How Kia Motors is eyeing the tier 4 towns and beyond

By: |
Updated: Oct 20, 2020 2:47 PM

The automaker is now aiming to set foot into underpenetrated regions such as Northeast India, Northern Telangana, Karnataka and Western Rajasthan

Kia MotorsThe company’s dealerships in smaller towns play a key role in its marketing communication.

South Korean automaker Kia Motors, which entered India last year, has recorded its highest-ever monthly sales in September 2020 at 18,676 units, and now commands over 6% share in the country’s passenger car market. Its sales volume rose almost 2.5 times last month, compared to the same period last year, on the back of its newly launched compact SUV Sonet — 9,266 units of which were sold in the launch month — at a starting price of Rs 6.72 lakh.

Apart from Sonet, Kia Motors has two other brands in its portfolio — mid-SUV Seltos (starting at Rs 9.89 lakh) and MUV Carnival (starting at Rs 24.95 lakh). Present in 265 touch points across 160 cities, the carmaker plans to expand further into the country.

“The expansion is focussed mainly on tier IV and upcountry towns, as we have covered a major part of tier I, II and III cities,” says Manohar Bhat, head of sales and marketing, Kia Motors India. More than half of its sales for Sonet and Seltos come from tier II and beyond, the company informs.

Changing gears

Kia Motors is now aiming to set foot into underpenetrated regions such as Northeast India, Northern Telangana, Karnataka and Western Rajasthan, and is in the midst of identifying areas for new dealerships. “We are choosing locations that can help us reach neighbouring towns and districts as well,” says Bhat.

These dealerships, he says, are being established on a smaller scale, to minimise capital and reduce the break-even time. In the smaller markets, Kia Motors has been operating through i2S dealerships, which are service and spare part modules; the vehicle is retailed through the nearest big outlet. “We are in the process of conceptualising a model, especially for smaller towns, which will offer more than the current i2S dealerships,” Bhat adds. It has also introduced mobile service vans for areas where there are no dealerships.

The company’s dealerships in smaller towns play a key role in its marketing communication. For instance, last year, before debuting with Seltos in the market, the company held a roadshow across 26 cities to raise brand awareness. For Sonet, meanwhile, Kia Motors launched a digital brand film in Hindi on the occasion of ‘Hindi Diwas’, says Shakti Upadhyay, GM – marketing and PR, Kia Motors India.

Speed bumps ahead

While it may have ambitious plans, Kia Motors’ success in the hinterland depends on its dealership strategy there, say analysts.

“While it is a good idea to get into these areas through service outlets, the company’s success depends on whether it is collaborating with existing dealers,” says Amit Kaushik, country head, Urban Science. Servicing is a crucial aspect and most dealers recover about two-third of their investment by offering the servicing facility. However, if the company ropes in new dealers for servicing, it could impact the sustainability of existing dealers.

As per industry estimates, for a mass-market brand, an investment of Rs 50-80 lakh is needed to establish a service dealership, depending on the service load. Meanwhile, an authorised dealership (including retailing, spare parts, servicing etc.) of Kia Motors in a tier I city could cost Rs 6-7 crore.

Mapping the potential of these markets in the absence of adequate data, Kaushik says, is another challenge for the companies.

Consumers in smaller towns, experts say, have a tendency to prefer established brands like Maruti Suzuki and Hyundai. It is uncertain if they would be keen on spending on a new and premium brand.

VG Ramakrishnan, managing partner, Avanteum Advisors LLP, says that competition in the SUV segment will only intensify as other carmakers launch products going ahead. Presently, Seltos faces stiff competition from Hyundai Creta. Consider this: Kia Motors sold 9,079 units of Seltos in September, 2020, whereas Hyundai sold 12,325 units of Creta.

“The other segments where Kia Motors is strong globally, are unlikely to gain substantial share here in India. Hence, it has to create a market for these segments,” says Ramakrishnan, referring to the automaker’s unsuccessful run with Carnival so far.

Read Also: How big data and IoT connection has transformed the automotive industry

Follow us on Twitter, Instagram, LinkedIn, and Facebook

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

BrandWagon is now on Telegram. Click here to join our channel and stay updated with the latest brand news and updates.

Next Stories
1Rajesh Iyer to lead charge of Colors Bangla, Colors Odia, Colors Tamil and Colors Gujarati
2Netflix, Amazon Prime top two platforms in terms of customer experience in media streaming category: Kantar report
3YouTube today is the #1 platform for accessing videos in Indian regional languages: Sanjay Gupta