Friday, March 07, 2008

Kia is the Latest Company With an Unrealistic US Sales Goal

By Chris Haak


We've previously covered Volkswagen's ambitious sales objectives for the US, as well as those of Hyundai. Kia Motors America is the latest imported vehicle company that expects a huge sales jump during 2008, in what is likely to be a very tough market.

The company has a new CEO in America now - its seventh since 1999 - and Byung Mo Ahn (who was also CEO of Kia Motors America from 1999 through 2001) has what we'll charitably call a stretch goal for Kia's dealers. He'd like to see 450,000 sales in 2008. That would be a 47% increase over last year's 305,473 sales. It's not like Kia can even claim that it has momentum, as the 2007 sales figure was just a 3.8% increase over the 2006 sales number.

Mr. Ahn, in a letter to dealers, wrote that Kia relies too much on incentives, needs to improve advertising and spend ad dollars more efficiently, and that it lacks brand awareness in the US. All valid points, but he did not outline his plans for addressing these issues in the letter. Meanwhile, 2008 continues to tick away and Kia's sales are actually down 5.8% through February 29 compared to the first two months of 2007. Kia does have its Explorer/Durango-sized Borrego midsize body on frame SUV (pictured at right) launching this year, but other than that, there isn't much news on the product front. Not only that, but the Borrego is the wrong vehicle at the wrong time, as the bottom has completely fallen out on the body on frame midsize SUV market, because they aren't as spacious as crossovers and lack the capabilities of full-size body on frame SUVs. On top of those issues, the Borrego has an extremely bland style and in spite of being an all-new vehicle, isn't really offering the consumer anything that hasn't already been sold by competitors for several years.

Kia dealers are understandably skeptical of Mr. Ahn's objectives for 2008. Additionally, they say that if the company wants them to sell more vehicles, it will have to offer floorplan assistance, making it less burdensome for dealers to have more vehicles in inventory. Kia is currently one of the only full-line manufacturers that does not offer its dealers help with floorplan expenses to finance their inventory.

Here's my not-so-bold prediction: Kia will be lucky to sell 300,000 units in the US in 2008, much less another 150,000 beyond that.

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