Introduction: Now that Dongfeng has withdrawn, how Yueda Kia twists into a rope and works hard to determine whether the new joint venture can successfully achieve the mission of brand rejuvenation. After all, time is not on the side of Kia, which has become a weak brand in China.
(Text/Pan Yuchen Editor/Lou Bing) Just after the Spring Festival holiday this year, Kia Co., Ltd. signed an expansion investment agreement with the Yancheng People's Government and Jiangsu Yueda Group. Kia and Yueda plan to form a new joint venture with a us$900 million capital increase, and the new company name will be announced in April this year.
The establishment of the new joint venture between Kia and Yueda is the inevitable end of Dongfeng Motor Group's withdrawal from the original joint venture company, Dongfeng Yueda Kia. In December 2021, Dongfeng Motor sold its 25% stake in the joint venture on the Shanghai Stock Exchange for a price of 297 million yuan. The deal was finally completed before the Spring Festival this year.
Subsequently, the shareholder composition of Dongfeng Yueda Kia became Kia Co., Ltd., Jiangsu Yueda Group and Jiangsu Yueda Investment Co., Ltd., with a share ratio of 50%:25%:25%. In the context of the relaxation of the restrictions on the equity ratio of joint venture car companies and the restart of The Korean senior management of Dongfeng Yueda Kia, Kia is more likely to strive for a larger share ratio and control in the future, and the final result may be announced when the company's new name is announced in April this year.
In addition to announcing the formation of a new joint venture, Yueda and Kia also announced plans for the next 10 years, including the goal of total production and sales of more than 4 million vehicles in China, that is, an average of 400,000 vehicles a year. In the past 2021, Dongfeng Yueda Kia's annual sales of only 158,000 vehicles have declined for three consecutive years. In other words, to achieve the new target, the new joint venture will need to more than double year-on-year this year.
To this end, the shareholders announced that the new joint venture will rapidly increase vehicle sales and capacity utilization through expanding investment, introducing new models, developing new energy vehicles, and setting up an export base.
The road is long
The biggest obstacle restricting Kia's sales at present is the recognition of Korean cars by Chinese consumers. If the new joint venture wants to return to the track, it must first solve the problem of Kia's brand image in China.
With "independent price and joint venture quality", Kia once ranked in the top ten in China's passenger car market. However, with the continuous improvement of the product strength of independent brand models and the decline in the price of German-Japanese joint venture vehicles, the living space of the Korean series, which has been double squeezed, is shrinking day by day. In the context of the general brand upward strategy of independent brands, low-end positioning has become the main factor restricting Kia's development.
Faced with a dilemma, Kia is not without the consideration of change. In September 2019, Dongfeng Yueda Kia appointed the first Chinese general manager Li Feng, and the practice of abandoning the market below 100,000 yuan and participating in the competition with mid-to-high-end models has also begun.
During Li Feng's tenure, the new generation of K5 Kaiku, which positioned the B-class car, became the first model. However, the sudden high-end did not allow Kia to quickly gain market recognition. In 2020, Dongfeng Yueda Kia sold less than 250,000 vehicles in the whole year, down 12% year-on-year. As for Kaiku, which has high hopes, it still sold 17,000 vehicles in the first four months of its launch, but sold less than 10,000 vehicles in the next 12 months.
Due to the performance did not meet expectations, Li Feng, who had only been in office for one and a half years, announced his resignation, and the rudder of Dongfeng Yueda Kia returned to the hands of the Korean manager. However, Kia's brand strategy of gradually discontinuing low-end models and focusing on high-end models in China has not changed. In the second half of last year, Kia Jawa, which averaged an average price of more than 300,000 yuan, went public, and currently has a cumulative sales volume of about 3,000 vehicles, which is still unsatisfactory as an MPV.
According to the plan, Kia will introduce more global models in China in the future. However, in terms of this year, Kia's upcoming fuel models include the new KX5, the new K3 and the new KX3, etc. In addition to the KX5, the rest of the models are still about 100,000 yuan A-class cars. In addition, last year, Kia's highest internal sales of Huanchi, K3, KX3 and other models were all A-class or below, and there is a clear phenomenon of multi-generation models being sold in the same house. It can be seen that in order to further enhance the brand image, the new joint venture company still has a long way to go.
At the same time, as the electrification of automobiles becomes an industry trend, Kia plans to launch a pure electric vehicle in China every year from next year until 2027. At present, Dongfeng Yueda Kia's double point ranking only ranks in the bottom 20 of domestic car companies, and Kia only has a small number of new energy vehicles such as K3 plug-in hybrid, K3 pure electricity and K5 plug-and-mix in China, with annual sales of only more than 900 vehicles, and the electrification transformation has long been on the string.
However, according to Kia's plan, the first model BASED ON the E-GMP pure electric platform EV6 will not be released until 2023, considering the ramp-up period of production and sales of new cars, how much share of China's new energy vehicle market can be left for Kia at that time is still unknown.
In addition to the product-side launch, Kia also said that it will strengthen regional marketing with the dealer location as the center, and at the same time carry out "door-to-door test drive" and "door-to-door service" throughout the year to shape Kia's new brand image. For the dealer system that has been withdrawn from the network in previous years, Kia has also tried to formulate more reasonable operating indicators, optimize business policies, and reward excellent dealers to win them over. However, the implementation of the above marketing measures still needs to be penetrated by time.
Why china and the ROK deepened their cooperation
Although the Chinese brand has been in the sand in China in the past few years, there is still a high demand for the market worldwide. In 2021, Kia still achieved global sales of 2.777 million units under the impact of the chip crisis, an increase of 6.5% year-on-year, of which overseas markets increased by 9.1%, which is a different kind among global car companies generally affected by the epidemic. In addition, Kia raised its global sales target for 2022 to 3.15 million units.
In this context, despite the limited demand in the Chinese market, Hyundai Kia Group has positioned Kia's Chinese factory as an export base for the world. At present, Kia has three vehicle plants in Yancheng, Jiangsu Province, with a total annual production capacity of 890,000 units; although the first plant has been leased to the new car-making force Huaren Yuntong, the remaining two plants still have a production capacity of 750,000 units, if it can be developed for export business, it will help the joint venture to further digest the remaining capacity.
The Yancheng city government, which participated in the signing ceremony, also said that it will fully support Kia's expansion of sales in the Chinese market and provide support for the export trade of Kia's Yancheng plant to help Kia's development in China.
However, for the current new joint venture, including the promotion of product launch, electrification, marketing, export and other reform measures, it is inseparable from the further cooperation between China and South Korea in the future, and this is the core element that is truly worthy of deep consideration by the new joint venture.
Since the decline in sales in 2017, Dongfeng Yueda Kia has successively replaced 4 general managers. At the beginning of his tenure, Li Feng predicted that it would take three years for Dongfeng Yueda Kia to return to the track, but he was not given enough trust and time by the Hyundai Kia Group. In the eyes of some internal employees, it is the contradiction between the senior management of China and South Korea that affects the efficiency of the company's decision-making implementation and operation.
The frequent change of management of Dongfeng Yueda Kia and even Hyundai Kia China is a microcosm of the long-term cooperation between China and South Korea. In this regard, Liu Changsheng, general manager of Dongfeng Yueda Kia, said that the new joint venture company will build a new organizational structure, establish an innovative organizational culture, actively introduce local outstanding talents and professionals, accelerate the localization work, form a more efficient decision-making process through organizational structure adjustment, and explore the most suitable management system for the Chinese market.
Take a look:
Although Kia and Yueda have made a series of plans for the future of the new joint venture, and the two sides have decided to inject US$900 million as an upfront fund to support the company. However, according to the financial report data, the net loss of Dongfeng Yueda Kia in 2020 exceeded 4.7 billion yuan, and even the stop loss was quite reluctant with the initial investment alone, let alone pushing the company back to the track.
And in 2022, the recognized year of products, the challenges facing Kia are obviously more severe than when they just declined five years ago. Now that Dongfeng has withdrawn, how Yueda Kia twists into a rope and moves forward in one place determines whether the new joint venture can successfully achieve the mission of brand rejuvenation. After all, time is not on the side of Kia, which has become a weak brand in China.
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