Page last updated at 11:06 GMT, Wednesday, 3 March 2010

Kia starts new model roll-out

By Jorn Madslien
Business reporter, BBC News, Geneva motor show

Kia Venga
Kia hopes electric cars and long warranties will help boost its market share in Europe

At first sight, there is nothing extraordinary about the Kia stand at the Geneva motor show.

Most carmakers here are displaying all-electric or petrol-electric hybrid cars at the show, and if anything the South Korean carmaker is a late entrant to the market with its Venga EV concept and its Ray plug-in hybrid concept.

Yet Kia's push towards electric motoring is different for one simple reason: it is backed by the Korean president.

The government is believed to be close to introducing economic measures to stimulate both the demand for and the research and development into the manufacture of electric vehicles.

"While it is difficult to predict the future of the industry, electric vehicles will play an important role as the world must move to confront global warming," South Korean President Lee Myung-bak said recently.

In South Korea, the authorities tend to act when they say they will, so this was an important statement, according to analysts.

There are plans to lift a ban on all-electric vehicles in South Korea - a ban that until now has been justified on safety grounds - and replace it with both research and development assistance, as well as tax incentives and other measures to stimulate demand for such cars.

"The government is hoping that South Korea can achieve a strong position in the global electric vehicle market, targeting an overall share of 10% in this arena by 2015," observes Paul Newton, automotive analyst at Global Insight.

'European cars'

But the Venga is not merely an electric car that will arrive some time in the future.

Kia Ray
In the last four months we've launched four new cars that are changing the perception of Kia design
Paul Philpott, Kia Motors Europe

The model - which is essentially a small people carrier that feels large when driven but tiny when parking - was designed in Frankfurt, Germany and is being built in Zelena, Slovakia.

As such it is an all-European car, made for European drivers, insists Paul Philpott, chief operating officer, Kia Motors Europe.

And the Venga is leading the way as the South Korean carmaker embarks on a total model overhaul. This includes its new Sportage crossover sports utility vehicle, launched at the Geneva show, which is longer and more spacious than its old model.

Mr Philpott believes the key driver to future growth lies within the cars' design, penned in Kia's global design headquarters in Frankfurt, as well as in Seoul and in California.

"With the new products that we are now bringing to the market, the product design is coming together as one family," he says.

"In the last four months we've launched four new cars that are changing the perception of Kia design," says Mr Philpott.

"By 2012, the Soul will be our oldest model, and that was only launched in 2009."

Repeating the success

Kia has already gained about 1.8% of the European car market, with much of the success attributed to the Ceed model it launched in 2007.

Kia emerged as the biggest winner in terms of its outright sales
Paul Newton, automotive analyst, Global Insight

The Ceed itself has been far more successful than the company's other models, and Mr Philpott believes this is because it was also designed and built in Europe.

The Ceed, which was promoted with the help of a seven-year warranty, has gained a 3% share of the so-called C-segment, in which it goes head-to-head with the likes of Ford Focus and Vauxhall Astra.

Mr Philpott believes the Ceed's market share could be echoed across the board once its new models come on stream.

Kia aims to raise its market share in Europe as a whole to 3% by 2015, Mr Philpott says.

Engine production should rise to 300,000 units in 2010, up from 243,000 units last year.

Analysts say Kia's warranty programme will help.

"The automaker is likely to reap the benefits of the extension of its seven years warranty on major mechanical components across its model portfolio in Europe, which was announced in early January," according to Global Insight's Mr Newton.

So the company is planning to raise output at its factory in Slovakia by 40% this year to 210,000 cars, and engine production will be raised from 243,000 units last year to 300,000 this year.

Global growth

Kia does not include Russia in its definition of the European market. The Russian market has contracted sharply in the last year or so, recording a 37% fall in sales in January this year when compared with the same month a year earlier.

Kia Sportage
Kia's redesigned Sportage has been designed to wow European customers

Yet Kia's sales rose sharply during the same period, when rival Ford saw sales drop 63%, Toyota's sales fell 54% and Chevrolet sales declined 51%

"Kia has seen a sales increase of 35%, driven by the Rio and the Sportage sports utility vehicle," says Ian Fletcher, automotive analyst at Global Insight.

The sales surge made Kia the third-largest seller in Russia in January after Lada, which remains the market leader in spite of a 41% fall in sales, and Kia's South Korean sister firm Hyundai, which suffered a 31% fall in sales during the period.

In fact, Kia sales rose across the world during the period.

"The year has opened with a continuation of strong sales growth for all the South Korean automakers," says Mr Newton.

"Kia emerged as the biggest winner in terms of its outright sales.

"The majority of [the South Korean] automakers posted improved sales in both the domestic and overseas market, with Kia almost doubling its overall sales."

Strong growth ahead

The strong start to 2010 followed a year that had been extraordinarily successful for Kia.

The company sold 1.1 million cars in 2009, resulting in a twelve-fold rise in net profits during the year to a record 1.2 trillion won ($1.3bn; £840m), with operating profits rising 270% to 1.1 trillion won.

This year, Kia predicts it will sell 1.9 million cars, thus recording another double-digit percentage increase in revenues, "something that IHS Global Insight thinks is possible", according to Mr Newton, even though scrappage and incentive schemes that helped boost sales last year have ended in many key markets.

"Kia's 2009 results show a company in robust financial health, with profitability and sales figures that are the envy of the industry at a difficult time," Mr Newton says.

"The company's high level of investment in research and development and new model launches continues to be vindicated and the increased cash in hand means the company is well placed to invest greater amounts in future."

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