Nothing metaphorises power like a tiger does. That, perhaps, explains the choice made by German automobile designer Peter Schreyer when restyling Kia Motors’ signature front grille in 2007. “Tigers are powerful, yet kind of friendly,” he had said at the time, and announced that no car from the Korean automaker would go without its trademark “tiger nose” design. This element went on to become central to its growth strategy in the European market, giving Kia a distinct identity in the previously unsuccessful region for the brand.
It is unclear if it is the nose that has worked for the company’s first product in India—the Seltos—but it has already sold over 45,500 units and bagged over 100,000 bookings since its launch in August last year. “The Seltos marks the arrival of Kia in India... and we have put our heart and soul into this product,” Kookhyun Shim, MD and CEO, Kia Motors India, said during the launch. “It has been one of the most ambitious projects for Kia Motors.”
Ambitious also because of the nature of the Indian market, where the top two players, Maruti Suzuki and Hyundai Motor India, hold 68% share. Breaking through is a tough ask, especially for a new entrant. But Kia chose to keep it simple, focussing on the basics: product, network, price, and promotion. As Manohar Bhat, head, sales and marketing, Kia Motors India, puts it, “The most difficult part was to get all four right. For at least three years before the launch, we did a lot of research into what the Indian consumer actually wants. At the end of it, we have a vehicle tailor-made for the Indian market.”
Not that Kia Motors fears a bumpy ride. South Korea’s oldest automaker has faced enough twists and turns in its journey since it started, in Seoul in 1944, as Kyungsung Precision Industry, to make bicycle parts. Of course, eight years later, in 1952, it ended up making the country’s first home-grown bicycle, the Samchully.
The same year, it donned a new name, Kia Industries (Kia translates to “rising from the east”), and a new path: It ventured into the production of motorcycles (another first for South Korea, in 1961), trucks, and cars. But the commercial expansion of the company was hampered by the Korean war (1950-53) which affected the industrial base of the company which had to be shifted to Pusan. It spent the following years developing its three-and four-wheeler market. But, around 1981, Kia had to stop making passenger cars due to the dictatorship of Chun Doo-Hwan, who enforced industry consolidation and, in 1997, it declared bankruptcy due to the Asian financial crisis. A year later, 51% of the company was bought by Hyundai Motor Company (today, it owns 33.88%).
However, Kia prefers to maintain a separate identity as part of its global strategy. “As far as we are concerned, it’s a totally different company. We are competing with Hyundai like we’re competing with Maruti Suzuki. As part of the Hyundai Motor Group, we share technology because the cost of technology development is very high but everything else is separate,” Bhat says.
Among what has worked for Seltos is its introductory base price of ₹9.69 lakh, making it a viable option for people who wanted a powerful, feature-packed SUV which is not as big as a Tata Harrier, for example (₹16 lakh, on-road). And its success is among the few silver linings in an auto industry crippled by a slowdown for over a year.
Consider that, in August when Kia was launching in India, the country's largest carmaker Maruti Suzuki cut production for the month by a third—it was the seventh straight month of cuts for the auto major—as its total monthly domestic sales fell by 36% (all changes are year-on-year). It was a similar story with Hyundai Motor India which reported a 17% fall in domestic sales in August, as did Tata Motors (49%). The overall industry wholesale numbers reflected that with a decrease of 23.55%—from 2,382,436 units to 1,821,490 units for the month, with production also going down by 18.45%.
Guenter Butschek, CEO and MD, Tata Motors, tells Fortune India that, in the past year, consumers have remained wary of buying vehicles.“While there is a buying interest, there have been several uncertain factors like GST, the BS VI transition, and fuel options, leading to confusion in the market,” he says. “We are seeing a gradual improvement in consumer sentiment with retails picking up and increase in enquiries but it is difficult to ascertain a recovery timeline at the moment.”
In that context, another aberration in a slow market is Chinese SAIC Motors-owned Morris Garages’ MG Hector. Launched in June last year, “the Internet car” sold 15,930 units from July to December (compared to Tata Harrier which sold 5,794 units and Mahindra XUV 500, 6,962). The aggressive pricing of ₹12.18 lakh makes it the most affordable in the mid-size SUV segment; add to that segment-first offerings like over 50 connected (Internet-enabled) features.
Within just a few months of its launch, MG Hector holds over 50% market share in its segment. “One of the reasons why the Hector has become a consumer favourite is the unique, hi-tech experience that it delivers. The Hector is also the first vehicle in the country to deliver over-the-air software updates directly to the car’s head unit,” says Rajeev Chaba, president and managing director, MG Motor India. The introduction of Internet cars has opened a gamut of possibilities for his company, adds Chaba.
“This, along with the introduction of luxury car features in the mass and premium segments, has also attracted customers to new brands. In terms of positioning as well, the new-age brands are global brands with a strong legacy, and that has worked well with Indian customers,” he points out.
MG has so far invested ₹2,200 crore in upgrading its manufacturing facility in Halol, Gujarat, and its overall investment outlay for the next three-four years will reach ₹5,000 crore. “The overwhelming response received by the Hector is a matter of great pride for us as we enter 2020 with an order book of 20,000 bookings,” Chaba says. “In line with our sustainability goals, we will be looking to ensure a smoother transition to the BS VI norms before evaluating opportunities for further ramping-up of our production numbers.”
Experts point to multiple fuel options as another positive for the car: It is the only brand that gives the choice of automatic, hybrid, petrol, and diesel while rivals like TataHarrier and Mahindra XUV500 are limited to diesel.
“MG Hector has broken the jinx that no Chinese company can do well in the Indian market because of the perception [problem]. They have executed their marketing strategy very well; a British-looking vehicle with a Chinese make. Another thing is the Internet inside the car,” Gaurav Vangaal, country lead, light vehicle production forecasting, IHS Markit, says. “And Kia, too, has provided a good value package with aggressive design attracting youngsters. Both these vehicles are very well priced.”
However, the outliers in this slowdown are not resting on their laurels. “Sales fluctuations are an inseparable part of every economy. The important part is to keep track of the market trends, tweak strategies, and keep moving forward. When we came to India, we started with a blank slate. However, the challenge is to sustain the momentum in this market,” Chaba says.
Also, it may be too early for unqualified congratulations, say industry watchers. If established brands like Maruti or Hyundai typically need to show sustained performance for around six months to be given the success label, new brands like Kia and MG have to be observed for around two years, they point out. “In a market of over 3.5 million, what are a few thousand cars? The point is that they couldn’t get incremental volumes in the industry even though their product offering was very impressive. The Indian market is always inclined towards the novelty factor. Also, there was no major product launch towards the end of 2019 from the existing players in the B-segment SUV,” says Vangaal.
“I won't say it was a cakewalk for these products because the Indian market is a difficult one. I would say their innovation worked. Possibly their sales would have been better had there been no slowdown.”
Industry watchers say new brands like Kia and MG have to be observed for around two years before they can be called successes.
Slowdown concerns notwithstanding, both companies are gearing up for new launches in India. Kia Motors announced it would launch the Carnival MPV at the 2020 Auto Expo in Delhi. The three-row MPV, to be introduced later this year, is going to be the brand’s more premium and flagship product and will compete with the Toyota Innova Crysta. “The slowdown in the market is not good for anyone but that’s not what we're worried about. My concern is to launch the Carnival and other cars in line. My first aim, going forward, is to fill the entire plant capacity of 300,000 a year. Right now, we're at roughly around 200,000. So, the next plan is to introduce new vehicles,” Bhat says. The price will be “irresistible”, he adds. “It’s a new segment and Carnival will set us up as a quality premium car manufacturer.”
Also, both Kia and MG are focussing on their electric powertrains. Kia, with a 5% market share globally in electric vehicles (EVs), has announced that it’ll launch an EV by 2021. It is also expected to launch the Rio, the Picanto, and the Sportage, besides some new compact India-specific models.
MG is ready with its ZS EV which is already present in 10 international markets such as the U.K., Europe, Australia, and Southeast Asia. It has partnered with Fortum (a Finland-based clean energy major) to set up 10 DC 50 kW fast-charging stations in five cities: Delhi-NCR, Mumbai, Ahmedabad, Bengaluru, and Hyderabad. “The Indian market is one of the most progressive and has, in line with its sustainability goals, been steadily progressing towards a future powered by renewable energy. It is in sync with this movement that we are committed to building a robust EV infrastructure within the country,” says Chaba, pointing to why the outliers are getting the inside track of the Indian auto industry.
(This story was originally published in February 2020 issue of the magazine.)