HO SUNG SONG: Positioning Kia for new era in EVs

Marketing

Editor’s note: Kia CEO Ho Sung Song said EV “price parity must be considered in terms of total cost of ownership area.” A previous version of this story misquoted him in this sentence.

Since taking the wheel of Kia Motors Corp. in April, CEO Ho Sung Song has been positioning the South Korean automaker for a new era of industry upheaval.

Under Kia’s five-year business plan unveiled this year, Song, 58, wants to make the company a global leader in electric vehicles, branch into so-called purpose-built vehicles and invest heavily in new mobility. To jump-start that makeover, he also will “relaunch” the brand in January.

Under the strategy, called Plan S, Kia will create a lineup of 11 models with electric powertrains by 2025, with seven EV-only models by 2027. By 2026, Kia plans to sell 500,000 battery-electric vehicles and another 500,000 hybrids, plug-in hybrids and other eco-friendly offerings.

In doing so, Kia wants EVs to generate 20 percent of its worldwide sales by 2025, and a quarter of them in 2029. Its first dedicated EV will be delivered next year.

Kia’s U.S. sales were down 7.6 percent to 428,350 vehicles in the first nine months of the year. But the brand outpaced the overall market’s 18 percent slide and boosted market share to 4.1 percent. Sales should increase in 2021 on the back of brisk crossover shipments, Song said. He spoke with Asia Editor Hans Greimel via Zoom. Here are edited excerpts.

Q: What is Kia’s outlook for its U.S. sales this year and next?

A: U.S. demand for 2020 is forecast to be around 14 million units, a 16 percent decrease vs. last year. But Kia in the U.S. will be around 580,000 units for 2020, about a 6 percent decrease from last year. We are much ahead of our competitors.

For 2021, we have strong momentum at the moment, with full capacity of the Telluride and new launches of other SUV models, such as Seltos and Sorento. So I have very good expectations for the U.S. market in 2021, too. We can be at least at the level of 2019.

What are your priorities for Kia since taking the helm?

These days, there is a big paradigm shift in the automotive industry, and also there is an impact from COVID-19. These unique cases were never expected. They are a very big burden. In the meantime, the auto industry is changing through new mobility, electrification, connectivity and autonomous area. So we have to prepare countermeasures, and we have to have a willingness to change our corporate culture. This is the important agenda for me.

What are the goals of Kia’s Plan S midterm business strategy?

With Plan S, the meaning is to shift our business for the future. I was deeply involved in planning Plan S. We started about two years ago, and we announced it earlier this year. The three main areas are electrification, purpose-built vehicles and mobility.

What are Kia’s electrification targets, and how do they differ from Hyundai’s?

Whether we like it or not, the EV world is coming. It’s only a matter of timing, earlier or later, but it will definitely come. We have to proactively concentrate more on the EV world, maybe more than Hyundai, earlier than Hyundai, in the balance of the weight of our business.

This is why the volume portion and the target are a little bigger than the market expected, so we can be a major EV player.

How will Kia keep its EVs affordable and in line with Kia’s image as a value brand?

Automakers are finding better cost structure through commonization of parts and so on. So in some years’ time, we can find a competitive edge to make EVs meet consumer expectations.

The price parity must be considered in terms of total cost of ownership area. By 2025 or 2027, maybe we can find some edge in price parity in respect to total cost of ownership of EVs.

Even today, in combustion-engine vehicles, there are differences in target customers, product positioning and in price positioning. And in the EV market, there will also be these differences. So it’s not that we would be using the same EV price levels of, say, Volkswagen.

At the moment, we believe EV demand is coming from the upper class. So we are preparing ourselves for the American market with that kind of product portfolio.

What will be Kia’s positioning in the EV market?

Going into EVs, I think every OEM will try putting their product into a new area of brand positioning. Also, we are thinking of a very innovative concept or innovative approach to brand positioning of our cars, especially EVs. So I cannot say that our EV brand positioning will be the same as it is today. Definitely, we will try to pursue different target customers with EV cars and a different, innovative approach with our product concept.

What are Kia’s plans for elevating its brand image?

We are preparing to announce a brand relaunching event early next year. It’s too early to comment in detail. But we will try to set up our new customer target together with our brand relaunch. The official announcement will be in January. We want to make a big scope of change. We will change our logo. That is one big thing.

Why does Kia need to change its logo?

Our current logo has been used for a long time. These days, we are transitioning to a new industry paradigm. We need something to drive that business paradigm into the new world. We need momentum to take a new course.

As Kia moves more upmarket, how will it differentiate itself from Hyundai?

In setting up our brand strategy, I don’t think much about strategy of Hyundai. I’m just thinking about our strategy. We want to be more dynamic, stylish and inventive. We have a very strong loyalty rate. Once customers purchase, they repurchase. This is a very strong point for us.

What is Kia’s vision for a complete EV lineup? What segments will be covered?

Through 2030 or 2035, EVs will enter the market alongside existing internal-combustion-engine vehicles. So the segmentation of each will continue to influence the other. When we talk about completing this 11-model EV lineup, we try to put them into different segment categorization.

But in the market, there is no clear clarification of EV segments, because EVs provide more interior room compared with internal-combustion-engine vehicles. So the actual segmentation in the future will be quite different from today’s.

What is your strategy for purpose-built vehicles? What does that mean?

In today’s market, automakers are producing general vehicles for consumers, and then customers modify them for their business purpose. In the past, this business was limited. But these days, because of e-commerce and the paradigm shift, there are new things in logistics and delivery; many new things are coming to market. But we are still producing just fixed models and selling to our customers. And after purchasing, they are modifying the vehicles, according to their business needs.

This business should change. We will directly provide vehicles that can be used immediately for the customers’ business. From now on, we will proactively invest to offer the vehicles that meet the customers’ various business needs. These are not only commercial vehicles but even small delivery vans. Today, they are using vehicles based on the combustion-engine technology, but customers want those vehicles based on EV technology. We will proactively invest to provide these vehicles.

When will Kia start selling these purpose-built vehicles?

From 2022. It will be global volume. Today, this market is mainly targeting the B2B (business-to-business) area. But the B2B market is expected to grow from 5 percent of the total auto industry today to 25 percent in 2030. This includes not only purpose-built vehicles, but the mobility area.

Today, mobility companies like Uber or Lyft are using general vehicles. But in the future, they may ask us for different types of vehicles. Today’s mobility area is basically based on the combustion engine. But our focus on mobility business in the future will be EVs.

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