Pendragon, Arnold Clark and Reg Vardy, which joined the network during the summer, will enable Kia to improve control over the rising number of cars returning to the used market. That will help to raise residual values – vital if Kia is to break into the fleet market.
“In the medium term we need a better balance between retail and fleet,” says Kia Motors UK managing director Paul Williams. “It’s smaller margins but consistent volumes. To get there we need to have the brand, the product and the infrastructure. We have the first two, now we need to get the infrastructure in place.”
He is working towards a 2007 deadline, the date when Kia’s Slovakian plant starts making cars in the fleet dominated C-segment. “We need fleet if we are to achieve our sales ambitions,” he adds.
An in-house fleet function, which adds cost and complexity, is not an option. Williams reckons he has 15-20 dealers in the 161-strong network –- set to rise to 175 by year-end, and 210-220 by the time the brand hits 100,000 sales in 2010 – that can sell to the corporate market and he wants to encourage greater take-up.
His medium-term aim is to boost the fleet proportion of sales, this year just over 20%, to 30%. But he warns that fleet “must not be a substitute for the retail business”.
Williams says: “Our dealers need to have an incremental attitude. We’ve had to have conversations with quite a few over substitute business both for fleet and on new products.”
Kia insists it has no intentions to force out owner-driver businesses that have been with the brand from the start, though Williams predicts a “network shake-up” which will see dealers not willing to expand with his vision dropping out of the franchise.
“This year and next year will be the most difficult that our dealers will have because we are neither niche nor volume. Costs are increasing and the returns aren’t there yet,” he adds.
“But we are gearing up for volume and dealers will benefit from the used car and aftersales business that comes with it.
Kia, which benchmarks itself against Toyota, is confident of ending the year on 47,500 new car sales, 7,500 up on its original target. Dealers will average 1.5% return on sales this year, although the upper quartile are hitting 4-5%. “We believe we can have a dealer network that is consistently achieving 3% returns by 2008,” says Williams.
“By the end of the decade we want a 4% share of the UK market. That’s the goal.”