WHU Otto Beisheim School of Management

"Kia's Rapid Rise to the Top: How the Automaker Conquered the Indian Market"

Professor:
Tim Oliver Brexendorf

Authors:
Samarth Garg

Vallendar, 01.01.2023
Table of Contents
1. Introduction
1.1. About Kia…………………………………………………………………………………………………………….3
1.2. Kia India………………………………………………………………………………………………………………3

2. Market Analyses
2.1. Indian Automotive Industry…………………………………………………………………………………4

3. Brand Analyses
3.1. Porter’s Five Forces……………………………………………………………………………………………..5
3.2. The 4Ps of Marketing…………………………………………………………………………………………..6

4. Conclusion…………………………………………………………………………………………………………………..6
5. Exhibits………………………………………………………………………………………………………………………..7
6. Bibliography………………………………………………………………………………………………………………..10
Introduction
About Kia
Kia Corporation is a multinational automobile manufacturer. It was formerly known as
Kyungsung Precision Industry and Kia Motors Corporation. It is headquartered in Seoul,
South Korea and it is the second largest automobile manufacturer after Hyundai (parent
company) in South Korea. (Kia. (2022, December 22) In Wikipedia, n.d.-a) It was founded in
December 1944 as Kyungsung Precision Industry. In 1973, Kia opened its first automotive
assembly plant and produced a range of passenger cars until 1981, when the government
forced industry consolidation and Kia was forced to focus solely on light trucks. In 1998,
during the Asian financial crisis, Kia declared bankruptcy and reached an agreement with
Hyundai Motor Company to diversify through an exchange of ownership. As a result,
Hyundai Motor Company became Kia's largest stakeholder, with a 51% ownership stake in
the company. (History of Kia Motors Corporation – FundingUniverse, n.d.) In recent years,
Kia has focused on the European market and has made design a key part of its growth
strategy. Kia has also established a manufacturing plant in West Point, Georgia, and has
recorded consecutive years of increased market share in the United States. In 2016, Kia was
ranked as the most reliable car brand in the US by J.D. Power and Associates, becoming the
first non-luxury automaker to top the list since 1989. (Kia Just Accomplished Something No
Automaker Has Done in 27 Years, n.d.)
Currently, Hyundai Motor Co. owns 33.7 of Kia Motors. Many of these vehicles share
platforms, powertrains, or other parts and engineering. However, Hyundai and Kia operate
independently of one another. Both brands maintain their design studios, engineering staff,
sales, and marketing departments. (Kia vs Hyundai | Brand Comparison: Similarities and
Differences, n.d.) Kia has established 14 manufacturing plants in 8 different countries along
with research centers. Kia has over 51,000 employees and annual revenues of over $45
billion. It is the major sponsor of the Australian Open and an official automotive partner of
FIFA. Kia's brand slogan is "The Power to Surprise," which reflects the company's goal of
providing exciting and inspiring experiences for its customers. (Kia. (2022, December 22) In
Wikipedia, n.d.-b)

Kia India
Kia India Pvt Ltd. is a private subsidiary of the Kia Corporation for its operations in India. In
April 2017, Kia India signed a memorandum of understanding (MOU) with the State
Government of Andhra Pradesh, India, to build a new facility. It launched its first automobile
manufacturing facility (536 acres) with a production capacity of 300,000 units in the district
of Anantapur, Andhra Pradesh. This was one of the biggest foreign direct investments in
Andhra Pradesh with 12,900 crores. (KIA Motors to Roll out First India-Made Car Today for
Trials | Business News, The Indian Express, n.d.) Kia aims to invest around 1 billion to further
develop operations in India and to build a network of over 250 customer touch-points which
include service, sales, and spares establishment. Kia commenced its mass production in
early 2019 with “Kia Seltos” being its first product. Kia has launched four models in India
now, with KIA EV6 being the latest. Kia’s cumulative sales have reached 6.2 lakhs units in
just three years. (Kia India Crosses 500,000 Sales Mark in Less Than 3 Years of Commencing
Ops | Business Standard News, n.d.).
Market Analysis
Indian Automotive Industry (Years concerned 2017, 2018, 2019, & 2020)
India has the fourth largest automotive industry and in terms of sales, it is the fifth largest
country in the world as per 2020 statistics. It is the fourth largest passenger vehicle
producer in the world. In FY 2018-19 it produced 4.06 million cars. It witnessed an increase
of 13.33 % in the sales of passenger cars from FY 2017 to FY 2019 (Exhibit 1). India's
automotive industry experienced significant growth from 2017 to 2019, with a compound
annual growth rate (CAGR) of around 7%. (Dr. Binkey Srivastava, 2020) The automotive
industry's strong performance was driven by a combination of factors, including increasing
demand for vehicles in both domestic and international markets, as well as favorable
government policies and a supportive business environment. As a result of these factors, the
automotive industry played a key role in driving India's economic growth during this period.
Unfortunately, the Indian automobile industry took a major hit in 2020 due to Covid-19. The
sales of automobiles significantly dropped. The Indian passenger vehicle market tends to
experience a recession when the country's GDP growth is around 5% or lower. A GDP
growth rate of less than 4% has historically resulted in a recession in the passenger vehicle
market in India. In 2019 the GDP growth was 3.7 % which dropped to -6.6 % in 2020. (GDP
Growth (Annual %) - India | Data, n.d.) The Indian automobile market went through a few
notable changes. Fiat left in 2018, General Motors stopped selling its cars in 2019, and Ford
also stopped selling their cars in 2021. (General Motors Will Stop Selling Cars in India - WSJ,
n.d.) While all these changes were happening with the top International Automotive firms,
there was one single player who entered and started capturing the Indian Automobile
Market, Kia.

Brand Analysis
Despite India witnessing the worst slowdowns in the automobile market, Kia was able to
make a significant impact in India in just one year. Kia launched its first model i.e. an SUV,
Kia Seltos in August 2019. It strategically launched in August 2019 to capitalize on the high
demand for SUVs during the festival season in India, which typically begins in the latter half
of the year. Within one year, Kia Seltos bookings crossed 100,000 units. It is one the most
successful SUV’s in the Indian market with net sales crossing 250K units as of date. (Exhibit
2) Currently, Kia holds around a 6% market share in the Passenger cars category and a 20%
market share in the SUV (Sport utility vehicle) segment in the Indian automobile market.
(Top 10 Car Companies In FY22; Maruti & Hyundai Decline, Tata Gains, n.d.). The question
arises, how come a new player which has gotten into the market in 2019, has captured such
a huge market within three years, while all the other major companies were struggling? The
following analysis of Kia’s Market Entry & Corporate Strategy will help us to answer this
question & understand the key success factors.
International companies trying to expand their business in foreign countries often face
troubles from the existing domestic companies of the same product. Several reasons can be
attributed to it. In our case, the domestic automobile giants such as Maruti Suzuki, Tata
Motors, Mahindra & Mahindra, Hero Honda had a huge market share in this industry. These
companies have been in the Indian industry for more than 40 years. They have built trust
amongst the citizens. For an International brand, it is difficult to build a similar level of
loyalty & awareness for its products. Now let’s understand the Internationalization process
of Kia with the help of “Porter's Five Forces”. This framework was developed by Michael E
Porter, at Harvard Business School, in 1979. With the help of this framework, we aim to
understand the Indian Market potential, competitiveness in the Indian automotive market,
and scope of profitability for Kia. Whether entering India is a good or bad decision for Kia?
Porters Five Forces
Threat of Entry: Threat of entry is dependent on the entry barriers. Higher these barriers are
more difficult for companies to enter the international market. These barriers are
Economies of scale, high customer loyalty for existing brands (Tata, Maruti, Mahindra),
capital requirements (manufacturing facility, dealership), Proficiency (experience in the
industry), and Government Policies. Kia has been in the automotive industry since the
1980s. With Hyundai being the parent company, previous successes in the EU market, and
India encouraging FDI, Kia, had a competitive advantage in this factor.
Threat of Substitutes: A substitute product performs a similar function as the Industry
product. They fulfill the same underlying need though they are not identical products. With
the growing market of cab services (Uber & Ola), Indian consumers have found it more
efficient to opt for these services than owning a car. Moreover, due to depreciation rates,
and high interest and maintenance rates, buying a car can be more expensive than using cab
services. These companies (Uber & Ola) have affected the sales of passenger cars in India.
Thus it can be considered a threat to Kia.
Bargaining Power of Suppliers: This force analyses how much power a company’s suppliers
have over it. Example: Kia does not manufacture every component. It buys from local
businesses. Fewer the suppliers the more power they have. The size of the Indian
automotive component market across India is quite high. The market grew by 30% from
FY’17 to FY’19 with a market size of 56.52 billion in FY 2019. (India: Size of Automotive
Components Market 2021 | Statista, n.d.) This is vital for Kia’s entry strategy. It supports its
competitiveness.
Rivalry of Competitors: This describes the intensity of the competition in a market. This is
determined by factors such as the Number of Competitors, Size of Competitors, & Industry
Growth. India is a highly competitive market having the fourth largest automotive market. In
our case, due to the recession in 2020, the automobile industry was affected. Several MNCs
had left India or stopped selling cars (Ford & GM). Even before Covid hit India, Maruti Suzuki
announced a decrease in net sales and income in FY2019, 2nd quarter. (Suzuki Announces
Financial Results for FY2019 Second Quarter, n.d.) (Global News News.2019 | Global Suzuki,
n.d.) We can infer that the competition in the Indian automobile market was struggling at
this point, making it a good position for Kia to enter at a right time.
Bargaining Power of Buyers: This force analyzes to what extent customers can put the
company under pressure by demanding better prices and high quality. The more
alternatives buying a customer has the higher power customers have. In our case, an Indian
customer has numerous options to choose a car brand. Most Indians have cost, utility, and
fuel efficiency as their constraints. Maruti Suzuki, Tata, Hyundai, & Mahindra have a variety
of options to offer to such consumers. Hence, Indian consumers have high power. This is an
important factor for Kia to consider while developing its product strategy.
Now that we understood the market competitiveness and profitability scope for Kia in India,
let us understand “What were the key reasons for their success & how strategies of Kia tore
through the Indian Automotive Industry to Race towards the Top?”
The Four P’s of marketing is a perfect framework to conduct this analysis.
Place: The SUV segment share in the passenger car market in India was rapidly increasing.
(Exhibit 3). As of today, two out of every five cars are SUVs and this is where Kia entered the
market. Kia’s first two products, Seltos & Sonet are both in the SUV segment. It entered at
the right time and in the correct place. Secondly, even before the launch of its first model,
Seltos, Kia was able to build a vast dealership network quickly. The synergistic relationship
with Hyundai Motor Group helped Kia in reaching 250+ customer touch points across India
thus giving consumers a better reach to Kia’s products. Thirdly, the competitors were
struggling to be compliant with the new BS6 norms which were introduced in April 2020.
Since Kia entered at that moment, their cars were compliant from day one. They didn’t have
to change anything in their manufacturing setup. All these factors are evidence of Kia being
in the right place.
Product: Kia was able to leverage Hyundai’s market data. With HMG being the parent
company, Kia had access to several key insights into the Indian Market. Based on the market
understanding, the two factors that helped them in brand positioning were Affordability &
Mileage. Providing high-end features at affordable cost. Example: The Heads Up display,
apart from Kia only the luxury/high-end cars have this feature. (BMW X1, Toyota Camry).
Ventilated Seating, Kia Sonet is the cheapest car providing this feature.
Promotion: Kia made their first debut at an Auto Expo in Jan’18. At this point, Kia’s plant
wasn’t ready nor was their cars. They tried to portray their strength and prowess via the
expo. After a year, in Jan 2019, they launched a global CSR program, “Green Light Project”.
To promote the rights of people to education and health while boosting the self-reliance of
local communities. They launched a very unique store, Kia BEAT 360 degree (Inspiration
Hub) showroom in Gurgaon, India. It is an experience store with the latest augmented and
virtual technologies. In addition, via social media platforms, Kia started branding itself by
saying their cars are an inspiration. By 2020 their ad was most loved on YouTube (232
million) ((1782) Kia Motors India | Magical Inspirations | Stunning Designs - YouTube,
n.d.)and among the top 10 most popular channels in India. (Based on number of views)
(Exhibit 4)
Price: Setting up a manufacturing plant & producing cars locally helped Kia to keep the
production costs in control. The positioning of their product was neither cheap nor
expensive. They offered Kia Seltos at a competitive starting price of ₹ 9.8 lakhs. Another
metric Kia captured is fuel efficiency. If we look at the list of most fuel-efficient cars in the
SUV segment, Kia’s both products Seltos & Sonet are present (Exhibit 5). Kia’s generous
protection plan, 10 years of warranty, further augmented its brand image.
Conclusion: Kia conducted thorough consumer research before entering the market, which
helped them succeed. Factors such as brand positioning, competition struggles, and being at
the right place at right time together helped Kia get into the Indian market. They focused on
sales volume over profit margin. Currently, Kia plans to unveil three new models at the Auto
Expo 2023.
Exhibits
Exhibit 1

Exhibit 2
Exhibit 3

Exhibit 4
Exhibit 5
 Bibliography
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