SWOT ANALYSIS OF KIA MOTORS
An Introduction: Based in Seoul, South Korea, Kia Motors is a leading name in the world of mobility known for its safe, reliable, and stylish automobiles. Hyundai holds one-third ownership of the automobile company.
In recent years, Kia has expanded its product portfolio to cater to the changing needs and preferences of the young riders. Apart from its domestic market, South Korea, Kia has also maintained a strong presence in the other corners of the world, including North America, Europe, and Asia Pacific (including its fast surge to market-leader in SUV category in India.) Kia’s growth has mainly been driven by its focus on making innovative, safe, and reliable cars that suit the modern generation’s tastes and needs.Â
Its product portfolio has grown quite diverse and includes SUVs, Sedans, hatchbacks, crossovers, MPVs, hybrids, and fully electric models. As the world is entering a new era of mobility, KIA is preparing itself for the fast-changing industry dynamics and consumer expectations. After the pandemic, it is expected that the demand for electric and environment-friendly vehicles will rise. The pandemic had hit the automobile industry hard. However, sales have started reviving following the reopening of economies worldwide. Kia expects to grow its sales faster in the future based on the consumers’ interest and demand for its vehicle models in various corners of the globe.
In this swot analysis, we will discuss the key strengths and weaknesses of Kia motors and the opportunities and threats before its business. As 2021 unfolds, many surprises might be waiting for the South Korean automobile manufacturer. However, with a sharp focus on innovation and maximizing customer satisfaction, KIA is ready for a highly digital and environment-friendly future with its modern, innovative and expansive product portfolio.
Strengths of Kia Motors:
Leading name in the world of mobility:
Kia has grown to become a leading name in the world of mobility. The company has found a lot of success due to its heavy focus on innovation and passenger safety. In 2020, it was ranked number one in the industry for the sixth time in a row as the highest-ranked mass-market brand by J D Power. KIA’s vehicles are considered to be among the safest and the most reliable. Its focus on ride quality has helped it cement its position in the global automobile industry. In the US, KIA car owners are known to have reported the fewest quality issues in the United States within the first three months of their KIA car ownership.Â
Several Kia models are among the best performers in their respective segments. Due to its focus on quality, innovation, safety and reliability, its position in the US automobile sector continues to strengthen. While the year 2020 proved to be a highly challenging year for the automobile brands globally, KIA expects more robust performance in 2021 as the industry is again experiencing higher sales. The company is also aiming to grow its line of electric vehicles to be more future ready. The future of mobility is going to be defined by sustainability, apart from safety and quality. KIA has maintained its focus in all these areas to continuously improve its market performance.
Highly attractive product portfolio:
KIA’s product portfolio has continued to grow more and more attractive with each passing year. The company has introduced several new models in recent years, that became best selling models in various markets including the Asia Pacific. The company’s SUVs have particularly won several markets including India where its Seltos and Sonet are among the best selling SUVs of 2020.
The company has a balanced and strong product portfolio that includes many SUVs, sedans, hatchbacks, MPVs, hybrids and electric cars. Apart from that, the company also makes vehicles for military use. Its product portfolio includes several vehicles that are rated as highly safe and reliable. For example, Kia’s Forte and Soul were included among the top ten vehicles in the industry in 2020 by J D Powers. While Forte is a compact Sedan, Soul is a crossover SUV and has received 4.5 out of five from Kelly’s Blue Book.
Apart from Soul, Kia’s SUV family in the US also includes Seltos, Sportage, Niro, Telluride, and Sorento. Kia has also included an excellent range of Sedans in its product portfolio including Rio, Forte, K5, Stinger, Cadenza and K900. The hybrids/electric car range of Kia includes Niro, Niro plugin hybrid, Niro Electric, and Sorento Hybrid. Other cars in its portfolio include Rio 5door hatchback and Sedona minivan.
The large and diversified product portfolio of Kia attracts customers from various classes including those who want affordable but safe rides and the modern and affluent. The attractiveness of its portfolio has also grown due to the growing focus of the company on electric cars and hybrids.
Focus on environment friendly innovation:
Kia is not just an innovative brand but it is also focused on sustainability. The company strives to build a sustainable production system, where it maintains a heavy focus on sustainability and environment-friendly business operations.
The brand had declared its commitment to eco-friendly management back in 2003. Since then it has taken several major steps in this direction to minimize its environmental footprint and develop more eco-friendly cars in an eco-friendly manner.
Not just in its production operations, but in other aspects of its business operations too including research and devel[opment, marketing, logistics, supply chain, and customer service, the company is dedicated to environment-friendly and sustainable operations. It sets its strategies in all these areas considering the relevant sustainability principles.
In the area of research and development, the company’s focus has remained on developing eco-friendly vehicles, growing fuel efficiency and reducing emissions, developing recycling technologies, and adopting clean production technologies and methods. The company’s focus on environment-friendly innovation has helped it maintain a strong image in the global market and continues to raise its popularity everywhere.
Strong performance in the US and other leading markets:
Both Hyundai and Kia have managed to perform well in the US market in 2020. According to reports, these car brands have gained market share compared to the other car brands selling in the United States including the local brands. The reason is their strong portfolio of SUVs. While the overall market share of Kia still remains low at around 4% only, it is expected the company will gain market share in 2021.
The release of Kia Telluride in the market also strengthened the company’s position there. The demand for Telluride in 2020 remained high in the US market. Apart from that, both Kia and Hyundai strengthened their pricing in the US by cutting their overall spending on discounts. Kia also expanded its appeal among affluent shoppers by selling larger and higher-priced SUVs. According to JD Power against the broader drop of 12% industrywide, Hyundai and Kia were successful at retaining sales and expanding their market share in the US.
Kia’s performance in the Indian market where it is a relatively new player is also strong. The company has quickly risen to become one of the top five best-selling auto brands in the Indian market. Its growth has mainly been driven by the launch of its Seltos and Sonet SUVs in the Indian market. Kia’s Seltos is among the best selling SUVs in India rivaled by Hyundai’s Creta.
By Jan 2021, Kia had sold more than 200,000 cars in India within a period of 18 months. Kia is the first car brand to achieve this feat in the Indian market. Its success in India is driven by the sales of Seltos, its most popular SUV model, which has accounted for more than 70% of the company’s sales in the Indian market.
Safe and reliable car models:
One important reason that Kia car models have gained heavy popularity in leading markets like India and the US is because of their safety and reliability. Kia’s SUV portfolio is particularly strong which attracts Indian or US car buyers. However, another major point is the reliability of these cars which are considered to be safe as well as considerably reliable in terms of overall performance.
J D Powers has ranked Kia as the top brand for the mass markets. Kia achieved this ranking for a sixth consecutive year. Apart from that, Kia has also achieved more J D Powers awards for Initial Quality than any other brand. Kia’s Forte, Sedona, Sorento and Soul have all topped in their respective segments. KIa owners have also reported less quality issues compared to other car buyers.
One of South Korea’s largest automobile brands:
Kia is also among South Korea’s largest automobile brands. While Hyundai is the largest car brand in South Korea apart from being the largest domestic car brand, Kia is just behind Hyundai in terms of local sales and market share.
Pricing strategy:
Another major strength of Kia Motors company is its pricing strategy. Its volume growth in key markets including the US and India, apart from South Korea is driven by its pricing strategy apart from product quality.
Kia has adopted a competitive pricing strategy, which has helped the company win in key markets, including the United States and India. Its car models appeal to middle-class buyers, which was evident in its sales of Seltos in India. However, it has also started attracting affluent buyers through its higher-priced models in the US, but its affordably priced SUVs remain the key drivers of sales in most corners of the world.
In India, Kia was able to beat most other brands including the local brands in terms of SUV sales from 2019. The reason was the growth in popularity of its affordably priced Seltos car model. Now, Sonet has also joined its fleet in the Indian market and is enjoying heavy sales. While Kia has a diversified product portfolio, its affordable pricing strategy makes the appeal of its car models grow for the middle-class consumers looking for a safe and reliable ride.
Weaknesses of Kia Motors:
Decline in unit sales in 2020:-
Kia’s overall unit sales globally declined in 2020. The decline in sales is not limited however to Kia but affected the entire auto industry. This decline is attributed to the pandemic and the resulting disruption of supply chains, sales and distribution channels. Kia’s global sales declined to 2.6 million units in 2020 from 2.82 million units in 2019. While its sales in its domestic market during 2020 grew compared to the previous year, sales in the rest of the world fell.
Decline in net profits in 2020:
Kia’s net profits also took a hit in 2020 and remained lower than in 2019. Net profits fell to 1,502.7 Billion KRW in 2019 compared to 1,826.7 Billion KRW in 2020; a YoY decline of 17.7 percent.
Lack of focus on marketing:
While Kia has achieved fast growth in various corners of the world, the company has gained market share mainly based on the performance of its vehicles and their quality. The company could achieve faster sales growth and expand its market share globally even faster if it had a focused marketing strategy. However, despite its lack of a focused marketing strategy, the company has continued to gain driven by increase in publicity and word of mouth marketing. Its vehicles have achieved impressive ratings in terms of safety and reliability which is also driving the car brand’s popularity and sales.
Vehicle quality and safety are good for grabbing sales. Still, every auto brand requires a clear and focused marketing strategy when it comes to sustaining overall performance and beating the competition. Kia does not have one. This could prove to be a dampener somewhere down the line. While competition in the industry is rising, marketing apart from product differentiation becomes critical to achieving higher growth momentum.
Opportunities:
Electrical cars:
The era of electric mobility is approaching as consumers have shown their interest in buying EVs. The sales of electric cars in 2020 grew by around 43% compared to the previous year. While the overall automobile sales slumped by around 20% in 2020, EV sales gained driven by increased interest of consumers in environment-friendly vehicles. The pandemic has accelerated the change as people around the world are now even more concerned about the climate and the environment.
Tesla, the largest automobile brand that sells electric cars only, was the biggest gainer in terms of EV sales and sold around half a million EVs worldwide. Volkswagen followed it in the global market. KIA is also investing in the expansion of its EV portfolio. This is a major opportunity for the car brand, which has already gained a firm footing in the US, India, and its domestic market South Korea. If Kia continues to innovate and invest in building electric cars and hybrids, it could significantly boost its sales worldwide. Its SUV models are already top-rated in several leading markets. With EVs and hybrids, the company can accelerate its growth momentum.
Governments worldwide are also pushing for this change and have formed policies that benefit electric car manufacturers. Tesla’s fast rise as the largest automobile brand is evidence that customers are loving EVs, and so are governments.
Autonomous vehicles:
Autonomous driving is also an area of opportunity for Kia. Investing in autonomous driving technologies will yield superior results in the coming years. The company has developed a roadmap for developing autonomous driving technology based on the growing demand and its advantages.
Technology has remained the biggest driver of transformation for the automobile industry in the 21st century. Currently, autonomous driving is among the most talked-about technologies in the world of automobiles. KIA’s roadmap is based on the classification by the Society of automotive engineers. The society of automotive engineers classifies autonomous driving technologies into six categories based on the advancement level from 0 to 5. Level 0 or the first level includes no automation. With each passing level, the automation level grows until it has reached level 5, where the automated driving system takes full control. Level 3 of the classification implies partial automation, and level 4 includes a high degree of automation, but the system only takes control under specific types of situations and specific road conditions.
KIA has planned to commercialize the stage 4 urban autonomous driving system by 2021. It plans to develop and commercialize a complete set of autonomous driving technologies by the year of 2030. In the coming years, as the competition in the automobile industry intensifies, apart from safety and reliability of cars, the key differentiators will be technology based including autonomous driving technologies. So, the brands that will develop superior autonomous driving technologies will win in the global market.
Digital marketing:
Competition in the global automobile industry continues to intensify with each passing year. Each major brand is focusing on research and development and growing its pace of innovation to beat the rivals. A key focus area for automobile brands is the marketing and promotions of their car models. Sales in the automobile industry are affected by several factors including quality, safety, reliability, marketing, and brand image.
Kia is a relatively new brand in most of its overseas markets. In several key markets where it has successfully achieved faster growth during the last two years, there are a large number of players holding substantial market shares. It is pitted against the likes of Ford, Toyota, GM, and its parent brand Hyundai, which is its leading rival in the Indian automobile sector.
The company can remarkably grow its sales in the leading markets if it can improve its marketing strategy and techniques. Since it is the era of digital marketing, the company needs to develop a clear roadmap for marketing its products digitally. Apart from publicity, the company has mostly relied on word of mouth and its distribution channels to drive sales. However, having a clear and focused digital marketing strategy can help the company achieve higher brand awareness and grow its sales faster.
Kia must also focus on branding instead of only sales growth. In the longer term, this will help the company improve its edge and beat the competitive pressure which will likely increase in 2021. It should also use social media channels to engage fans and followers from around the world and to generate excitement about its new and upcoming models. Digital marketing can help the company cement its position in the industry and it will not require any significant investment either except for a clear cut digital marketing strategy.
Diversification and acquisitions:
Another method of achieving faster growth for Kia is to try diversification. Since it is in the automobile industry, the company does not have much scope for diversification. Still, it can expand into related business areas. Diversification can open new channels of growth for its business. It can also help the company control some of its operating costs or utilize its existing capabilities to grow its market share and revenue. KIA can also try backward integration to cut down its operating costs. Apart from that, the brand can also achieve superior growth through acquisitions. Acquisitions can help it diversify into new markets, and technology-related acquisitions can especially become the drivers of transformation for the brand.
Threats:
Intense competition in the industry:
The competition in the global auto industry has kept intensifying, driven by a growing focus on technological innovation, growth in demand for SUVs, and other factors, including the increase in the middle-class segment’s income. While all these factors drive intense competition in this sector, the incumbent players in various markets are being aggressive about defending their turf from the relatively newer entrant, Kia motors. However, Kia has strengthened its position in the key markets, including the US and India. Despite its sharp rise in the SUV segment, Kia is caught in a fierce battle where its rivals include some of the auto industry’s leading names like Ford, Toyota, GM, and even its own parent company Hyundai. The competing brands are also investing aggressively in research and development, product quality, passenger safety, and marketing.
While Kia has found impressive initial success in the short term in markets like the US and India, in the longer term the battle could grow even fierce as the rival brands release new models of SUVs, electric cars and hybrids. In the longer term, Kia’s focus would depend on innovation and how well the brand promotes its products. In 2021, the competition in the auto industry is all set to grow. The key factors that will drive automobile sales include technological innovation, differentiation, fuel efficiency and passenger safety. Kia must focus on marketing and expanding its product portfolio to maintain its growth momentum in the face of rising competition.
Regulatory threats:
One of the key challenges before the automobile industry is the large web of regulations worldwide that controls its expansion and growth. A large number of vehicle brands have previously been forced to bear hefty fines over noncompliance and regulatory violations. Volkswagen is one of the biggest examples of how much these violations can cost an automobile brand.
Apart from laws and regulations related to product quality, environmental safety and passenger safety, there are labor laws that companies need to adhere to. Moreover, the laws differ from market to market and an automobile brand must first review the regulatory environment in a particular market before entering it. Kia has remained careful about these factors and some of its success in markets including the US and China can be attributed to its focus on ethics and compliance apart from product quality and passenger safety. It has managed a strong image of an accountable brand that cares for its customers and community.
Passenger safety is one of the paramount concerns before auto manufacturers and therefore even a minor defect that threatens passenger safety can lead to thousands of vehicles being recalled for a safety inspection and replacement of defective parts. According to news sources, Kia recalled 295,000 vehicles of various models over an engine defect that could cause a fire in December 2020.
In this way, regulatory and legal challenges do not just add to the operating costs of automobile businesses, they also somehow limit their potential for faster expansion. The situation can grow particularly difficult in highly regulated markets like China where the regulatory framework is very complex and new players can easily land in trouble.
Impact of the pandemic:
The pandemic had a severe negative impact on car sales in 2020. While it disrupted supply chains and stalled production in the automobile sector across the world, the pandemic has also brought some lasting changes to consumer behavior and market dynamics whose full impact is not yet completely understood. The automobile businesses have also run into heavy losses due to the pandemic. Now, as the impact of the pandemic is slowly coming under control, automobile businesses are faced with several new questions related to supply chain, research and development and truncated demand apart from profitable and unprofitable markets.
The demand conditions have changed fast and automobile companies in general and not just Kia motors may need to address some troubling questions related to distribution. Overall, the pandemic’s impact may take time to go away but automobile businesses, their suppliers and distributors need to maintain business continuity. Overall, the automobile industry has been through one of its toughest phases in this century. Achieving faster growth after the pandemic will also be difficult for most because of the economic impact of the pandemic.
Economic fluctuations:
One of the key factors that affect the demand for automobiles, including SUVs and other cars worldwide, is the global economy’s condition. If the global economy is healthy, it leads to good car sales and higher revenue for automobile manufacturers. On the other hand, when the economic conditions are poor in a specific market or throughout the world, car sales remain lower since consumers generally avoid non-essential purchases during such times. The global economy flourished before the pandemic, and key markets like the US, China, and India enjoyed impressive GDP growth. However, the pandemic had a drastic impact on economies, particularly during the lockdowns when millions worldwide lost their jobs. The pandemic induced recession brought car sales down globally. With the global economy slowly returning on track, companies are expecting superior car sales in 2021. Kia had managed to gain strong sales despite the pandemic and the recession it caused. However, its sales could have been even better if the pandemic had not caused the level of economic losses worldwide it did.
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