Kia Motors set to enter India

It’s no secret that Kia Motors, a part of the Hyundai Motor Group has been exploring an entry into the Indian market for several years. In fact, it’s surprising that Kia has taken so long to enter such an important market that has long been ripe for the picking. Newbie Kia has the massive advantage of piggybacking on sister brand Hyundai, which is a hugely successful in India, to tap a country forecast to have five million car buyers ever year, by 2020. 

 

Kia’s model line-up which ranges from budget hatchbacks to premium SUVs and sedans would be well suited to the Indian market, especially since many of them share the same underpinnings with popular Hyundai models in the market. Hence, developing the right products for India may not be that big a challenge as setting up an all-new factory and supplier base, building a dealer network and of course, establishing the Kia brand. Besides, to compete effectively, Kia would have to start with a high level of localisation from job one to keep costs low in what is undoubtedly the most price-sensitive market in the world.

 

Location tracking

 

Kia is yet to identify a location for its first factory in India and it's only after this big hurdle is cleared that a formal announcement on its entry into India can be expected. For now, the only official statement Kia has made on its India project is “We at Kia Motors are continually evaluating potential locations for overseas manufacturing facilities, including India, to secure additional engines for future growth. However, as of now no concrete plans have been finalized.” 

 

According to sources, several sites in various states are under consideration for the greenfield plant. The states of Tamil Nadu, Andhra Pradesh, Gujarat, Maharashtra and even Madhya Pradesh have all been wooing the Korean automaker. Setting up a plant in the vicinity of Hyundai’s existing Tamil Nadu factory to have close access to a ready supplier base, which would be common to both Hyundai and Kia, is the logical thing to do. However, the Hyundai Motor Group may not want to put all its eggs in one basket and may prefer to invest in another state. This is why Andhra Pradesh, adjacent to Tamil Nadu and a few hours away by road from the Hyundai plant, is emerging as the most sensible option. But discussions and negotiations with the various states are still underway and Kia is understood to be carefully weighing up all its options before taking a decision.

 

Sibling rivalry may have been a reason why Kia didn't come to India earlier. Though Hyundai and Kia belong to the same group, they fight viciously in the market for the same broad set of customers. Industry sources have hinted that Hyundai tried its best to keep Kia away from a market it has built up over two decades, until parent Hyundai Motor Group stepped in to look after the interests of both its progenies. And a new plant is in the interest of both brands, especially at a time when Hyundai is running out of the 6,80,000 capacity at its Sriperumbudur plant.

 

The new Kia plant is expected to have an installed capacity of around 3,00,000 units per year, but clearly, the brand will need to establish itself in the market before it can achieve those volumes. A likely scenario is for Hyundai to use the surplus capacity, which it urgently needs until then, possibly on a contract manufacturing arrangement with Kia.

 

Kia will also leverage Hyundai’s existing supplier base, and key components like the platform and powertrain will be shared. Not only will this give Kia products immediate access to high level of localisation from day one, the increased economies of scale will result in huge cost savings as well. For example, Kia won’t have to invest in an engine plant and can simply source the Kappa petrol and U2 diesel engines from Hyundai, which has also set up a state-of-the-art and flexible engine manufacturing facility.

 

It’s these synergies that will give Kia a massive head start when it kicks off its India operations, and Hyundai too will benefit as the unit cost of shared parts will come down with higher volumes.

Product strategy 

Kia’s model line-up for India is far from decided, but we expect a ‘top-down’ strategy to be adopted. This means launching high-end products first and bringing mass-market models later, once the distribution network is established and the plant is humming smoothly. Kia will obviously try and mirror Hyundai’s model range and therefore, the following models can be expected. 

 

Kia Sportage SUV

The Sportage is one of Kia’s oldest models on sale globally. Currently in its fourth generation, the Sportage is a direct rival to Tucson and is one of the most popular Kia models globally. The current-generation model was first revealed at the Frankfurt motor show last year. A short drive in the Sportage revealed that it lived up to its name with its punchy 172hp 1.6 turbo petrol engine and agile handling. It also has the measure of the Tucson with smarter interiors and sportier styling. However, when it comes to India, the engine range is likely to be same as the Tucson's – that means a 2.0-litre diesel is likely to be the mainstay of the range.  

 

Kia Niro hybrid crossover

The Niro hybrid is Kia’s first model based on the company’s eco-car platform. The brand's first dedicated hybrid model, the Niro is not related to any other model in the carmaker’s global platform. It gets a crossover treatment along with a SUV-like high seating position. It comes with a 1.6-litre four-cylinder motor that works along with an electric motor integrated with the gearbox. Peak power output is 146hp. The Niro comes with a long list of features offered as standard, and a host of electronic driver aids like rear cross-traffic alert, adaptive cruise control, emergency braking system and blind spot warning.

 

The crossover styling and spacious interiors will go down well with Indian consumers, but the overall driving experience, like in most hybrids, is a bit lacklustre. Also, hybrids are still a very expensive proposition and if Kia launches the Niro, it will probably be an import and sell in very small volumes just to make a statement of the company’s green aspirations.

 

Kia Rio hatchback 

Just like the Sportage, the Rio is also a popular model globally. Currently in its fourth generation, the Rio’s launch in India is almost a certainty after seeing the huge popularity of sister car – the Hyundai Elite i20. Like the i20, the Rio will be positioned as a premium hatchback with similar space and comfort. However, Kia will aim to trump the i20 with a better-specced cabin and stronger engines perhaps. Kia displayed its new range of engines at the Geneva motor show and the Rio could get the 1.0 turbo-petrol which would make it a fuel-efficient offering too.

 

Kia Picanto hatchback 

The Kia Picanto, or Morning as it is known in Korea, sits in the middle of the hatchback segment and squares off against the Hyundai Grand i10. The first thing that strikes you is the premium quality of Kia interiors. If you thought the Grand i10 had a well-built cabin, the Picanto takes it a step further. By the time Kia starts producing cars in India around 2019, the next-gen Picanto will be launched. Engines are likely to be carried over from the Grand i10, though a highly fuel-efficient, 1.0-litre three-cylinder version of the Kappa petrol is expected.

 

Kia Soul 

The Soul is unique to Kia with no equivalent in the Hyundai range, and that's all the more reason to bring it to India. It’s a car full of character that will certainly set Kia apart in the hatchback segment. In its second generation currently, the Soul was heavily revised earlier this year and now comes with a long list of equipment and safety features.

Plugging the gaps 
Kia still has a few big holes in its model range that it needs to fill if it wants to be a serious volume player in India. Kia has no sub-four-metre sedan, compact SUV or mid-size SUV, and that could put it at a disadvantage in India. But again, with Hyundai present in all these segments, Kia is sure to spawn its own models off these platforms. For example, the next-gen Creta is expected in 2021 in both five- and seven- seat versions and its only logical to expect a Kia equivalent. Hyundai’s compact SUV based on the Carlino concept and due in 2019 may also be the base for a Kia as well. It remains to be seen if Kia will develop a compact sedan, especially with the uncertainty surrounding the taxation benefits sub-four-metre cars currently enjoy, in the post-GST era. 

 

Future ready

Kia may be late to the party, but in a way, its timing couldn’t better. The uncertainty around GST, future crash and emission norms should clear before Kia launches its models in India. That means the company can properly plan and develop its products to suit market conditions and regulations beyond 2020.

 

Building the brand and dealer network will be a long, painstaking process that will be hard to shorten. However, Kia’s positioning as a youthful and sporty brand could resonate with young car buyers.