Kia and Hyundai start competing in world's fifth-largest car market, India

Kia's network development plan gets a Hyundai punch even before the former's official launch, slated for 2019

Kia and Hyundai — two sister car brands — have started competing in the world’s fifth-largest car market, India, even before the former’s official launch, slated for 2019.

Kia Motors, which announced an investment of $1.1 billion in India last year, organised several roadshows to attract investments from dealers in setting up sales service networks. Of the many applications Kia received, about 60 happened to be dealers of Hyundai.

However, Hyundai, the second-biggest player in the domestic car market, was keen to hold its flock of dealers together. It is learnt to have issued strict directives to its dealer partners to withdraw their applications, which they did. Hyundai has close to 500 dealerships with 3S facilities (sales, spares, and service). It is interesting to see how twin brands of the same parent company operate. They enjoy some synergies in the back-end, while they compete in the market. A Hyundai spokesperson declined to comment on the story.

Kia conducted at least four dealer roadshows in the country — Delhi, Mumbai, Bengaluru, and Kolkata — in August and September last year. It announced its India entry in April last year, when it said it would pump in Rs 70 billion to build a greenfield car plant in Andhra Pradesh with a capacity to make 300,000 units a year. The company is planning to produce a strategic compact sedan and compact sport utility vehicle, especially for the Indian market, at the 563-acre plant in the second half of 2019.

The roadshows generated a significant interest in the dealer community. The company is estimated to have received an interest from a few hundred investors. Kia, it is learnt, offers handsome margins to dealers. While the number of dealerships Kia aims to set up before the 2019 launch is not known, industry watchers said the number could be 150-200, to begin with. But the company’s plans to establish a sales service network has now received a small setback, with 60 experienced automotive investors deciding to withdraw. Kia Motors did not respond to the queries sent to its public relations agency at the time this article was going to print.

Y K Koo, managing director of Hyundai India operations, said last year Kia and Hyundai were different companies. “Management, operations and network ... everything will be different. Vendors can be shared for cost reduction, but strategy will be different. Their DNA is different. They have different sales and marketing strategies.” Indicating that Kia will be like any other competitor in the market, he said Hyundai would be “aggressive”. Globally, Hyundai happens to be a bigger player than Kia. Last year, the brand sold 4.5 million vehicles, while Kia ended the year with sales of 2.75 million. For Hyundai, India happens to be its third-biggest market, accounting for 15 per cent of sales volume. 

While most automobile companies, including Hyundai, operating in India are liberal as far as their dealership policies are concerned, some such as Maruti Suzuki do not allow their car dealers to own and operate any rival car brand. “As a large number of dealerships of various brands have struggled to make money in recent years, some companies are now cautious that dealers don’t stretch their resources. Ultimately, a weak performance from one brand has some impact on the other brand belonging to the same investor,” said an industry executive.