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Dealers look to Kia as dual franchise in recession

Kia is continuing a drive to grow its dealer network in the face of a challenging economy that has seen disappointing return on sales figures for the South Korean brand.

It has 20 open points in the UK. It started the year with 138 dealers and the target for 2012 is 170. It has made 18 dealer appointments so far this year, with around eight ready to open shortly.

It is hoped another 10 open points will be filled in 2009.
Paul Philpott, Kia Motors managing director, said there were difficulties in some areas.

“Key areas such as Greater Birmingham have been an issue for us, more so than Manchester and London, and we are working to find out why. The brand has not been able to stand on its own two feet in areas in the south-east, such as Guildford.”

However, the challenges in the economy have prompted a growing interest in dual branding.

Philpott said Kia had received approaches from half a dozen Ford dealers and the same number of Renault dealers interested in adding the franchise.

“We’re flexible on this and, with the right location, the right company and the right team, we will look at dual branding with manufacturers suffering a market share decline right now,” he said.

“We won’t bring a lot of aftersales trade to a business in this case because of the lack of exposure to Kia in the area, but we will add revenue streams in new and used cars.”

Philpott revealed that return on sales for the network stood at 0.3%: “Way down on what we want, but at least we are in the black." The average for dealers across all networks was -0.2%.

“We have yet to see the first quarter composites, but the ad hoc feedback has been that March was good, with sales down just 2% year-on-year and dealer profitability above 1% return on sales, which is acceptable – although we want 2%.”

These are average performance figures and Kia acknowledges that some dealers are making 5% and some a loss. The loss-makers are the focus now for Philpott.

“I have to ensure that their new and used car sales business and their aftersales departments are working efficiently,” he said.

“What they can then earn on finance and other additions is a bonus. If our dealers tick all the boxes they can make 3-4% return on sales.”

Essential to this is market stability. Kia is working on market recovery – excluding the impact of the scrappage scheme – beginning in the first quarter of 2010.

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