Kia focuses on localised products to compete with Maruti Suzuki

Korean carmaker Kia Motors has kick-started the process of developing products specifically built for the Indian market to compete with Maruti Suzuki, the biggest carmaker.

The company, more than one-third of which is owned by India's second largest firm Hyundai, thus opened a research and development centre in Hyderabad that is already operational.

Kia, known globally for its compact cars, has begun talks with states for finalising a green field manufacturing plant in India. Government officials from Andhra Pradesh and Tamil Nadu, where Hyundai has its plant, have met Kia officials and offered land, according to sources.

The R&D centre in Hyderabad supports design and evaluation of automobiles with a focus on developing localised products, a note in Kia's latest annual report said. The India centre is one of six outside Korea. Kia, Korea's second largest company after Hyundai, has such R&D centres in the US, Europe, Japan and China. While a R&D centre specially for India may not be new, what makes Kia stand out is that it has not followed the product-first-R&D centre-later norm. For instance, Hyundai's R&D centre came up around a decade after the company set foot in India. French carmaker Renault too adopted a similar pattern. Companies generally test the waters before committing investments when entering a new market.

Kia, however, has made a break from that pattern and aims to go after volumes that it hopes would come from products developed keeping in mind local taste and needs. This investment is despite sales slowing in the world's biggest auto market, China. Besides China, Kia is facing slowdown in Russia and other Asian markets. Last year, Kia witnessed worldwide retail sales of 2.91 million units, reporting a flat growth compared to a year ago, when it recorded sales of 2.90 million units.

Kia's retail entry into India, expected to happen before the turn of the decade, will most certainly impact Maruti Suzuki. Kia could look at the compact car segment, which forms around half the domestic market. As Hyundai has already declared its intentions of shifting focus to the premium customers with products like Creta and Elite i20, the void in the cost-competitive segment (sub Rs 4.5 lakh) could be filled by Kia.

Globally, Hyundai and Kia, like Volkswagen and Skoda, and Renault and Nissan, share platforms to make projects cost-effective and generate profits faster. Kia has developed its own models based on shared platforms, which Hyundai has used for making the i10, i20, Elantra, Accent and Tucson. The affordable small car segment has shown a resurgence recently with robust demand seen for the Renault Kwid, Tata Tiago and Datsun redi-Go. Maruti too has shifted focus from its bread-and-butter Alto-Wagon R segment to the premium segment with products like Baleno, Vitara Brezza, S-Cross and Ciaz. This has allowed rivals to eat into its market share.