How Kia cracked the Indian auto market

Wooing Indian auto shoppers is not for the faint of heart.

In fact, cracking the world’s fourth-largest auto market was so hard for some foreign automakers from General Motors to Ford that they had to pull the plug on their operations in India, after their products did not pass muster with its price-sensitive shoppers.

A series of bold and timely moves has helped South Korean carmaker Kia show the way ahead for multinational companies looking for a piece of the Indian auto sales pie, making it a perfect example of how to adapt to a unique market where competition is high and customers are hard to please.

Kia started its India journey in July 2019 with ‘Seltos’, riding the wave of Indian consumers shifting towards feature-packed sports utility vehicles in a market that up till then was largely driven by small cars.

“We anticipated the shift well in advance and which is why we came into the SUV segment as our first two launches were SUVs - the Sonet and the Seltos,” Hardeep Singh Brar, Vice President and Head of Marketing & Sales, Kia India, told DH, adding that their price tags were also in sync with the growing aspirations of Indian consumers.

The results are for everyone to see.

Kia India topped the dealership satisfaction study released last month with 871 points, far ahead of the four-wheeler industry average of 773 points, the Federation of Automobile Dealers Associations (FADA) said. With this, the subsidiary of South Korea’s second-largest carmaker Kia Corp held the pole position for the third consecutive year.

FADA and Singapore-based consulting firm PremonAsia undertook this study to examine the health of the relationship between auto dealers and original equipment manufacturers post the Covid-19 era.

Kia’s growth in the world’s second-most populated nation comes at a time when its auto market has just begun recovering from various setbacks including the pandemic-induced chip shortage, supply chain constraints and rising input prices.

The company’s steep rise is further evident by the fact that it has remained among the top five carmakers of India consistently in the last two years amid conditions which saw some prominent automakers shut their India business due to improper business strategy.

“Kia made its India debut in the fast-growing SUV segment and has continued its focus in the UV segment (SUV and MPV) with its follow-up models, all of which are feature-rich and have been priced competitively,” said Ammar Master, Senior Manager, Asia Pacific Vehicle Forecasts, LMC Automotive, a GlobalData Company.

That has helped Kia attract more buyers and bolster sales, he added.

In the utility vehicle segment, Kia had topped the exports chart with as many as 37,630 sales outside the subcontinent in the current financial year as of August 31, about 37% higher than those done by the second-placed auto giant Maruti Suzuki.

Thinking ahead of rivals

Kia’s foresight and preparedness to match up to the industry expectations helped it take on seasoned automakers as they were caught unaware gearing up to shift to the newer trends and technologies.

“The model also had the distinct advantage of being BS-VI compliant from the outset, while its rivals had to play catch-up (at that time) by upgrading their engines to meet the stricter emissions norms before the April 2020 deadline,” Master told DH.

In the last two years, there were instances where Kia’s retail sales overtook those of automakers including Mahindra and Honda, thanks to its decision to start off with SUVs.

Despite having a higher average ticket price than its rivals, Kia’s pricing strategy has worked as it capitalised on the consumer shift towards feature-rich cars.

“If you look back, maybe more than a decade ago, people were cost-conscious, but today consumers don’t mind spending money. He wants features, and the designs of the car have become very crucial,” Brar said, adding that Kia’s research team did “a fantastic job in understanding what the consumer is looking for”.

Experts pointed out that this strategy has helped Kia compete better against the higher-end models of its competitors despite positioning itself slightly above the mass-market models.

“It is also important to realise that both Tata and Mahindra were in the process of revamping their somewhat aged line-ups when Kia entered the market, thereby giving the Korean brand the advantage of novelty. For instance, the new Tata Safari did not come out until early 2021,” Master said. Like most auto companies in India, Kia faces some challenges too including strong-performing competitors at the top, industrywide supply chain constraints and the struggle to retain customer loyalty.

“There are a lot of launches happening in different segments and when the customer has more choices they tend to explore more. How we look at this is that we give the best customer experience,” said Brar.

Homegrown automakers Maruti Suzuki and Tata Motors alongside Kia’s parent Hyundai have held onto the top three positions for a long time with their wide range of vehicles.

While the Indian auto market is leaning towards SUVs, experts said ignoring the small-car segment altogether would be foolish.

“While Kia’s immediate emphasis on SUVs and MPVs is sound, we think to ignore the sub-compact car segment entirely, in the long run, would be a mistake,” Master said. “In short, if Kia is to make its mark in India in the long run, only a well-rounded product strategy will do.”