March 11, 2016 / 11:48 AM / 2 years ago

Kia eyes steady sales, increased market share in Russia

MOSCOW (Reuters) - Kia Motors (000270.KS) plans to maintain sales in Russia this year and build on its position as the country’s third-largest carmaker by increasing its share of the ailing market, the company’s Russian managing director told Reuters.

Visitors looks at Kia Motors' new Sorento sport utility vehicle (SUV) at its launch event in Seoul August 28, 2014. REUTERS/Kim Hong-Ji

As Russia’s car market has crumbled, hit by a steep economic downturn fueled by lower oil prices and Western sanctions, Kia has used lower prices to fend off competition and increase its market share to 10.2 percent.

The Korean carmaker now plans to sell 160,000 vehicles in Russia this year, slightly down from 163,500 in 2015 but representing a market share of around 11 percent as rivals’ sales plunge, Managing Director Alexander Moinov told Reuters in an interview.

“As a minimum, we want to maintain our share. At best, increase it,” Moinov said. “Our goal is the horizon. We will see where the market takes us.”

Capitalizing on the success of its budget Kia Rio sedan, which was one of only four models to post positive sales growth in Russia last year, Kia has managed to weather the decline of Russia’s auto industry better than many of its competitors.

It is now Russia’s third-biggest carmaker after market-leader Avtovaz (AVAZ.MM) and Volkswagen (VOWG_p.DE). Kia sales fell 16 percent year-on-year in 2015 but outperformed a 36 percent decline in the market. Avtovaz and Volkswagen sales plunged 31 and 39 percent respectively.

“Kia are doing well in Russia as a result of having the right volume product in the form of the Rio,” said IHS analyst Tim Urquhart. “It is rugged and reliable ... at a very competitive price point.”

The Rio was Russia’s third most popular car last year.

Moinov said Kia’s investments in local production have allowed it to undercut rivals whose reliance on costly imported parts has forced them to hike prices to offset the devaluation of the rouble.

The Russian currency fell more than 20 percent against the dollar last year, making production prohibitively expensive for some international carmakers such as U.S. General Motors Co (GM.N), which quit the market and idled its plant in St. Petersburg.

Kia’s own St. Petersburg plant, which it operates together with sibling company Hyundai Motor (005380.KS), produces all of its Kia Rio vehicles, meaning the model as a localization rate of 48 percent, Moinov said.

Other foreign producers struggle to achieve a localization rate - a measure of imported parts used in construction - of around 40 percent.

The price of a Kia Rio increased 11.2 percent last year while average car prices in Russia have jumped 24 percent since November 2014, Moinov said.

“We see a strategic goal in front of us and consider it an investment in the future, which Kia believes in,” he added.

Writing by Jack Stubbs; Editing by Christian Lowe and Jane Merriman

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