings, the Sportage and Sorento, have also grown, to the tune of 29.5 per cent and 15.5 per cent, respectively, while the newly-launched Stinger is expected to sell 200 units this month, and provide incremental growth for the brand.

The only models in Kia’s portfolio to experience a decline in sales this year are the Optima mid-size sedan, which has fallen 44.9 per cent to 603 units, and the Rondo, which after splitting into five- and seven-seat versions has seen a 26.9 per cent fall in seven-seaters.

However when combining the five- and seven-seat versions, sales have increased 58.7 per cent, from 109 units up to 173.

The manufacturer remains on track to easily eclipse the 48,000 sales target set at the start of the year, with a figure of over 56,000 sales expected if it can maintain its current growth, however Mr Meredith expects its eventual figure to finish up around 54,500.

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