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Kia has re-engineered the 2014 Forte to be the most luxurious compact car in Canada, say company officials. (Kia)
Kia has re-engineered the 2014 Forte to be the most luxurious compact car in Canada, say company officials. (Kia)

Brand Strategy

Kia’s 48-month winning streak finally ends Add to ...

The streak, of course, had to end, and it did in January.

After 48 straight months of growth, Kia Canada’s sales declined for the first month of 2013. Sales didn’t do a Thelma and Louise and go howling off a cliff, but they did slip 2.7 per cent year over year.

Ah, but the optimists at Kia found a silver lining: January sales of the Rio subcompact – sedan and four-door hatchback – jumped 24.8 per cent. Kia Canada vice-president and chief operating officer Maria Soklis is also offering a caution for the year ahead: the company will be hard-pressed to match the double-digit sales gains of the past few years.

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Demand remains high for most of what’s in Kia’s lineup, but global economic conditions and currency matters are combining with tight supplies to undermine growth, she said. And there are other challenges ahead for Kia, as Chung Mong Koo, chairman of both Hyundai and Kia, noted in a year-end address to employees.

For the moment, well, the product renewal continues. Kia early this year will launch a completely reinvented Forte compact sedan. Company officials boast that the 2014 Forte will be the most luxurious compact car in Canada. It will have new technologies, a lower and wider stance than the Honda Civic and Hyundai Elantra (Canada’s No. 1 and No. 2 best-selling cars) and the re-engineered Forte has all sorts of fancy technologies, right down to voice-activated controls. The Sorento SUV is also getting updated, though it’s not as comprehensive a job as the Forte.

Compacts, however, are the cars that matter most to Canadians. So while the Forte finished a respectable eighth in its class last year (with sales of 14,856), it lags far behind the Civic (64,962), Hyundai Elantra (50,950), Toyota Corolla (40,906), Mazda3 (39,295) and Chevrolet’s Cruze (32,628). Even if the reworked Forte knocks buyers flat with its excellence and value, Forte sales would need to more than quadruple to catch the Civic. Just as important to Kia, Forte sales would need to increase more than 3.5 times to catch the Elantra, a corporate cousin that shares many mechanical components with the Forte.

Now think about this. I’m putting Kia’s Forte in the same sentence as the Civic and all these other well-established small cars that have dominated Canada for years. Kia has notched 48 consecutive months of growth in Canada, too. That’s not a small thing. Like it or not, the good and bad of all this is that Kia now must cope with weight of expectations – expectations that are astonishing, really, given that Kia was a bankrupt shell of a company just a little more than a decade ago.

Today, Canadian marketing director Robert Staffieri is tipping his hat to a recent Interbrand study that shows Kia Motors Corp, is ranked 87th on the list of the Top 100 Best Global Brands. Kia’s brand is now worth $4.1-billion (U.S.). Brand ratings are interesting, but they’re based on a lot of factors, not all of which make sense to the typical car buyer, and some so-called experts, too.

But here’s a brand strength measure everyone understands and values: according to research by Canadian Black Book, Kia models retain on average 41 per cent of their value after four years (based on 2009 models). That compares with an industry high of 52 per cent for Toyota and a low of 29 per cent for Smart.

Your typical Kia holds its value better than the average Chevy (39 per cent), Chrysler (33 per cent), Dodge (40 per cent), Hyundai (40 per cent), Jaguar (37 per cent) and Suzuki (39 per cent), notes CBB.

Resale values reflect what buyers think in the marketplace, but are at their root based on all sorts of factors. Consumers don’t act in a vacuum. They may not always act rationally, but they do consider real data, such as crash test scores and reliability stats.

On the safety side of things, all the core models in Kia’s lineup are labelled Top Safety Picks by the U.S. Insurance Institute for Highway Safety (Forte, Soul compact car, Optima mid-size car and the Sorento and Sportage SUVs).

Kia has also made great strides in improving durability and reliability. Consumer Reports’ latest predicted reliability study placed Kia No. 10 among the 28 rated brands – ahead of Cadillac, Mercedes-Benz, Nissan, Chevrolet, BMW and Hyundai, to name five. Kia’s worst model here is the Sorento V-6, while the Sportage is the best.

J.D. Power and Associates long-term Vehicle Dependability Study, on the other hand, ranks Kia well below average – trailing Caddy, Mercedes-Benz, Lexus, Audi, Hyundai and others.

So, the quality studies are inconsistent – a mixed bag, but clearly with room for Kia to improve. What no one can deny is Kia’s growth. Until recently, Kia had been touting three consecutive years of double-digit growth around the world. From 2008 to 2011, in fact, Kia’s annual global sales grew by a whopping 81 per cent.

Thus, chairman Chung Mong Koo’s recent warnings and cautions from Kia Canada’s Soklis didn’t exactly send off alarm bells, but they did jump out. As Bloomberg recently reported, Kia and its larger affiliate and parent Hyundai, are dampening expectations. The official forecast is for the slowest combined sales growth in seven years. Why? An uncertain and perhaps even sputtering global economy and the strengthening Korean currency (won) are taking their whacks at Kia.

Nothing catastrophic is coming, Bloomberg added, but the two companies plan combined sales to rise a fairly meagre 4.1 per cent to 7.41 million vehicles in 2013. Nothing like this has happened since 2006 when deliveries shrank 1.2 per cent.

“2013 will be a very difficult year as the ongoing European crisis and the slowing global economy affect international and domestic markets,” Chung warned, as reported by Bloomberg, adding that Hyundai and Kia’s 2013 growth forecast is half the 8 per cent increase posted last year. Kia predicted deliveries will increase 1.1 per cent to 2.75 million units.

The Kia story for 2013, then, is slow growth ahead, with just a little caution stirred in for good measure – caution over big, macro matters that are well and beyond Kia’s control. The wildly good times of Kia’s past few years are to giving way to caution, which I’d argues puts all the more pressure on the new Kia models to perform and exceed expectations.

The streak is over. Time to start a new one.

Follow on Twitter: @catocarguy

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