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Market Insight: Kia enjoys post-GFC success

Tiger tale: Kia’s market share has increased rapidly since the GFC and vehicles wearing the distinctive ‘Tiger nose’ are now selling in record numbers.

Newfound style, better supply and post-GFC exposure make Kia a serious Top 10 player

Market Insight logo10 Apr 2012

THE stars are aligning for Kia in Australia, where the Korean brand appears to have secured a desired permanent return to the Top 10 of the world’s most notoriously tough automotive market.

Given Kia’s considerable momentum at the first-quarter mark of 2012, only a massive recovery by Honda against the flow of play – which the Japanese brand is intent on doing – or a sudden surge by Suzuki, could threaten its position among the elite of the Australian car industry.

Gone is the pain the Korean marque suffered between 2006 and 2008 after the factory took over local distribution and ditched the ‘cheap and cheerful’ approach with light and small cars in favour of more profitable models.

With a stable and attractive model line-up in place, Kia Motors Australia is planning for more than 30,000 sales this year – an increase of between 20 and 25 per cent over 2011 – and is right on track with a rise of 22.1 per cent in the first quarter.

Honda, by comparison, is planning on returning to 40,000 sales this year now that its major Thai supply source has recovered and will be in full swing by June. As GoAuto has reported, Suzuki Australia also has top-10 aspirations by 2017, but is targeting 26,000 units for this year.

Kia’s 30,000 would finally achieve the rather bullish goal set by former sales boss Bill Gillespie for 2008 – which came in the wake of a debilitating 17.9 per cent fall in 2006 following the replacement of local franchise-holder Ateco Automotive, who had progressively increased sales to 25,000 on the back of low driveaway pricing for the ubiquitous Rio light car.

 center imageLeft: Kia Rio, Cerato, Carnival, Sportage and Sorento.

Rather than the anticipated 50 per cent increase in two years, Kia lost further ground and at the end of 2008 replaced Mr Gillespie, who is now national sales manager at Peugeot Automobiles Australia. It might have ended differently if he stayed another year.

While Kia sales dropped a further 1.3 per cent in 2009 to a six-year low as the GFC bit, this was actually a watershed year for the company in Australia. Not only was its result better than the industry fall of 7.4 per cent, it was the first time in five years that the company’s market share had increased.

Not entirely coincidentally, parent company Hyundai’s local sales boomed in 2009 as Australian buyers turned to the Korean brands for their value proposition in tough times.

Given the subsequent double-digit growth for both brands since 2008 – Kia has gone from a 1.9 per cent market share to 2.7 per cent while Hyundai’s share has soared from 4.5 to 8.6 per cent – it could be argued that Australians not only turned to the Koreans when money was tight and stayed true, but that word spread about their improved quality, attracting even more buyers.

As well as taking over the Australian franchise mid-decade, Kia Motors also began a post-Asian meltdown rejuvenation under Hyundai ownership, renewing its entire model line-up, expanding production capability and hiring German design guru Peter Schreyer away from VW/Audi.

Mr Schreyer not only set about modernising the Kia line-up, but immediately introduced his now-famous ‘Tiger Nose’ that helped provide a distinct family look. Until then, no Kia model looked related to another.

By the time the Cerato small car, Rondo mid-size people-mover and Carnival large MPV are replaced next year, the whole Kia line-up will express the distinct and eye-catching Schreyer design language that has helped Kia set sales records around the world (up 20.1, 26.5 and 18.6 per cent in the last three years alone).

That global growth has long inhibited Kia Australia because as the brand grew internationally, especially in core markets, production simply could not keep up with demand. It was hard to get cars Down Under, especially as right-hand drive was not a priority.

Even last year was heavily supply-constrained – Rio was completely absent for two months before the new model arrived, the stylish Optima was limited to 1000 vehicles and buyers had to wait up to eight months for a diesel-engined Sportage – but this year it is no longer a problem and sales already reflect that.

Despite the shortages, Kia still sold 5.4 per cent more vehicles in a market that dropped 2.6 per cent last year – even though its top-selling Rio fell some 31.7 per cent due to the lack of the run-out model and the fact that the all-new model arrived only in five-door hatchback form before the vital three-door hatchback and four-door sedan were launched in February.

If nothing else, that put paid to the industry’s old ‘Rio Car Company’ jibes.

It also showed that Kia could rely on top performances from other models such as the venerable Carnival (steady at 3600 sales last year), Cerato (up 73 per cent to 6100), Sorento (up 24.5 per cent to 3600 after the new model was launched in late 2010) and even Sportage, which lifted 17.2 per cent to 3600 units despite the lack of diesels.

Carnival has long dominated the large people-mover segment and become the school-run bus of choice, taking more than one-third of the segment and outselling its nearest rivals two-to-one. But it is long overdue for a full redesign, even though it was modernised with a Tiger nose grille in 2010, and that new model will arrive next year.

This year, Kia Australia has little new-model activity, with only a major upgrade of the Sorento medium SUV – with the same new running-gear as the new Hyundai Santa Fe and facelifted bodywork – due late around September or October.

That will enable the company to concentrate on selling a settled range, including the full line-up of Rio, which is already up 19.7 per cent in the first quarter compared to the same period last year, putting it on track to contribute an extra 4000 units alone to Kia’s 2012 total by the end of the year.

And Optima, with supply new free and a new entry-level Si model providing extra volume, is already running at double last year’s rate, which could add another 1000.

Not surprising, then, that there are a lot more smiles at Kia’s Homebush HQ these days than a few years ago.

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