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Kia takes action to protect dealers

Kia has taken measures to help dealers’ sales in a fourth quarter that is expected to be down across the industry by at least 25% year-on-year.They include amending its margins earnings threshold so it cuts in at around 90% rather than 100%. However, the carmaker has not reduced sales targets.

Paul Philpott, Kia UK managing director, said: “We are basing our fourth quarter targets on dealers’ ability to hit them. Last year we had a weak start and a strong second half; this year we had a strong start but we recognised that in the second half the rise would be lower, around 10%.

There are still opportunities for dealers to hit those targets.”
Kia’s sales were flat in quarter three, partly due to shortages in supply of some of its smaller cars. However, more than half of the retail network hit their targets. 

There are big fluctuations, though. In September, some dealers were at 50% of target; others were at 140%. 

Kia is planning for a 2009 market that “will be close to two million”, said Philpott. He’s more confident than some peers who are budgeting for about 1.8 million.

Kia has secured higher volumes of its small cars, including Picanto and Rio. Supply of Cee’d – which is taking 4% share of its segment – is already strong, while in spring the Soul is launched. 

“We will go from having just one small car in good supply to having three cars in good supply and one new launch,” said Philpott.

Kia prices rose this month by an average of 1.1%, following a 1% increase in April, to offset rising steel and fuel costs.

With dealers’ margins at 12%, Philpott says the prices rises are a small percentage; what’s more critical, he believes, is how much of the 12% dealers can keep. At the moment they are retaining margins of £900-£1,000.

Network return on sales at the end of September averaged 1%; at half-year they were 1.6% against an industry average of 0.6%. Those figures are attracting the attention of more dealer groups.

Kia has appointed 21 this year and expects to add up to nine more. It will terminate 12, so the net gain takes the network from 140 to 155. 

Most new dealers are dual or triple-franchising – “a positive way through challenging times”, said Philpott.

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