News - Kia
Kia to target sub-$20k segments
Sub-$20,000 passenger-car market becomes a focus for Kia with driveaway pricing
9 Jun 2016
KIA is aiming to take bigger slice of the sub-$20,000 passenger-car market in Australia as it positions its small-car line-up to appeal to used-car and first-time car buyers.
Despite sliding sales in the micro, light and small passenger-car segments in Australia, Kia has implemented an aggressive sales plan that could help it improve its overall market share Down Under.
The Korean car-maker has a trio of offerings from under $20,000, starting with the just-launched Picanto micro car that is priced from $14,990 driveaway with a standard automatic transmission, the Rio hatch from $16,990 driveaway with free auto and the Cerato with free auto from $19,990 driveaway.
Speaking with journalists at a media event in Melbourne this week, Kia Motors Australia (KMAu) chief operating officer Damien Meredith detailed the company's plans to increase its sales in the lower end of the passenger-car market.
“The passenger market under $20,000 has been decreasing,” he said. “What we believe is we can grow our market share in that declining volume in that passenger market because of our consistency and because we have got three offerings in there.
“If you look at a lot of manufacturers, they are easing out of the passenger car under $20,000 area, so we believe we could be a stronger player in that area. I think there is opportunity for us in that regards. In the medium term that’s going to be one of our strategic goals to grow our market share strongly in that sub-$20,000 passenger segment.”
Micro-car sales have dropped by 27.3 per cent year on year, after sliding by 32.3 per cent in 2015, with just 3297 sales to the end of May this year.
It makes up 0.7 per cent of the total new-vehicle market in Australia, with only upper-large sedans, such as the Holden Caprice, grabbing a smaller share with 0.2 per cent.
The Picanto topped its segment in its first month on sale last month with Kia shifting 189 units, beating the all-new Holden Spark and the Mitsubishi Mirage that recorded 140 sales apiece.
It is a bold move from Kia, given that low volumes and low margins have prompted a number of car-makers to pull out of the dwindling micro-car segment in the past couple of years.
Nissan announced in April that it would pull its Micra from the market by the end of the year, Volkswagen discontinued its tiny Up after just 18 months on the market and Fiat Chrysler Automobiles Australia stopped sales of its Fiat Panda and Punto models in September.
Mr Meredith said KMAu was one of few manufacturers that believed there was growth to be had in the sub-$20,000 market.
“I can't think of anyone else who has got three cars under $20,000.
“Let's be honest, there are manufacturers deleting vehicles out of that area and we believe that we can get stronger in that area. That's our intention.”
As GoAuto has recently reported, KMAu opted to launch the Picanto even though the next-generation version will arrive in Australia next year so it could build awareness of the model in Australia.
Mr Meredith said planning was well under way for the introduction of the new-gen version, and that early interest in the existing Picanto have been positive.
“The only decision for the new Picanto for next year is whether to bring in a manual. There is internal debate over manual price leader.
“I was always very confident that we would pull up from used-car buyers rather than people coming down from Rio or Mazda2 or (Honda) Jazz. I think that’s what's happening. It's only early days. To get young people into our brand – $14,990, auto, seven-year warranty – it’s a pretty compelling argument.”
Prior to officially confirming the Picanto for Australia midway through last year, KMAu suggested that it would roll out a unique marketing plan for the tiny city car by pitching it directly to university students using marketing activations at campuses.
Mr Meredith acknowledged that this plan did not get off the ground in time for the Picanto launch in April, but said it would definitely be used for the next-gen version next year.
“We wanted to put in a finance offer. For a thousand reasons it didn’t come to fruition. But it will come to fruition with the launch of the new Picanto next year.
“Basically it is a finance offer that is of great value to uni students. I can’t give you the ins and outs of it but it will be really good. It will put another bow to what we think is a great offering in the marketplace with Picanto.
“What we want do is we want to get young people into our brand.”
Mr Meredith said the larger Rio light car “plays a really important role in that growth of sub-$20,000 passenger cars for us”, and added that he hoped the new-gen version, also due next year, would attract more sales than the current model.
“It's a completely new design so that always helps, but what we have to do with Rio is, we have got to get better at those private sales. We have been really good at that fleet segment with Rio, with rentals, etcetera. It's been really good.
“But with that private business, that's where we have got to get better with Rio. We will have a strong focus there. We are relatively happy with volumes that it does, but as a brand we think we can do better.”
The Rio is running seventh in the sub-$25,000 light-car segment in year-to-date-sales, behind segment leaders such as the Hyundai Accent, Mazda2 and Toyota Yaris as well as the Suzuki Swift, Honda Jazz and Volkswagen Polo.
Mr Meredith said one of the reasons it has not hit the sales highs of its rivals was not enough promotion of awards it won following its launch in September 2011.
“I don't think we took advantage of the (CarsGuide) Car of the Year status that it had. That wasn't pushed strongly enough. It's still a great looking car. We just haven't been able to take advantage of that. It's really hard – if you don’t take advantage of that momentum, it's very hard to kick start it again and it is expensive.
“The other problem is, what you tend to do is, you tend to go on price to try to get that catch up. That car was being sold at ridiculous figures. Sometimes I think it was $13,990. But it wasn’t increasing volume at all.
“We took a different tack. We positioned it to make room for Picanto. It didn't affect the volume one little bit. I think what we have to do is when a new car arrives, we keep it around where it is, around that price point, and market it correctly, and make sure that we are consistent with our pricing strategy with that car.”
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