Kia is a much different company in 2023 compared with five years ago when it focused on value vehicles with a hefty discount.
A transformative image overhaul, an emphasis on crossovers — including the three-row Telluride, which is in high demand — and more disciplined incentive spending has helped Kia change consumer perceptions, improve residual values and increase average transaction prices across its lineup, said Sean Yoon, 57, CEO of Kia North America and Kia America.
Now the U.S. unit is angling to fill its lineup with a roster of high-style, tech-forward EVs to capture the eye of young, affluent buyers.
Yoon spoke with Staff Reporter Carly Schaffner. Here are edited excerpts.
Q: There have been some changes in consumer behavior and preference over the past couple of years. In your view, how is the U.S. consumer evolving?
A: The average age of a vehicle on the road has been extended. Because of the steep increase in pricing, some customers are moving their focus to used cars or they are trying to fix their cars and extend the life of their old models. New-generation cars come with a lot of new technology, particularly related to autonomous driving and safety. Inevitably the industry will need to increase their prices, but some customers are not ready to accept that. So customers are now more split between new-car buyers and used-car buyers, and that trend will continue.
I also can see some increase in the demand for passenger cars, particularly compact cars. And some customers will lower their expectations and move from the top and middle of the line to lower trims because of the high MSRPs and high interest rates.
Do you think consumers looking for smaller sedans is a trend that will carry over into EVs?
SUVs account for 80 percent U.S. demand, and just 20 percent are passenger cars. This will carry over into the EVs. My expectation is a growth in the passenger car portion because of a better all-electric range and price. The U.S. has not developed enough charging network all over the country, and usage of EVs will be constrained because of all-electric [battery] range and charging availability. So I think the sales mix of passenger cars in the EV market will be higher than in gasoline engine vehicles.
What do you think Kia’s growth outlook is?
As of today, Kia is one of the hottest brands in the market. We drastically reduced our incentive spending, and we have one of the highest inventory turns. That means we are doing well over most of our lineup. EV sales have been impacted by the [Inflation Reduction Act] a little, but we are regaining our momentum because we set our position [to increase leasing] after the final provisions on the EV tax credit was released.
Another benefit we can rely on is our residual value, which has improved significantly. Historically, in the old days, some customers were concerned about low residual value, but now we are within the top five with companies such as Toyota, Honda and Subaru. We also have some of the best designed cars in the industry, and we apply the best technology to our vehicles.
In terms of EVs, EV6 won North American [Utility Vehicle] of the Year and the GT version won World Car Awards’ Performance Car of the Year. Our position is comparatively better than other OEMs, and I’m sure that trend will continue. For almost all the models in the lineup, demand is overwhelming supply. Some of the new models have not reached their sales potential yet.
Which models are you referring to?
I think we have not yet reached the sales potential for most of our SUV lineup, including Sportage, Seltos and Telluride. We expanded our capacity of the Telluride from 100,000 to 120,000 in September last year, but it’s still the fastest turning model, and it doesn’t require any discount and hasn’t since its introduction in 2019.
In addition to stronger residual value and flashier design, how has Kia evolved over the past five years?
In 2018, we set up a long-term brand strategy and the first vehicle to launch was Telluride in March 2019. The new models that launched after that were all successful. In terms of retail sales volume since 2018, excluding fleet, we grew by 31 percent, and our average transaction price increased 60 percent. A huge jump over the last five years.
We are seeing a lot more affluent buyers, and we are doing well with Gen Y and Gen Z buyers. That is a kind of guarantee for our bright future because the buying power used to be owned by Gen X, but now more weight is moving toward Gen Y and Z. So over the past five years, we elevated our brand perception, changed our logo and design and launched new products. A full transformation of the brand.
What contributed to such a big change in average transaction price?
Our average transaction price is one of the highest, excluding the OEMs selling pickups, so the Detroit 3 plus Toyota. But other than those four, we are one of the leaders in terms of average transaction price. That’s thanks to the customers’ appetite for not only our models but also the high trims with more technology. They have made a great contribution to the increase in average transaction price as well as to the profitability of the dealers. I believe the situation will continue for a while, and we’d like to carry that momentum on to EV sales.
Kia has been steadily gaining market share among rivals. How big do you envision Kia becoming?
Our market share has gone up recently. We are doing business only in 60 percent of the market, but we reached a market share of 5 percent, up from slightly over 3 percent. Our competitive market share is pretty close to 10 percent at the moment. Any incremental supply of our SUVs is a chance to grow and gain market share. In terms of EVs, the company is planning to introduce a total of 15 models globally until 2027. And that will bring us a lot of growth opportunity in the industry.
How will Kia continue to distinguish itself from new entrants in the fast-growing EV market?
We are going to differentiate our vehicles by design. The first dedicated EV model, the EV6, has a stunning design, and it’s been well-received by the market. And EV9 is the second dedicated EV that also has a very distinctive, rugged design, different from any available EV in the market. Our position will also be supported by technology. Hyundai Motor Group established a joint venture with Aptiv called Motional. It specializes in autonomous driving, and we will capitalize on the technology and apply it to all our new EVs.
A differentiator between Kia and other EV startups is our 780 dealers and service centers across the country that have completed the training on the EV technology and installation of EV chargers. I think it’s the first case in the industry that the entire network has an EV charger.
Many consumers are now priced out of the market because vehicles are more expensive, and money is less available. How do Kia’s offerings fit into that more complex landscape?
Kia is not a value brand anymore, but we are going to keep the value in our car. We try to avoid bundling desirable options with undesirable options to improve profit, which customers don’t like.
Our vehicles will be developed in a way that is beneficial for the customers. We made safety-related options standard without raising the price. We are going to keep that strategy so can we provide a great value to the customers at a reasonable price.
Kia has been critical of the Inflation Reduction Act because of the disruption to the company’s business plans. How will that affect Kia in the U.S. market?
We are experiencing an unexpected disadvantage but will be able to overcome it within one year by making aggressive investments in [the] U.S. market. For now, we’re putting a lot of weight on leasing to maximize utilization of the tax credit.
Lease penetration has more than doubled. We started our preparation earlier than the others, and the EV9 will be the first volume electric vehicle to be built by any Asian maker in the U.S.
In terms of the battery, we have a partnership with SK, and we are going to have our own dedicated EV battery plant in Georgia. It will take a little time, but the EV9 will end up with a U.S.-assembled EV battery.