Kia India Private Limited 

is a subsidiary of Kia for its operations in India. The company was

founded on 19 May 2017 following an announcement of the construction of a new 536-acre
manufacturing facility in Anantapur District, Andhra Pradesh. The plant started its trial
production in January 2019 and the mass production of its first product, the Kia Seltos started
on 31 July 2019. The US$2 billion manufacturing plant is capable of producing 300,000 vehicles
annually.
Kia Motors India, the local arm of the Korean carmaker, sees sister brand Hyundai as a
competitor in the country, at least in the near to short term. In the long term, though, it has
ambitions to take a large pie in India’s passenger vehicle market together with Hyundai.

strategic challenge/s faced by the brand and the corresponding objectives set to be achieved
by the company

1) Big Barriers to Entry

For a long time, the Indian Auto industry has been an oligopoly, where the top two car-makers
hold more than 65% of the market (Maruti Suzuki at ~50%, and Hyundai at ~16-17%). The other
competitors have long found holding even 5% of the market as an ambitious target, and indeed,
many foreign car-makers hold less than 1% of the market despite being around for more than a
decade.

Understandably, therefore, competition in the lower half of the pyramid is intense. With
discount wars stretching the dealers thin, and tighter liquidity affecting the financing of cars,
the entry barriers move up another notch.

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 While these huge barriers to entry loom, the Indian consumers and regulators have thrown
their own spanners into the works. Urban consumers, affected by worsening traffic conditions,
and the pains of finding safe and inexpensive parking spots, have chosen to place their trust in
ride-sharing and aggregator apps instead. There is also the growing trend of forgoing spending
on expensive depreciating assets in favour of expensive experiences – urban youngsters are
no longer as excited about ‘the first car’ as they were less than half a decade ago (though this
has recently been debated).  In rural and small-town India, consumers are embattled by the
twin macroeconomic demons of farm distress and rising unemployment – they are naturally not
thinking of splurging on cars.

Meanwhile, regulators have chosen to skip BS-V norms and have decided to jump straight to
BS-VI in the coming years, forcing carmakers (Maruti Suzuki most recently) to re-evaluate their
diesel engines, and overall long-term strategy. Safety regulations like compulsory airbags on all
cars, while a welcome change, have surely affected the sales pitches of most carmakers. Earlier,
the sub-4-metre segment cars used to get away with 2 airbags as a premium feature –
something that will no longer be possible. And the mandatory safety requirements are a
laundry list – seatbelt reminders, speed warnings, manual overrides for central locking systems,
crash test compliance… the list is worrisome for Indian automakers who have often traded poor
safety standards for cost competitiveness. To top off the list, the government unveiled in 2017,
a grand ambition to convert India into an EV-only economy by 2030.  

2) Big Slowdown Woes

Needless to say, with all this baggage, the Indian Auto industry is going through a slowdown of
problematic proportions. In the month of April, Y-o-Y car sales crashed by 17%, and reports
were circulated of this being the worst dip in the last 8 years. Then in May, sales crashed by
20%, making it arguably the worst dip the Auto Industry has ever faced.

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 Out of the top 10 automakers in the country, 7 have been forced to either lower their operating
rates or take an actual shutdown for a few days in May-June.

3) Big Competition

The management at both Kia and MG have a very difficult task cut out for them. The only
segment that they can safely enter is sub-4-metre and 4+-metre, 5-seater SUVs – the only
segment where a new entrant can have some hope of fighting off the incumbents by swinging
customer opinions and hope for some growth during these tough times. Less than 5 years ago,
this segment was not really on people’s radars, but a few key launches have exploded this
market. The SUV segment has grown so fast that almost every major manufacturer has an
offering for the sub-4-metre segment post the launch of Hyundai Venue, something which has
only happened for hatchbacks before, and even there, not as uniformly as this.

Amongst the premium/4+-metre five-seaters, first the Hyundai Creta took the country by
storm, then the Jeep Compass took the country by storm, then the Tata Harrier tried the same
with limited success, and now the MG Hector as well as Kia’s SP2 wish to do the same. The less
successful incumbents include Renault’s Duster (which also had a successful launch but is stuck
in a rut now), and Captur, and Nissan’s Terrano and Kicks. The sub-4-metre segment is
consistently expected to draw some share away from these players. The premium sub-4-metre
cars often reach into the entry-level price bands of the 4+-metre cars, and with the facelifted
Ford Ecosport, Hyundai’s Venue and Mahindra’s XUV 3OO, there are now many lucrative
features on these cars (sometimes at a lower price-point) which may draw customers away
from the 4+-metre segment.

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 4) Big Arsenals

For most of the Indian car consumers, and to a large extent, even for UVs, the car’s features
and engines work only towards drawing Attention and generating Interest. The final two stages
of ‘AIDA’ – the Decision and Action, are primarily driven by the Total Cost of Ownership (fuel
efficiency and resale value included), and the After Sales Service. While Kia is expected to
piggyback on Hyundai and will start with the largest network ever for a new entrant in India,
MG comes with the kind of deep pockets that only a “Big-Four” state-owned automobile
company from China can have. Kia’s preparedness may allay consumer concerns and MG’s
pockets may help it achieve in the Indian Auto Sector, what Chinese Smartphones achieved in
India’s Mobile Phone markets. But in my mind, the key to success still lies in building a brilliant
product, and clever marketing.

The Jeep Compass was launched in this country at a challenging price-point, and a rudimentary
sales and service network like any other new entrant. And yet, it was a success. The product
was amazing – the SUV had looks to die for, an engine that could set the roads on fire and a
good mix of features. The marketing was spot-on. Plus-sized billboards, a brilliant launch event,
amazing buzz creation by auto-enthusiasts and TVCs that wouldn’t make you change the
channel. The truth is that by virtue of price-points, the 4+-metre and sub-4-metre UVs target
the best possible Indian car buyer for a new entrant – one who will not be overly pragmatic or
utilitarian in their purchase and one who can be easily duped by good marketing into parting
with their significant disposable income.

Kia and MG have starte quite strong. MG gets Benedict Cumberbatch to endorse their product
in a post-Avengers: Endgame world.

Hyundai beat the Hector by a slim margin in becoming the first automaker to launch a
connected car, but MG’s features will still have a lot to sway the consumers and its design
language is already drawing the eyeballs. Kia has started with really quirky and fun ads which
draw attention, and the ‘well planned’ test runs of the SP2 on Mumbai roads has caused a lot of
buzz.

5)

 § Threat of Substitutes – In recent years, the influx of app-based ride-hailing cab services (Uber
& Ola) have become highly popular across cities in India, with on average 3.65 Mn rides per
day (refer Figure 1). These app-based cab services in recent years have emerged as substitute
for car ownership- for many consumers, and have affected a portion of car sales in the country.

With Uber and Ola in the fray, many consumers have found it to be comparatively easier to use
such services rather than buying/owning their own cars, which they consider cumbersome.

  Figure1: Number of Ola/Uber rides per day and Y-o-Y Growth

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  Source: Economic Times

6)

§ Competitive Rivalry – Competitive rivalry is extremely high in India, the 4th largest automotive
market in the world, and already 7th largest manufacturer of commercial vehicles, and a key
net exporter- with automobile exports having grown 14.5% during FY 2019

7)

§ Bargaining Power of Suppliers – The Indian the automotive components industry is a mature

one and has witnessed high growth during 2014 to 2019, at a CAGR of 10.1% to reach $56.5 Bn
in FY19, and exports of $15.2 Bn. Bargaining power of suppliers is moderate as they also need
automobile manufacturers and consumers to grow their business and ensure growth.

8)

§ Bargaining Power of Buyers – In a challenging and slowdown impacted automotive

environment in India, bargaining power of buyers has certainly gone up. Various manufacturers
have been witnessed to be doling out large discounts (often to the tune of Rs. 40,000 to Rs.
50,000) and extended warranty features – to lure the ‘price-sensitive Indian consumer’ during
festive months such as Diwali.

7) List Of Problems That Are Being Faced By Kia Seltos Owners

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 The list of problems faced by Kia Seltos owners includes late delivery, poor servicing and poor

quality of the components used onboard.

Kia Seltos is currently one of the most popular SUVs in India. Priced starting at Rs 9.69 Lakhs up
to Rs 16.99 Lakhs (Ex-showroom), it has already made it to the top-selling cars list for the past
two months.

The bookings have crossed over 60,000 units in just months of it being launched. The waiting
period, however, is in much control, as the maximum that you have to wait is up to 3 months.
Its price-rival MG Hector, had a waiting period of over a year.

On the other hand, many owners of the SUV have taken their problems on social media. The
problems regarding Kia Seltos have been faced by many buyers, which have been clubbed
ahead.

1. Overheating of Transmission

Many buyers have complained that they are getting a message on the MID that says
“Transmission temperature is high. Stop Safely”. One buyer drove the Seltos GTX+ for around
100 kms and then he got the overheating message on the MID. Another buyer who has the DCT
variant has experienced the same problem in just a couple of weeks of purchase.

2. Delivery of a defective car

An owner of Kia Seltos Diesel HTK 6-speed AT has discussed her problems. In the long post, she
said that in just 20 days of buying, the infotainment started going off. While hopping from
dealer to dealer, she finally managed to get the car fixed after 2-3 days. However, in just some
time of driving again, the problem came again. Then the owner also experienced the white
smoke and bad smell coming from the AC. All these problems are being faced in just 20 days of
the car being purchased.

3. No response for an accident-affected car

Many users are facing trouble with the Kia service centres. One owner got into an accident
within 3 days of buying the car. However, it has been over 2 months without any response from
the Kia service centre, about the affected car. Similarly, another buyer has his Seltos parked at
the service centre for 15 days because there are no spare parts and decent customer service
available.

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 4. Wrong Delivery Time Period

A lot of buyers have complained that they have still not received their Seltos till now. For one
buyer, it has been over 100 days since he booked the GTX DCT variant and there is no update
about the delivery. Another person has the same issue and it has been 93 days since the
booking. The buyers think that there is a preference system going on with the Kia dealerships.

5. Low Mileage

One specific owner has claimed that despite driving for over 450 kms on a traffic-free road and
at a speed of 40 km/hr, the mileage of the GTX DCT is just 7.7 kmpl. Also, the person was
constantly driving on the ECO mode and despite that, low mileage. The company claims to offer
16 kmpl with the DCT variant.

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