Kia bucks sagging sales trend
Kia was the only real success story in the Australian market during 2019. Alone among the top 10 brands selling cars in Australia the Korean brand’s sales volume last year improved by 4.6 per cent – from 58,815 sales in 2018 to 61,503.
And despite most industry analysts anticipating another rough year in 2020, the COO of Kia Australia, Damien Meredith, predicts Kia can further expand its sales base this year.
“We think we can probably grow between four and five per cent this year, because we’ll have a full year of Seltos, so our product is going to help us there – significantly, I think,” Meredith told journalists late last week.
“We’re pretty confident that we can go close to doing 64,000 or 65,000 cars this year.”
The Kia Seltos (pictured) will be joined this year by the smaller Kia Stonic, plus an all-new Sorento and a larger Sportage during the year. With so many new SUVs on the way, Meredith’s estimate may be on the conservative side, especially when Kia’s small car range (Cerato) and light car model (Rio) are carrying their weight as well.
“We believe that we will hold on to our small passenger-car volumes reasonably well,” Meredith said, pointing to the warmed-over Cerato GT as an example of the brand’s strength in smaller passenger cars. The Kia Cerato GT has consistently accounted for up to 17 per cent of Cerato sales since it went on sale last year.
There are various reasons for Kia powering away from the competition in the market. In the example of the Cerato GT, the product is a key factor – with its flexible powertrain and locally-tuned suspension – but price is also a consideration.
Most importantly, however, is the company’s seven-year warranty, which is unmatched in the longer term by any of Kia’s mainstream rivals.
“The reality is, apart from MG and maybe SsangYong… no one’s actually gone and [offered] the seven years,” Meredith said.
Companies like Holden and Honda have dabbled with seven-year warranties as a “marketing tool”, but no mainstream brand has yet posed a serious threat to Kia in that regard. That’s why the company is not prepared to move to a 10-year warranty just yet; the rest of the industry needs to catch up first.
“It’s been a huge help to the brand,” Meredith acknowledged, sounding like a man who can’t believe his own luck. Kia Australia introduced the seven-year warranty back in October 2014, expecting that competitors would respond within three months or so. Five years down the track, the importer is still waiting.
“Five years later, six years later we’re still really the only top-10 manufacturer that has a seven-year warranty.
“It’s been pretty good.”
It’s probably no coincidence then that over the same five-year period, Kia’s sales have more than doubled from 28,005 in 2014.
In the main, Meredith says, the sales gains over that time have come principally from private buyers, although the fleet sales team accounted for nearly half the company’s sales in 2019.
“We were 54 per cent private and 46 per cent fleet [in 2019]… still favouring private,” Meredith said.
“We had a meeting with the dealer council yesterday; I think they’d probably be a little bit happier if we were 60:40 [private to fleet], but… we’re pretty happy with that split at the moment.”
But would there be more profit following in Mazda’s footsteps, attracting a higher ratio of private buyers to fleets?
“What we needed to do, I think, in 2014, we needed to build a volume for the dealer network to achieve,” Meredith explained.
“We had a choice; the choice was that we would take a long lead in regards to building brand, which in effect would have given us a higher private sales situation, or move relatively quickly and implement [the] seven-year warranty, and work harder in the fleet sphere to get things moving.
“We chose the latter: implement seven-year warranty [and] work hard with our fleet partners – and that’s what has taken [us] from 28,000 to 61,000 in that five-year period.”
“What we’ve been able to do over the five-year journey is grow our private-business sales quite significantly also. Our fleet business has grown, but it hasn’t grown as quickly as what our private sales are, because we were coming off quite a low base with private sales, so both areas have grown, but private’s grown a little bit quicker.
“What we’ve been able to do with fleet is get new partners; get new businesses that we’ve never had before.”
Fleet buyers in the main can purchase cars with the seven-year warranty, although Kia does make exceptions if the vehicles purchased are likely to do some hard yards. One example cited by Meredith was a security firm, which placed its business with Toyota rather than Kia, because Kia wouldn’t offer the cars with the standard seven-year warranty, knowing that these vehicles would be subject to a higher level of wear and tear.
“With the normal fleets… the seven-year warranty’s there, but with the security companies, et cetera, because it’s high [kilometre], stop-start business, it’s not covered under that.
“We need to address that.”
Selling cars into rental fleets makes the company some money, and exposes the product to buyers who may have never considered purchasing a Kia. The danger is that if the car is seen on every street corner, it will inevitably become invisible and overlooked. Frequently, rental cars come to be considered bland and boring. Meredith says that Kia has that covered.
“You’ve just got to make sure that you stick very strongly to your percentages in regards to rentals, specifically. We basically stick to a five per cent rule, so if we’re selling 65,000 cars, 3000 we sell to rentals…
“That’s the rule of thumb…”
Importers have often placed cars with rental firms because it helps spread the message. Over the course of their working lives, rental cars can often impress hundreds of users with fuel efficiency, ease of use, performance, safety and comfort – provided the product is good enough. The trick is not to over-expose the product in rental fleets.
Drivers who rent cars will often inform friends, family and colleagues whether the car was satisfactory – or not. Word of mouth, as it’s known, is very important to Kia, says Meredith.
“Word of mouth is incredibly important, because we sell a lot of cars to family friends… and we direct them to a dealer and they get well looked after.”
However, the Kia boss is also quick to praise his communications team for boosting the brand.
“Our communication has moved dramatically from price to brand and product. That was obviously a strategy we put in place a few years ago. So far so good.”
Meredith is not content to revel in the company’s historic performances; he’s looking forward to a solid future for the Kia brand.
“Everything we’ve done is all history now; it’s all about this year. We’ve just got to make sure we’re on top of our game and our dealer networks attuned to a really tough environment. We’ve got to keep them positive; the end result is always looking after the customer.
“We’ve ticked most of the boxes relatively well; we’re not perfect. We could improve, we will continue to improve…”