Kia is the first automobile brand to enter the mainstream new car circulation field in China. Maxima, Cerato, K5, K9, etc., these models that have had a profound impact on China's auto market seem to be drifting away from the mainstream market in recent years. Kia's decline is more like a reflection, giving people to think about the gains and losses of Korean brands.
Author | Liu Jinnan Edited by | Luo Lijuan
Within 5 months, three "big things" have brought Kia Motors, which was once somewhat dormant in China, back to the attention of everyone.
On March 1, Jiangsu Yueda Investment Co., Ltd. (hereinafter referred to as Yueda Investment), one of the shareholders of Dongfeng Yueda Kia Automobile Co., Ltd. (hereinafter referred to as DYK), issued an announcement disclosing that intends to increase its capital by US$600 million, but due to the fierce competition in the domestic automotive industry and its own capital needs, Yueda Investment decided to abandon the capital increase. According to the estimated value of DYK's equity of 771 million yuan, its shareholding ratio will be reduced from 25% to 4.2% after the capital increase. At the same time, Yueda Investment will remove vehicle manufacturing from its main business.
On November 19 last year, Dongfeng Motor Group (hereinafter referred to as Dongfeng Motor) sold its 25% stake in for 297 million yuan. On January 24, 2022, Jiangsu Yueda Automobile Group Co., Ltd. (hereinafter referred to as Yueda Automobile) took over, officially ending Dongfeng Motor's 20-year-long "Kia Love Affair".
It is reported that was jointly established by Kia Co., Ltd., Yueda Investment and Dongfeng Motor in 2002, when the shareholding ratio was 50%:25%:25%; with the withdrawal of Dongfeng Motor and the abandonment of capital increase by Yueda Investment, the shareholding structure of was changed to 50%, 4.2% and 45.8% of the shares held by Kia Co., Ltd., Yueda Investment and the newly entered shareholder Yueda Automobile respectively.
At the 2022 CEO Investor Open Day, Kia officially released its 2030 strategic plan. Image source: Network
Just three days ago, Kia Motors officially released the "2030 Strategic Plan", listing four core goals: it will achieve annual sales of 4 million vehicles in 2030; annual sales of pure electric vehicles of 1.2 million units; full product coverage of intelligent networking and autonomous driving assistance technology; and become the first brand in the global personalized customized model (PBV) market.
On the one hand, Kia is "ambitious" for the future, and on the other hand, it is the withdrawal and reduction of shares by domestic shareholders.
Today's Kia is like a complex piece of information, which is difficult to summarize in one word. Looking back at Kia's path from "darling" to "outcast", it seems to be a mixture of emotions. To get a full picture of Kia's past in China, we have to start 30 years ago.
1
"Darling"? "Outcasts"!
In the early 1990s, when the land of China was experiencing a boom in the "restructuring of state-owned enterprises", like many "tide makers", Yueda Group acquired a car factory in Yancheng that had lost money for many years. At first, in order to reverse the loss, Yueda introduced the production technology of a car called "Pratt" owned by Kia Motors of South Korea, and has since become acquainted with Kia.
Kia Pratt Image source: Network
In 2001, the state tightened the management of "automobile production qualifications". Yueda Group, which lacks relevant qualifications, found Dongfeng Motor and hoped to "borrow" Dongfeng Motor's qualifications to achieve compliance. The "drunken meaning" is not at Kia, and Dongfeng Motor is more eager to take back the 21.4% stake of Wantong Automobile held by South Korea's Hyundai Kia. In the end, with the mediation of multiple parties, the needs of all parties were met. On March 29, 2002, Hyundai, Yueda and Dongfeng Motor signed a joint venture agreement, and was officially established.
Kia Maxima Image source: Autohome
In December of the same year, DYK's "fist product" Maxima sedan was fully launched. The owner of the small car market, priced at 70,000 yuan, although the price is slightly higher than faw Xiali in the same period, but with relatively excellent fuel consumption and interior, consumer reputation rose rapidly. "Kia Maxima, Hyundai Yasquit; if the two are one, the status is by no means low" became the best footnote of the car.
Initially successful, quickly sniffed out business opportunities in the domestic cruise taxi market. In 2006, Kia Yuanjian went public, and at the same time, combined with the characteristics of taxi operation, it innovatively launched the "all-weather rescue service" in the field of after-sales service, which created a "precedent" for after-sales service in that era and introduced the large customer sales model of "standardized fleet procurement" into the domestic market.
The success of both household and commercial ends has made enter a period of rapid development.
In 2009, the "first car to the countryside" activity swept the country, Kia with a rich product line in various segments of the continuous efforts, in China annual sales for the first time to break the "200,000 mark"; in 2014, the total design capacity of 440,000 units kia can no longer meet the needs of the Chinese market. At the beginning of the year, DYK's third plant was officially put into operation, with a design annual production capacity of 450,000 units, and two years later, in 2016, Kia's sales in China peaked at 650,000 units.
Kia's "highlight" did not last long, and in early 2017, the "THAAD incident" provoked by the United States and South Korea broke out, and Korean companies, including Kia, were boycotted by domestic consumers. At the same time, the contradictions accumulated between dealers and for many years have frequently erupted. A dealer once said bluntly: "Now (2016) more than 600 dealers, 80% are in a state of loss. "Under the combined effect of various unfavorable factors, Kia's sales in China in 2017 fell to 360,000 units, plunging 44%.
According to the financial report released by Yueda Investment, as of the end of the third quarter of 2021, DKY's total assets were 11.68 billion yuan and net assets were -611 million yuan; from 2017 to 2020, DYK's net profit was -1.123 billion yuan, -492 million yuan, -1.299 billion yuan and -4.75 billion yuan, respectively; in the first half of 2021, with shrinking production capacity and other factors, the loss narrowed to 1.371 billion yuan. However, in the first half of 2017-2021, DYK's cumulative loss exceeded 9 billion yuan.
In the 2021 Q3 financial report, Yueda Investment specifically mentioned that the reason for the company's net profit loss was mainly due to the loss of, which led to a decrease of 152 million yuan in the company's investment income compared with the same period last year.
At the same time, has also experienced three consecutive declines in retail sales, with total sales of 163,400 units in 2021, only 1/4 of the peak period in 2016. Interestingly, Yueda Investment said in the Announcement that abandoning the capital increase can increase the company's net profit by 192.75 million yuan.
For Dongfeng Motor, Kia's sales are no longer attractive. In 2016, Dongfeng Motor sold 3.1568 million units a year, accounting for about 20.6% of kia brands; by 2021, the proportion was only 4.99%.
Dongfeng Motor's shareholding in the period is the same as that of Yueda Investment, and has become a non-performing asset for both sales and investment value.
Industry insiders said that with the positive growth of independent brands and the transformation of new energy, traditional car companies are becoming more pragmatic about joint venture brands. The essence of Dongfeng's sale of lies in industrial optimization, which is the inevitable behavior of marketization; while Yueda Investment's abandonment of capital increase is more of self-protection. However, it is undeniable that the attitude of the two major shareholders makes Kia's development situation in China look precarious.
2
Channels & Products,
Breakdown of Kia's "Achilles' Heel"
There seems to be a consensus in the industry that the decline of Korean brands has led to Kia's current situation. In fact, hyundai and Kia, two car brands that belong to the same group, have long occupied more than 95% of the Korean car market share. In short, both are enough to represent the entire market pattern of Korean brands.
Throughout the decline of traditional car brands, almost all of them are transmitted from the negative emotions at the retail distribution end, which in turn affects the research and development and replacement of the product side, and eventually makes the retention rate decline and the market scale shrink.
And so is Kia.
Heli Group Kia Dealership Image source: Internet
As early as September 2015, some Kia dealers in Guangdong under the auto dealer Heli Group retired from the network one after another due to problems such as broken capital chains. At that time, Kia adopted a production and sales assessment program for dealers, and at the same time, divided the rebate ratio by the number of goods purchased by dealers. In order to obtain sufficient manufacturer rebates, dealers also have to suppress goods.
A store general complained that Dongfeng Yueda Kia blindly focused on its own interests, blindly pursued sales, and let dealers bear inventory pressure.
On the other hand, Kia's channel network is excessive, accelerating in-product competition among distributors. According to a dealer, in 2010, had about 440 outlets, and by 2015, Kia had set plans to expand its stores to 885. As a result, dealers in key areas have frequently repeated coverage within a radius of 15 square kilometers.
In order to destock, each dealer has to "exchange price for sale", and a large area of loss-making promotions affects the dealer's already fragile ability to resist financial pressure. For such a price war, the relevant departments of are indifferent, which has become a precursor to the large-scale withdrawal of dealers.
In January 2017, more than 100 dealers who "sold more and lost more" collectively attacked Kia. The requirements for the revision of the system of "pick-up rules, rebate policies, and no forced wholesale sales" have been revised, and the contradictions between the two sides have reached a climax. After the above incidents, the number of Kia distribution networks plummeted to more than 600. Although saved 22 distribution stores at the end of 2019, this could not reverse the negative sentiment of operators investing in Kia. According to media disclosures, in 2021, THERE are only more than 400 online dealers.
Faced with the defeat of the channel, Kia seems to be more superstitious about the metaphysics of "changing the coach like changing the knife". Since 2016, the general manager has changed four times in 5 years. With frequent high-level changes, Kia was unable to establish a unified business philosophy. Car dealer Long Jian said bluntly: "They don't understand what Xiao Zhicao Sui is, and a pursuit of his performance in office will only make the brand more and more chaotic." Kia does not want reform, but stability. ”
The collapse of the channel has severely frustrated DYK's profit sources; frequent coaching changes have made it difficult to form a mature development concept. In the end, it affected product research and development and missed the era of product transformation.
Public information shows that in the sale of models, product changes stay in 2021 models. According to the industry's recognized speed of automotive product turnover, the main product should meet the year-on-year update, obviously, Kia has been slightly outdated.
Kia K3 2017 Source: Autohome
Car dealer Changjian believes that only taking the hot-selling model K3 as an example, the price of the naked car after the car discount is mainly within 100,000 yuan. The core performance configuration of the vehicle is decent. Even though K3 supports a phone mapping software called "CarLife", it can no longer be called a "selling point" compared to the more intelligent in-vehicle system of the mainstream model of the same level that is now popular.
Not only that, but there is also a "first-class double product" product planning in Kia's product lineup. Not only does a single model need to compete with other brand models, but also faces competition with the same level of products of the same brand. Taking the compact SUV as an example, there are two models on sale, the KX5 and the Smart Run. A second-network salesman said that the price difference between the two hot models is about 10,000 yuan. In his opinion, if you put aside the description of the training language, the essential difference between the two models is: "The chassis is different." ”
From peak to trough, according to the latest data from the China Automobile Association, in 2021, the market share of Korean brand passenger cars, including Kia, fell to 2.4%; the reduction of Kia's maintenance network further affected the cost of consumer cars; the three-year retention rate of Kia brand used cars fell from 72% of the peak to about 66%, and some second-hand car dealers bluntly said that they did not dare to operate Kia brands, because of the high discount of new cars and the low efficiency of circulation. "There are fewer and fewer approved owners, and it may be inventory that comes in." It's a 'Matthew effect' that only gets worse and worse. ”
China Automobile Dealers Association and Jingzhen Valuation Jointly Released the "February 2022 China Automobile Retention Rate Research Report"
The two-line failure of channels and products has become a sharp arrow to defeat the "Kia's heel".
3
With a new energy outbreak or silence?
Compared with the decline of the domestic market, kia brands still maintain a relatively leading industry position in the global market.
According to the global 2021 data released by Hyundai Kia Group, Kia completed annual sales of 2.777 million units during the period, an increase of 6.5% year-on-year, and the growth rate outperformed major competitors such as Volkswagen, Honda, Nissan and Ford. Kia attributed the success of 2021 to the hot sales of three SUVs and the orderly transformation of new energy models.
Returning to the domestic market, Kia's 2030 strategic plan (hereinafter referred to as the 2030 plan) released at the beginning of the article aims to reverse the Chinese market and establish a global dominant position through new energy, digitalization and PBV. Compared, it seems that reality is not as beautiful as it is described.
Kia EV6 Image source: Network
In 2022, Kia aims to sell 3.15 million units worldwide, of which new energy vehicles will sell more than 530,000 units. Judging from kia's EV6 models, which have been released overseas, in January this year, the number of units sold in batches worldwide was 6,378 units.
The domestic new energy vehicle sales champion BYD sales in the same period has reached 92,800 units; The new power brand Xiaopeng and Ideal, which have been competing with them for many years, have exceeded 12,000 monthly sales during the period, while Tesla's monthly sales are as high as 19,000 units. At present, the global sales of more than 6,000 units of Kia New Energy do not seem to be able to return to the sequence of other car companies.
Kia EV9 Image source: Network
From the product point of view, Kia hopes to boost it with the upcoming SUV model EV9. The full tram has a cruising range of 540 kilometers, "0-100" acceleration of 5 seconds, according to the EV6 overseas market price estimates, the owner hit more than 200,000 consumption levels.
At present, in the domestic market of the same class, the cruising range of more than 600 kilometers has become the standard of this class of models, and the "0-100" acceleration of the Polar Fox Alpha T can reach 4.6 seconds. The EV9, which has not yet been listed, has been inferior to its peers in core parameters, and Kia seems to have not yet found a differentiated development route.
Also unable to keep up with the rhythm are intelligent products.
Today, when mid-to-high-end new energy brands have launched their own autonomous driving, Kia's "AutoMode" autonomous driving technology may be used for the first time in the EV9 model in 2023.
Liu Gang, an automotive analyst, said that autonomous driving has fully entered the L2.5 era, and if Kia's related technology hopes to win the market, it must be higher than or equal to the L3 level when promoting. Directly landing higher-level autonomous driving technology requires a wealth of experience and a large amount of research and development funds, which may be quite challenging for Kia.
As for the retail network layout, almost covers first-tier cities and second-tier provincial capitals in this year's investment plan cities. Such an investment plan can roughly explain that there are certain deficiencies in the channel network coverage of kia's new car hot selling areas at this stage. (7) After several previous dealer rights protection, Kia's store establishment threshold has been relaxed. However, some dealers are still not optimistic about the prospects of specializing in Kia.
"First of all, the image of Korean cars is not as good as before, and the strength of Kia's new products has not been verified by the market." Car dealer Changjian said that the investment in building stores of traditional joint venture brands is generally higher than that of independent brands, and the operating income of new cars does not have a great advantage.
Chuji information statistics show that the average pre-tax profit of dealers nationwide in 2021 is 876 yuan. The pre-tax sales profit of the joint venture brand was -140 yuan, and the independent brand and luxury brand were 1206 yuan and 15419 yuan respectively.
After the rebate of the merged manufacturers, the gross profit of the joint venture brand before sales was about 10.86 million yuan, although the independent brand was only 3.96 million yuan. However, considering the return on investment ratio of Kia's store and the negative sentiment generated by the previous rebate policy. "It's a really cost-effective deal." Changjian believes that the role of dealers for OEMs lies in sales on the one hand, and brand promotion on the other hand. The strength of the car dealership's single store can almost be regarded as the main influence of the main engine factory on the region.
Lack of coverage capabilities, coupled with Dongfeng's withdrawal of shares, Yueda investment and share reduction, it seems that it is difficult for to meet the profit requirements of dealers. As for the relaxation of the conditions for building stores, it seems to be the only measure under various objective factors.
4
postscript
The birth of Kia, riding on the east wind. The inflection point caused by the international event seems to have become an excuse for Kia's decline; and the successive departures of shareholders have made Kia rethink what tomorrow will be? We can't predict whether the transformation of new energy will bring new opportunities for Kia, but what is certain is:
In 2016, Kia was bright and picturesque; in 2021, Kia was as desolate as snow. And the giant ship of the market will not slow down due to the rise and fall of a certain brand; Kia under the 2030 strategic plan still needs to work hard to sing for tomorrow.