Since launching its Vision 100 strategy in 2012, Kia has regularly reaffirmed its target of 100,000 annual registrations by the decade’s end, but remained coy about exactly when. If it could replicate its 2016 performance this year, it would hit it with two years to spare.
Kia’s registrations hit a record high of 89,364 last year, up 13.9% year-on-year in a market that grew 2.3%.
This success was capped with recognition for and from its dealer network. It was voted franchise of the year at this year’s AM Awards and returned such good results in the NFDA Winter Dealer Attitude Survey, that Kia Motors UK president and chief executive Paul Philpott was “punching the air”, he told AM at the Geneva Motor Show.
The network recorded a 9.4 score for value of the franchise in the survey, just behind table-topping Mercedes-Benz’s 9.7, with a key profitability score of 8.5 against the German brand’s 9.1. In fact, when the score to every question in the survey was averaged, Kia emerged ahead of Mercedes-Benz.
Kia also had 96 responses compared with Mercedes-Benz’s 13, giving a much broader representation of the network.
“The results of the NFDA survey are really important because when a network isn’t engaged with the manufacturer you can never achieve your goals,” said Steve Hicks, sales director at Kia Motors UK.
“We have a really strong network full of quality individuals and experienced management: Kia has always managed to keep its network strong and this puts us in a really strong place.”
Kia put last year’s performance down mainly to new product, particularly its Sportage SUV, which was launched in February 2016 and accounted for 40,083 registrations. It also launched a new Optima Sportswagon plug-in hybrid and the Niro hybrid last year.
Simon Hetherington, commercial director, said: “I can categorically say that we are not forcing the market.
“Exchange rates at the start of the year meant that manufacturers were definitely putting volume towards the UK, and that volume resulted in quite a lot of forcing action later in the year to make sure that all found homes.
“Our success was driven above all by new products and conquesting.”
These conquests account for about 60% of registrations, but Hetherington said Kia had also worked hard on retention.
“Through a combination of different products and programmes – and particularly increased take-up of PCP finance – we are seeing more and more repurchase,” he said.
Hetherington believes a large part of the brand’s appeal to customers of other manufacturers has come from Kia’s move upmarket. He said it is no longer a budget brand, as its quality and pricing pitch it against brands such as VW and Peugeot.
This realignment, together with increased demand for higher-specced models across the range, helped average dealership turnover grow to £10.6 million last year, up 20% on 2015 (£8.8m).
However, it has also brought an unexpected challenge to dealers: what to do with an increasing number of premium brand trade-ins?
“This dates back to the fourth generation of Sportage, which was the first time we took in premium part-exchanges in any number,” said Hetherington.
“This has increased dramatically with the fifth generation and more dealers do focus on selling exclusively used Kias, so having disposal routes for premium product is a very real challenge for some, which you would not have imagined happening a few years ago.”
Despite this, Hetherington said Kia also had a “great year” with used cars in 2016. Auto Trader data showed the 2014 Sportage was the fastest-selling used car last year. Sportage also won the AM Award for Used Car of the Year.
The brand’s growth and seven-year warranty mean it now has the fourth-largest warranty parc of any brand in the UK after Ford, Vauxhall and Volkswagen.
“This is great for the overall business model, because a lot of our focus is obviously on the success of our dealers,” said Hetherington.
Average overhead absorption was just over 50%, while average dealer profits were £187,000 – a record high – with a 1.6% return on sales.
Is 2% possible? Hetherington said: “I’m delighted with the rate of return our dealers are getting. Of course, I’d like it to be more, but we are not stating it as a KPI in the way perhaps some other manufacturers have in the past, as we try not to be hung [up on] setting targets that create issues.
“I think the reality is our network still has investment to make to keep pace with the level of growth required, and obviously the more investment you make, the harder [reaching 2%] gets.
“I think the relationship is as important as the profit: the two things go closely together, but I do think the relationship between Kia and our dealer network is different to what you will find with most manufacturers. That’s something we are very proud of.”
Kia has 187 dealers across the UK. Hetherington expects this to grow, although “not massively as we are close to full representation”.
Instead, he anticipates an expansion in the quality and capacity of dealerships to support the growth in registrations. This confidence in the future of the brand was also demonstrated by a number of new dealerships opening last year, he said, including Kia’s flagship dealership on the Great West Road in Brentford. Owned by the carmaker, it is operated by Norton Way Group.
Hetherington added: “There has also been an interesting change in the dynamic of our dealers. If you go back four or five years, it used to be that about one third of our network was solus and sold only Kia; that equivalent figure now is two thirds.
“Again and again we are seeing businesses decide to focus exclusively on Kia as we have grown.”
Strength in owner-drivers
Owner-drivers still make up the core of the network, which Hicks described as a strength.
“Some of the regionally owned owner-drivers really understand our local
business and are integrated into their communities, so we want to make sure that we are important to those guys,” he said.
“We have a nice mix within the group that we have, but we need to make sure our network works for all partners.”
Hetherington said Kia works closely with the dealer network to make sure all employees are trained to understand the brand and customer needs.
One way the network has sought to improve customer service is the launch of the Kia Genius programme.
Similar to BMW’s product geniuses and Hyundai Rockar’s ‘angels’ these are employees whose job is not to sell. Instead, Hetherington said their role is “to know and love the product, and be able to explain the benefits of that product to the customer”.
“The reason for this initiative is that car sales is a complicated business, there is a lot to do and it’s something we, as an industry, don’t always get right,” he added.
Kia PicantoQuietly holding position as Kia’s second-biggest seller in 2016 – with 13,098 registrations – the Picanto should gain a further sales boost in 2017 thanks to a new model launched in April.
Kia RioThe Rio is another model re-launched in 2017, but the new version lacks the personalisation offered by some key rivals. Prices start at £11,995.
Kia NiroInitially launched as a petrol-hybrid, Kia’s plug-in hybrid Niro crossover was unveiled at this year’s Geneva Motor Show. The new format could attract better registrations than 2016’s 1,269.
“Our dealerships are getting busier and busier with volume growth. Therefore, challenges like looking after customers with initial enquiries, test drives, vehicle handovers, etc. are often the things that get in the way of a salesman trying to do their job. Separating those tasks out is proving very successful.
“They are not geniuses in the sense that they are technical experts. They are looking after the product knowledge and customer qualification, but not trying to sell.
“There is a distinction. They want to explain the benefits, explain why this is such a great car and then hand over to somebody who can actually talk about finance or how they want to structure the deal.”
Currently, 30 dealerships employ a Kia genius and Hetherington expects this to grow. “It is a programme that we are promoting, but we are not setting any targets and saying ‘we must roll it out to 50 dealers by the end of the month’ or anything like that. But we are seeing more dealers taking it on.”
In another dealer initiative, Kia seeks to expand its business centre programme. Fleet is an important sales channel, accounting for 51% of its registrations last year, and it is aiming to increase its share of this market from 3.2% to 4%.
To do this, the brand has increased engagement with major leasing companies, but its dealer network has an important role to play, particularly with small businesses.
Kia currently has 20 business centres and has a medium-term target to increase this to 30. It hopes to be close to this figure by the end of the year, although John Hargreaves, head of fleet and remarketing, said cost may limit its appeal.
“To be a business centre dealer, you do have to invest fairly heavily and, most notably, you do have to have a dedicated person just to do fleet,” he said.
“You have to run extra demonstrators and invest in local advertising, so for a lot of our dealers it isn’t viable.
“We are also embarking on an initiative so all dealers have to have a basic level of expertise in business sales.
“We don’t want experts, but if someone comes in and wants to talk about business finance, contract hire and the pros and cons thereof, we want someone trained in each dealership who can give them practical business advice.”
TV and sport support for dealers
Kia will also be supporting its dealers through national marketing campaigns. It aims to have a television presence throughout the year through a combination of programme sponsorships and television advertising, “not something we have always been able to do”, said Hetherington.
Sport also plays a major part in its marketing strategy: the manufacturer sponsors the Australian Open tennis
championship, while it has also extended its partnership with Surrey County Cricket Club, where it is shirt sponsor and has naming rights to its historic Oval cricket ground.
The Kia Super League – a women’s T20 cricket competition – will enter its second year this summer and will also be televised on Sky Sports.
On track for 100,000 by 2020
So, with a happy and developing dealer network in place, high-profile marketing and more new products either launched, such as the Picanto and Rio, or on the way – the Stinger and plug-in hybrid versions of the Optima Sportswagon and Niro – what will 2017 hold for Kia?
Hetherington expects the total new car market to decline by about 5.5% to 2.54 million, but predicts his brand will buck the trend.
“I’m very confident that we will continue to perform well and continue to grow,” he said. “We set ourselves ambitions to grow in this market by around 3-4%, so we will break through into more than 90,000 units this year.”
This anticipated growth keeps Kia on track to meet its ambition of 100,000 annual registrations by the end of the decade, as stated in the Vision 100 strategy it announced five years ago. The same strategy also outlined its desire to become a top five non-premium manufacturer by the same date.
Last year the brand was eighth (discounting BMW, Audi and Mercedes-Benz), behind Ford, Vauxhall, Volkswagen, Nissan, Peugeot, Toyota and Hyundai. It trailed Hyundai by 3,000 units and Toyota by 6,000.
“Based on the recent rate of growth, reaching 100,000 units a year feels within our grasp,” said Hetherington.
“However, it’s almost more important to set that ambition for when we talk to our network partners. They do need to plan knowing what sort of volumes we are talking about because it’s got immediate capacity and resource implications.
“We’ve tried very hard not to say we are definitely going to achieve Vision 100 by that deadline because I think it could lead to the wrong sort of decision-making, but I think we will get there.”
Kia’s growth does mean dealers are having to invest to cope with the extra demands, but Hetherington said there were no plans to introduce a new corporate identity. Its current showroom style was launched in 2012.
He added: “We are not into gin palaces for gin palaces’ sake, but we do want to have the right sort of representation for what our brand is now.
“If you look at our product line-up today, it’s very different to our line-up of four or five years ago. There is a customer expectation that goes with that. However, we are not a brand saying ‘you must build this’.
“What we are seeing time and time again across our network is a dealer-driven desire to improve and expand the quality of their facilities because they can see the size of the range and the size of the opportunity, and they believe they need better representation to deliver it.
“We do not want to get into chasing volume for volume’s sake. We want a sustainable, profitable business model. We want to have an ambition throughout our whole organisation. We want our network to grow and to deliver more, but not to hit a number at any cost.”