Kia Motors America Inc. sees 2014 as the year of the luxury sedan—and the time to push up market perceptions of its brand.
The Irvine-based automaker is set to roll out its K900 sedan with a starting price of about $60,000. The new model takes it into sales territory where the buyer pool is smaller and competition includes brands such as BMW, Mercedes, Audi and Lexus.
Michael Sprague, Kia’s recently promoted executive vice president of sales and marketing, told a group of industry executives and automotive press last week at the company’s U.S. headquarters that the K900 will bring a halo effect to the automaker’s vehicle line-up as part of a longer-
term strategy set out by its South Korea-based parent, Kia Motors Corp.
“We wanted to showcase our best foot forward” to potential luxury-car buyers “so that, in turn, they would go and realize, ‘Wow, if Kia can introduce the $66,000 luxury sedan, what else can they do?’” Sprague said.
It’s an ambitious step following the automaker’s 4% decline in U.S. sales last year to 535,000 vehicles, which ended a three-year streak of record-breaking sales.
Kia Motors Corp. said it believes its U.S. subsidiary will resume growth this year and projects a 9.3% increase in sales to 585,000 vehicles.
The parent company outlined this year’s strategy in its annual report and said it’s counting on an upgraded brand image via the K900, along with stronger sales of other vehicle models.
Kia Motors reported global sales of about $44.6 billion, with net profit down about 1.2% to $3.58 billion based on current exchange rates. North America’s revenue share grew less than 1% last year to 35.9%—good for about $16 billion. The region’s sales come from the Irvine-based U.S. unit, as well as Kia Canada Inc., and operations at a manufacturing plant in Georgia.
Somber Sentiment
Kia Motors is owned by Hyundai Motor Co. in South Korea, where Chairman Chung Mong-Koo delivered a somber sentiment to employees at headquarters in January, according to a recent report by Reuters.
Mong-Koo said sales of the Hyundai and Kia brands this year are expected to grow by 4%, which would be the lowest annual growth rate since 2003. He cited a weaker Japanese yen, which is expected to benefit Toyota, Nissan and other Japan-based brands, among the challenges for Kia and Hyundai this year.
Kia’s hopes of moving its brand upscale with the K900 amid tempered expectations for overall sales build on last year’s introduction of the near-luxury Cadenza sedan. That model hit showrooms last April at a $35,100 starting price and sales totaling 8,626.
Feedback, Shift
Sprague said the decision to take it up a notch with the full-luxury K900 stemmed from customer feedback that called for more technology, luxurious features and a larger vehicle. He also pointed out a shift taking place among existing luxury brands.
“We also saw other luxury brands moving down into the mass market space, selling vehicles under the $30,000 price point, and we asked ourselves, ‘If they can move down, why can’t we move up?’” he said.
Kia executives realize it’s a demanding road.
“We know we’re competing against the finest cars in the world: the BMW 7 Series, Audio A8 and Lexus LS,” K900 Product Strategy Manager Eddie Rayyan said during last week’s event.
He also said the K900 can compete in the mid-luxury range with vehicles such as the BMW 5 Series and Audio A6.
Emphasis on value will be a key to differentiating the K900 from other offerings in the market. It’s the same strategy Kia used to woo customers during the recent recession—an effort helped along by its dizzying production schedule, which included the launch of nine new or redesigned vehicles between 2009 and 2012. It followed that up last year with seven new or redesigned vehicles.
“We’re talking to people who say, ‘We don’t want to be defined by brands that other people define themselves by,’ ” Sprague said. “They’re looking to discover new things, and particularly in the post-recession environment, they’re looking for something that they can feel good about buying. They’re OK if their neighbors pull up in their $100,000 BMWs and they can drive up in their driveway in a $66,000 K900, because the value that this product represents is significant.”
He described the K900’s target buyer as someone “straddling the Gen X and Baby Boomers demographics” and at the top of their careers.
In some ways, despite the strides Kia has made during its 20 years in the U.S., it still views itself as the upstart looking to upset the industry.
“We zig when others zag,” Sprague said. “We’re a challenger brand, and we continue to challenge what we perceive as traditional automotive thinking, whether it’s from a product standpoint or from a marketing standpoint—and that’s where the K900 comes in.”