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2012 Kia Rio Sedan (Mike Ditz/Kia)
2012 Kia Rio Sedan (Mike Ditz/Kia)

Strategy

Who's laughing at Kia now? Add to ...

Maria Soklis is talking about the confidence and maturity that comes with age and a little success, and she’s not talking about herself, her kids, her favourite niece, or even her fellow employees at Kia Canada where she’s the chief operating officer.

No, she’s referring to Kia, the upstart global brand with grand ambitions in Canada and around the world. Kia also has what looks like just the slightest chip on its reinvented shoulder. Just the slightest.

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The rock comes from having to keep over-achieving in a brutally competitive global car market, where even Kia’s sister brand, Hyundai – part of the fifth-largest car company in the world, Hyundai Motor Group – is viewed as a competitor. No, Hyundai is actually a fierce and determined rival.

“I think we are more mature, more confident than we were six years ago [when Soklis joined Kia Canada]” she says at the launch of the 2013 Rio compact sedan. She then goes on to tick off objective measures of success: increased market share, better residual values, improved brand awareness, profitability, owner loyalty – by all these measures and more, Kia is making a lot of progress in Canada.

The same can be said around the world. Kia and its South Korean-based affiliate Hyundai are targeting a 6 per cent increase in global vehicle sales to a combined seven million units in 2012, reports just-auto.com. That’s good, though something of a pullback from several years of double-digit growth. The problem: most car companies expect an industry-wide slowdown in global sales growth. Last year, Hyundai-Kia’s global sales increased by more than 15 per cent to 6.6 million (of which about 2.3 million were from Kia).

That was good, but Kia’s performance in Canada was better. Kia Canada’s 2011 sales were up 20.9 per cent in 2011, significantly outperforming a new-vehicle market that overall grew by just 1.8 per cent. Kia has, in fact, enjoyed double-digit sales growth every year in Canada since 2007. Still, with total sales of about 65,000 last year, Kia Canada’s final tally was almost exactly half of Hyundai’s. For 2012, Kia aims to sell 80,000 vehicles to Canadians.

The driver, as always, is a roster of new and daringly designed products that, while not yet ranking among the quality leaders, are certainly improving. In Consumer Reports’ most recent quality survey, Hyundai and Kia ranked 11th and 12th, respectively, or about mid-pack. Even at that, Hyundai and Kia each had just one below-par entry: the V-6 Hyundai Santa Fe crossover and its sibling, the V-6 Kia Sorento.

In J.D. Power and Associates longer-term Vehicle Dependability Study, Kia scored 160, not far below the industry average of 151. Similarly, in Power’s short-term Initial Quality Study, Kia scored 113, tied with Audi and below the industry average of 107 (Hyundai was at 108). The Kia Rio stands out clearly as a breakthrough model, scoring a runner-up place in the subcompact car class, tied with its sister model, the Hyundai Accent, and just below the class-leading Honda Fit.

The long and short of it is that Kia, says Soklis, knows exactly how to move ahead on quality and achieve the company goal of being a Top Three brand on quality within three years and a Top Five in terms of consumer perception of quality within five years.

That said, the public may be closer to accepting Kia as a builder of quality vehicles than many might think. Late last year, ALG released its 2011 Perceived Quality list and it ranked Kia Canada seventh among mainstream brands, behind Mazda, GMC, Toyota, Hyundai, Buick and Volkswagen – and ahead of Ford, Subaru, Honda and Nissan to name just four.

“The gap between perception and reality is closing,” says Soklis.

When it does, Kia should be able to tout increased resale values, which will be another strong selling point for left-brained car buyers. Last year, Kia ranked eighth in retained or resale value of its vehicles, according to ALG – up from ninth in 2010. By all these objective measures, Kia is making steady progress in the actual quality of its vehicles and the perceived quality among consumers.

For now, Kia is a value play (as I said, for the left-brain buyer) and a design story (for the right-brain dominants out there). Kia envisions itself as a youth brand among mainstream car companies. The idea is to pull in customers with affordable features in cars with eye-grabbing styling – something I have joined others in calling “cheap chic.” In an unstable economic world, that may not be a bad place to be.

Cheap doesn’t mean junky, though, and Kia types bristle at the very mention of the word “cheap” – a word that surely carries undertones of junky and unreliable and second-rate. Kia wants to erase any mention of its vehicle as being anything less than world class and eye-grabbing.

One thing that could slow Kia Canada down is production capacity and this can be a deterrent for buyers who walk on a dealer lot and want a new car right away. The Hyundai Motor Group is stretched for capacity to meet consumer demand, the result of a well-considered corporate decision to refrain from over-boosting production capacity. The main focus at Hyundai, and at both of its auto brands, has been to improve product quality and spin off rich profits, not building bigger plants and expanding existing ones.

“We will strengthen quality management we have continuously pursued,” Chung Mong-koo, chairman of Hyundai and Kia's parent group, recently told employees, Reuters reported.

Indeed, the 73-year-old Chung, who has headed Hyundai Motor Group since 2000, is credited with not only creating Hyundai Motor out of the auto-related firms of the parent Hyundai Group, but also navigating a bitter family feud all the while leading the transformation of the once-maker of cheap, poor-quality vehicles into a world-class performer. Hyundai Motor is now South Korea’s No. 2 conglomerate, just behind Samsung Group, reports Reuters.

Kia and Hyundai stand to become even more profitable as new products fill showrooms, the brands grow stronger and the discounting that bolsters Kia sales is reduced. Indeed, many Kia models are still being pushed off dealer lots with the help of rich factory incentives – at least $4,000 on some versions of the Kia Rondo wagon, for instance, and at least $1,500 on the Kia Forte compact, to name two.

We’ll know for certain that Kia has arrived as a fully mature global brand when the discounting is minimized and buyers are stepping up to pay something close to full price for Kias of all shapes and sizes and at a variety of price range.

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