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From the ashes

LESS than two years ago, Kia in Britain looked dead in the water.

It was in financial crisis back home and its mainstay product was a day before yesterday’s Mazda 121 clone.

When the so-called Asian flu economic crisis hit the Far East, Kia caught full blown financial pneumonia that would have killed it if Hyundai hadn’t steamed in with a successful takeover bid, plans to turn it into a budget sister brand and a much needed cash transfusion.

Before that, British dealers must have begun wondering whether the franchise would collapse, leaving them to suffer the same fate as Lada and FSO agents.

Yet, in the past year, Kia has staged a business recovery worthy of Lazarus. Registrations in the year to May 2000 were 6,170 compared with a paltry 368 for the same period in 1999. The company has pencilled in an end of year sales figure of around 13,000 units, double its previous best in 1997.

The comeback has been so complete says Alex Purdie, regional business manager, that Kia in some cases has had difficulty keeping up with demand; it takes six weeks for cars to be delivered from Korea.

The recovery began last summer. Importer MCL had throttled back on bringing the cars into Britain, and Kia had gone from being a low profile to a no profile company. When it was clear it had a future, prices were chopped by about 13 per cent across the range. This could have been seen as stock dumping, but it got people through showroom doors and presaged the current market wide vogue for reducing windscreen sticker prices. Kia presented itself as the car maker which would go where others feared to tread.

Kia spokesman Paul Carter says that, given the low level of sales at the time, the risk of cheesing off existing customers and damaging residuals was limited.

Stocks built up, and the year ended with the range expanded by the Sedona people carrier and Clarus medium sized saloon. Demand for Kia’s existing products – the revised Mentor and Shuma saloons, Sportage offroader and hardy perennial Pride – all picked up too.

Yet how to pension off the Pride has been a long term issue for Kia. Even this year it took 40 per cent of the company’s British sales – the Mentor and Shuma took 30 per cent, the Sportage 15, Sedona 10 and Clarus 5.

Since its UK launch in 1991, the Pride found a receptive market. Once budget buyers got over the predictable jokes about processed orange juice, they began to view it as a sound, value for money product.

Early sales were helped by favourable reviews in specialist press. The Pride was studiously unremarkable – it’s only distinguishing feature being the use of whitewall tyres, deleted halfway through its life here – but it was rather better screwed together than the Yugos, Ladas and Skodas of the period, light and easy to drive, and decently equipped.

These features gave it a healthy following among driving instructors and retired private motorists, who wanted something new, dependable and cheap. Such a customer base hardly represented a fashionable audience, but it was a useful and sustainable one.

However, as VW found with the Golf, relying on one model is potentially dangerous, and MCL spent years trying to buttress the Pride with products that had a wider appeal. It brought in a South African, licence-made Mazda 323 called the Sao Penza, which didn’t sell and was dumped in 1993. Then there was the Rocksta offroader, a Suzuki Vitara-sized 4×4 based on a military vehicle and built by Kia’s Asia Motors truck making subsidiary.

The Rocksta had genuine offroad capability and a bargain price. A serious tilt was made at selling it in Britain, but it was marginalised by its militaristic driving characteristics and lack of image.

This wasn’t such a problem because by the mid 1990s Kia had begun selling the Sportage, a true Vitara rival, and had launched the Mentor, its own Escort-sized saloon.

However, Mentor arrived to a muted reception. It sold into a competitive market and to start with wasn’t especially cheap. Bargain hunting buyers did not beat a path to Kia’s door as they had with the Pride.

Dealers did most of their business with a very old car, hardly an ideal way to enter the new millennium. Kia still has nothing specifically to replace the Pride, but salvation seems to have come in the unlikely shape of Sedona, its large, big engined, cut price people carrier.

With this car Kia suddenly had a genuine niche market product. Until its arrival, people carriers tended to chase after premium buyers, witness the upmarket drift of the Renault Espace. By contrast, the Sedona appealed to people who could afford a Mondeo estate but could do with some extra space.

“Sales are coming from all areas,” says Carter. “We’re seeing people who previously thought they couldn’t afford a people carrier.”

Carter was candid enough to say the three year, 60,000 mile warranty was an added bonus for people who previously would never have considered a Kia.

“The Sedona is very visible,” he says. “It gives us a different identity from the Pride, and we’ve got to move away from that as we don’t have a direct replacement.”

The Pride has finally kicked the bucket. Production stopped at the start of this year and, dogged to the end, it put on a small scale sales spurt in Britain as dealers sold the last examples.

The Sedona is unlikely to match the Pride in volume terms, but it is a higher value product and provides Kia with something different and some good press. The nearest thing to a rival comes in the form of parent company Hyundai’s just launched Trajet people mover, which costs more and so far has a smaller range of engine options.

So a volume hole has opened in Kia’s range, but this month saw the arrival of the Carens, a smaller Toyota Picnic lookalike people carrier, which should go some way to plugging it. With this car Kia is likely to repeat the pricing and buying package trick, and must be hoping the Carens will be a Sedona-like success. So far, it looks promising. Carens is Korea’s biggest selling car with nearly 60,000 units sold in 1999 after the car went on sale in June. In the first quarter of this year, more than 23,000 Carens have been sold.

As with all Kia models, a critical issue is pricing, helped by the strength of sterling and the weakness of the Korean won. The bottom line is these cars sell on price. The entry level Carens 108LX with three years or up to 60,000 miles warranty costs £9,995, undercutting the competition.

With the expansion of the range, Kia has been trying to boost the numbers of dealers across the UK from about 80 to 110 by the end of the year. It wants to take on about 40 dealers and lose ten to build the network while improving quality.

Selling in city areas can pose its own challenges. Kia has thus linked with Perry Group to launch a virtual car dealership in London to increase its representation without investing in bricks and mortar.

Kia Direct covers the north west quadrant of London bordered by the M25, A10 and M4. Dealer group Perrys directs enquiries through a web site, e-mail or call centre.

Kia Direct employs eight sales people who visit customers at their homes or workplaces. The company is thinking of rolling out the virtual theme to other cities including Glasgow, Leeds and Manchester.

TABLE: Kia UK market share performance 1991 -2000

Year % Registrations

2000* 0.6 6,170

1999 0.29 6,385

1998 0.13 2,894

1997 0.26 6,644

1996 0.24 4,919

1995 0.21 4,004

1994 0.21 3,939

1993 0.25 5,445

1992 0.23 3,519

1991 0.11 1,786

*Year to May 2000

CAPTION: NOLONGERDEADINTHEWATER: The Carens looks set to carry Kia’s recovery on now the Pride has gone

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