The average return on sales for Kia dealers was 1.8% in 2012, with the retained margin per unit running at around £1,000. 

The UK all brand average RoS was put at around 0.7% in 2012.

Of the network, about 20 dealers made a loss in 2012. 

A number of these were in the start-up phase, with more than half budgeted to make a loss as they adapted to the new franchise. 

Another four or five are serving out termination, and Kia says it is working closely with the remaining ones to understand why 85% of the network can make good profits but they are not.

While Kia has 12 open points, typically in high-cost metropolitan areas west of London, Philpott says dealers are knocking on his door to take on the franchise – and very few retailers are looking to drop it. 

Furthermore, dealers are also putting themselves forward to be in the next wave of the DNA training programme.

Long-term, Philpott wants a retail network of up to 185 sites.

With a 2012 new car sale per site average of 383 units, this would give Kia total annual registrations of 70,855 units – exactly where Philpott believes the brand can be this year, providing appropriate geographical representation, allied
to vehicle supply capabilities and controlling inter-dealer competition where all retailers can make a profit.

“Dealer profitability is critical to our growth ambitions because only if they remain profitable will they invest, will they move the showroom wall a few more metres in our favour, expand the showroom and workshop facilities, buy land for more customer parking spaces,” Philpott said.

And he has no wish to see Kia set up its own retail network, denying that its highly-structured, prescriptive training programme should suggest it knows better than dealers on how to sell and service cars.

Paul Philpott, Kia Motors (UK) president and CEO, Q&A

Finance programmes fuelling used car supply
“Demand for used Kias is strong, with values consistently above the guide books.

“Auction prices are typically 102-104% of CAP or Glass’s.

“Some of the dealer network would love us to do more rental business so that we can create more used cars to feed their used car operation. 

"However, I want to provide more two, three or four-year-old used cars.

“A three-year-old Kia still has a four-year manufacturer’s warranty, which is longer than most manufacturers offer on their new cars.

"This is why we’re working hard with the network on finance programmes that drive change cycles of two-and-a-half to three years.

“We’re doing a lot of work on PCP with the balloon payment at the end – or the option to take a new car.

"We’re seeing about 50% of our sales now financed through Kia Motors Finance and about 85% of that finance business is on PCP, which, of course, gives us great renewal opportunities in the future.

“This year we have about 3,000 contracts ending and by 2016 we will have 15,000 a year coming to an end.

"From now on we have the opportunity to win conquest sales, but also to drive another sale to an existing customer.”

Solus-branded sites

“It’s not in our strategy to move to solus dealerships because in some of the high-cost markets, our car parc and our service parc is still not big enough to be able to carry a cost of a central Birmingham or London inner-M25 dealership
on its own.

“Even when we reach 100,000 new car unit sales per year, I’m far more driven by having the right operators representing Kia in a professional way, irrespective of how many other brands they have on site.

“Some of our most successful dealers are dual or multi-brand because customers are coming out of a Ford Focus and while they’re looking at a new one at one site, they see there’s Kia in the showroom next door, and realise the Cee’d stacks up very well against it.”

New product

“Once new Carens is launched all of our range will have been changed and we’ll have products in all the key segments.

“The next two or three years will see refreshes, but not all-new cars in our existing range.

But we are looking at niche segments. I see different derivatives off the B-platform, particularly an SUV.”
Kia’s seven-year warranty

“The Cee’d is fundamental to our brand.

"It was launched in early 2007, so the first seven-year-old car will come to the end of its warranty period early next year.

"Based on our experience at six years, we’ve seen no change in annual warranty costs.

"There is no ticking timebomb.

“Seven years has been a strong basis for customer confidence in the brand as it’s seen as a commitment from us, the sort you seldom get in other retail sectors.

“We have no plans to make it longer. No manufacturer has matched or bettered it.”

Threats to Kia

“We’re not looking over our shoulder at anyone in the short term. Long-term, of course, the new challenges will come from China and maybe in time India.

“If the world went to a seven-year warranty, our position would be threatened.

“And if our design didn’t move on, or there was disappointment in the next next range of cars – if it was seen as ‘more of the same’ or maybe even worse – this would be damaging.

“Most of our customers have owned only one Kia. We need to ensure they own two or three. Warranty and design are critical – and our dealers giving our customers the experience they expect.”