Aspiring to greatness requires some serious heavy lifting no matter what the endeavor.
For Korean automaker Kia, the path to success in the world’s largest automotive market hasn’t been without its pitfalls, but the brand is closing in on the quality goals necessary to run with the industry stalwarts.
However, just as it draws closer to the leaders in the small car segments, where it has enjoyed the most sales, Kia is confronted with another challenge. There is a subtle, yet significant shift set to occur in the compact classes. While it is granted that small car sales will continue to gain attention, the most recent focus by a number of makers is how to increase margin on these products. Traditionally high-volume, low-margin products for the Detroit Three and others, small cars are poised to offer more content while prices will rise to meet higher expectations as the market is transitioning.
A cursory review of the automotive sales numbers in America (for 2009) tell part of this very interesting story. Bear with me for a moment.
Three brands exhibited remarkable growth considering the doom and gloom of the economy — and the majority of automakers. While the Chrysler brand tanked an incredible 47 percent last year, and GM’s overall sales dropped 30 percent, (the entire U.S. market slid 21 percent from the previous year) Hyundai and Kia appeared to readily capture some of these lost sales with increases of 8 percent and 9 percent, respectively. Joining this short parade of success is Subaru, up 13 percent over 2008 with total sales of 216,000 vehicles, or about half as many total sales as Hyundai.
Toyota, with by far the best-selling car lineup, suffered an ignominious year. With several models struggling to reach modest goals, embarrassing quality gaffes that forced huge recalls, plus overall sales that slid 20 percent, Toyotas rise to the top has already been tarnished. Bright spots, however, included the sales climb of the Venza, a late-year spurt for the Prius (still down 12 percent from 2008) plus a resurgence of interest for the right-sized RAV4 as compact-class crossovers now lead the entire wagon/crossover/SUV segment.
Kia, with the competent Forte sedan pictured, as well as Hyundai, can attribute their growth to smart efforts to improve their product — across the board — plus better marketing. Quality scores are climbing, resale values are increasing, and this Korean-based duo seems posed to make further inroads in a market that is definitely shifting to smaller vehicles in all classes.
Clues of this shift are found in the details on the sales charts. While America’s three best-selling pickup trucks — Ford F-series, Chevy Silverado and Dodge Ram — still populate the top 10 sales list, the remaining seven spots are taken up by cars and/or small crossovers, which are really cars with larger cabins.
The Toyota Corolla/Matrix series is this country’s best-selling small car — with almost 300,000 units sold last year — while the compact Honda CR-V is the most popular SUV/Crossover of any size.
Midsize sedans still dominate the sales charts, led by the Toyota Camry, Honda Accord, Nissan Altima, Ford Fusion and Chevy Malibu, in that order. In 2010, however, there will be a lot of activity in the compact end of the car spectrum.
Kia and Hyundai have recently upgraded their small car offerings — the Kia Forte being the most notable. The Forte, available in classy sedan and sexy coupe (called the Koup), promises great value in the same way that Toyota and Honda created this segment; reliable, competent vehicles that everyone can afford. Kia and Hyundai take this premise one step further by adding the latest amenities as standard equipment so buyers feel like they are getting a deal — which for all intents and purposes, they are.
But the shift in the small car segment is a reflection of changes that have trickled down from larger, more expensive products.
The ongoing economic malaise illustrated that high volume compact sales were good if you made at least some money on those products. Toyota, Honda and the Koreans cultivated the process to make their small offerings somewhat profitable at retail, while cultivating long-term buyers.
GM, Chrysler and Ford have, realistically, been dumping small cars into the market for years to offset EPA fuel-mileage penalties for their truck lineups. When market forces unearthed the weaknesses in this strategy, all three domestic makers got smacked in the face. We all know what has happened since.
Hidden in the sales numbers is the success of a small car known to us all — the Volkswagen Jetta. Last year, the Jetta outsold Chevy’s Cobalt — an unheard of event based on previous paradigms in the compact segment. Why?
The latest Jetta comes with several variations that range from low-price entry models to high-end versions dubbed GTI, GLI and TDI. Key to each model is a high level of refinement, comfort and standard equipment, features that make each Jetta buyer think that he or she has selected a high-end German car, rather than a low-end economy car.
Now, Chevrolet and Ford are going to offer similarly outfitted small cars in the coming months. The newest Chevy Cruze promises German-inspired handling and build quality along with fuel economy ratings near 40 mpg. Interior fit and finish will also rival the Europeans along with interior accoutrements.
Ford will counter with a new Fiesta subcompact this year, with comparable characteristics to the Cruze, plus a Euro-version of the Focus next year. All three models are vastly more attractive than the cars they replace and will pack more engineering into their drivetrains with optional six-speed automatics and direct injection engines.
Where does this put the Kia Forte, a new model just introduced 10 months ago? What if Toyota and Honda re-engineer the Corolla and the Civic, which they surely will?
The Korean automakers have vaulted so far forward from where they were, that I have no doubt that they will make the leap, and the commitment, to retain the marketshare they have gained by whatever means are necessary. If anything, Kia — and Hyundai — probably have the successor to this competent Forte already on the drawing board and about ready for production.
The Forte is a very nice compact car, no matter what standard we apply to it. To buyers used to earlier Kias, this car will make you believe that you were blindfolded and fell into a Honda.
That commitment to the U.S. market alone is what has helped the Koreans make such an impact here. Kia and Hyundai accounted for 7 percent of our auto market last year — outselling all but four brands in America. Where do you think they’ll be by this time next year?
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