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Last Updated: Friday, 9 February 2007, 00:00 GMT
Korean cars rev up for Europe
By Jorn Madslien
Business reporter, BBC News, Zilina, Slovakia

Every evening, some 60 Korean executives retreat to their homes in a building complex, tucked discreetly away off a remote Slovakian mountain road.

In-Kyu Bae
Bae: "We can't survive in the European market if we [rely on] exports from Korea"

To the man in charge, Bae In-Kyu, it is the perfect location for hammering out an invasion plan with a difference.

"We need to live together," he says.

"When we finish work, sometimes we go home and have meetings to prepare.

"We are always working, even after finishing work."

Such Korean work ethics might put Mr Bae in a strong position as his team sets out to more than double Kia's sales in Europe in just three years.

But he has plenty more weapons in his arsenal.

"We will have nine new models by 2010 in trendy and growing segments," the president and chief executive of Kia Motor Slovakia declares.

And they will be built in Europe.

"We can't survive in the European market if we [rely on] exports from Korea," says Mr Bae, which is why he has overseen the construction of a 1bn euros ($1.3bn; 663m) factory in Zilina, Slovakia.

European quality

The model that is spearheading Kia's assault on Europe is already rolling off the assembly line at a rate of about one per minute.

Kia Ceeds
Slovakia is becoming one of the major automotive production hubs in Central and Eastern Europe
Ernst & Young's Global Automotive Centre

A seven-year warranty and write-ups to die for in car magazines have helped fill up the order books for the Ceed hatchback, as the Koreans try to do what Toyota did a couple of decades ago, only in a hurry.

"Making the Ceed as practical as its rivals isn't Kia's greatest success," according to What Car? magazine. "A trickier task was to match them for quality and Kia has done a pretty convincing job."

"The ramifications of this European-designed and built Korean hatch will be felt for years," adds Autocar.

European manufacturer

Some 75% of the parts used to build the Ceed are produced within the European Union, explains Mr Bae.

Korean quality control staff at Kia's factory in Zilina
Kia's new models are no longer marred by quality issues

And in a couple of years, when sister marquee Hyundai - which owns 39% of Kia - builds a similarly sized factory just across the Czech border, that proportion should rise to 85% or 90%, he insists.

"Our long-term ambition is to be seen as a European manufacturer," adds Kia Motors Europe's senior vice president Jean-Charles Lievens.

"We have a factory, we have a design centre, our cars are becoming more important.

"Our aim is to sell 500,000 cars by 2010, so we have to gain more than 220,000 in four years."

'Significant threats'

And that's just the half of it - literally.

If Kia's arrival marks the Koreans first step into the European Union, then Hyundai's entry will provide the group with a steady stance - and a joint 7% market share by the end of the decade.

Together, and virtually overnight, the Korean partners will produce a whopping 600,000 new cars in their European factories.

Kia has created several hundred jobs locally, as well as a firm foundation from where it can target the European markets.

And when all these cars are parachuted - along with a few hundred thousand imported models from Korea - into Europe's largely stagnant market there will be a mammoth battle.

Or rather, in the more sombre tone of Citigroup's auto analysts: Europe's incumbent carmakers face three "significant threats to earnings growth", namely a weak US dollar, a weak market in Europe and - wait for it - "Korean competition".

Head-on challenge

Kia is gunning directly at Europe's current best-selling models; the Volkswagen Golf, the Ford Focus and the Opel/Vauxhall Astra.

"In Europe, the passenger car segment represents 77% of sales, so that is where we want to grow," explains Mr Lievens.

Moreover, the one area where analysts predict growth in Europe is in the market for small and medium-sized cars, as drivers increasingly desert "gas-guzzlers".

"Relative winners within Europe might logically be those already skewed towards smaller, lighter vehicles," predicts Lehman Brothers auto analyst Christopher Will.

"With the trends in the market and with political and public concerns about CO2 emissions, the story of the GTI is over," adds Mr Lievens, firmly unapologetic about Kia's decision not to build a high-powered Ceed flagship to impress petrol heads.

Yet, if the response seen in the motoring press is anything to go by, there is every chance that Kia will swiftly improve on last year's dismal figures, when sales fell 12.3% to 213,388 according to the European Automobile Manufacturers Association.

"The Ceed is better [than previous Kia models] in every area, and matches or even improves on many of its European and Japanese rivals," according to Parker's Car Reviews.

"Don't be surprised if history shows this was one of those epoch-shifting cars that transformed the fortunes of its parent company," concludes the car website verdictoncar.com.

And, equally: Do not be surprised if you find yourself behind the wheel of a Korean car sometime soon.


This is the second of two pieces about Kia's European operations. The first, which looks at Slovakia's emergence as a major automotive production hub has helped boost economic growth in the country, was published on 6 February.




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