24/7 Wall Street seems to believe that Hyundai’s junior brand could go away in the next year and a half, as it named Kia to its “Ten Brands That Will Disappear in 2011” list. This despite the fact that Kia’s first-half sales were up 15 percent over the first half of 2009, and Kia’s rolling 12-month sales are over 22 percent higher than its performance in the previous 12 months. So, why does 24/7 Wall Street see Kia disappearing?
Kia Motors Corporation is one of the two car brands of Hyundai of South Korea. It has always been a marginal brand. Its stable mate, Hyundai USA, has a reputation for high quality cars like the Sonata and Genesis. Kia sells “low rent” cars and SUV nameplates like the Sorento and Rio. As GM and Ford have already discovered, it is expensive to maintain multiple brands and storied car names, including Pontiac, Saturn, and Mercury, are disappearing. Most Kia cars sell for $14,000 to $25,000. Hyundai has several cars in the same price range. Hyundai’s Sonata has quickly become one of the best-selling cars in America, and its Genesis flagship model competes with mid-sized BMWs and Mercedes. The parent company will take a page from several other global car companies and dump its weakest brand.
This is something of an increasingly legitimate point. With Kias now being styled by former Audi man Peter Schreyer, Hyundai’s budget brand is slowly moving to a more upmarket positioning, even as Hyundai itself moves upmarket with its Genesis and Equus luxury sedans. Hyundai’s Elantra and Kia’s Forte, for example, fight for the same C-segment customers, with only about $400 separating their base prices. Only $1,000 separates the Optima from the new Sonata, and with a new highly-touted Optima replacement due this year, that price difference could shrink further still.
And there’s more: just about a week ago, the Korea Times noted that even Hyundai is starting to acknowledge that Kia and Hyundai cannibalize each other. With Kia’s South Korean-market volumes approaching those of Hyundai, and with the junior brand receiving more media campaign attention from its corporate overlords, there’s talk of actually reducing cooperation between the two brands. According to the KT
Now, Chung Eui-sun, Hyundai vice chairman and the only son of Chairman Chung Mong-koo, has reportedly talked about the reduction of support for Kia. Hyundai has shared car platforms and served as an app store of sorts for Kia. The junior Chung’s remarks are interpreted as a show of frustration by Chung, who is not comfortable with Kia’s success.
Even official Hyundai spokesfolks admit that
I know that Kia is doing well and we are happy. But Hyundai is not doing well, which I believe is partially due to Kia’s success.
With the new Optima, Sportage, and several other new Kia products coming to market, Hyundai is afraid that its junior brand could actually surpass it to become the top-selling brand in Korea. Meanwhile, outside of Korea, Kia remains far too important to Hyundai’s success to simply go away. Hyundai is still growing faster than Kia in the US, though with new Kia products coming to market and a new US plant coming online, Kia is poised for continued growth. In the short term, there’s room for both to grow in the US market, so killing Kia makes little sense right now.
Still, in the long term, the two brands are insufficiently differentiated enough to create a bit of the Chevy/Saturn dynamic down the road. Sure Hyundai will offer upmarket cars, but both brands essentially stand for Korean value. Once Hyundai and Kia’s market-proof momentum slows (and it always does), competition between these two brands will become inevitable, and Hyundai will be faced with some tough choices. That almost certainly won’t happen by 2011, which makes 24/7 Wall Street’s prediction ring a bit hollow, but it’s definitely a problem that bears having an eye kept on it.
Maybe, but there are plenty of other brands that are more likely candidates in the game of automotive dead pool.
Eh, there needs to be less overlap with Hyundai but whatever. Kia should be value (Chevy, Ford) and Hyundai should be upmarket (Buick, Lexus, Infiniti.)
I say that Hyundai (the parent company of both Hyundai and Kia) should make Kia the sport/luxury brand – aka: Audi-like but cheaper.
And Hyundai should be the Korean equivalent of Toyota – aka: the Asian version of Buick.
There’s plenty of time to differentiate the brands along the value scale before the market momentum fails if they start now. Killing a viable brand to avoid overlap would be ridiculously wasteful and would simply open up room for competitors.
Exactly. Perhaps Chung & co can figure out how to do a better job of differentiating the two over the next few years, whether it be the typical basic/luxury split or something else.
Pretty much what I was going to say. It would be silly to kill Kia, but they do need to do a much better job of coordinating and differentiated the brands.
Kia is more than a brand. It’s a company. So, no Kia will continue. Mitsubishi and Suzuki seem like more likely candidates for a USA retreat. Followed by Saab when it finally runs out of money and interest.
“Still, in the long term, the two brands are insufficiently differentiated enough to create a bit of the Chevy/Saturn dynamic down the road…”
How can one base a prognostication on the “long-term” based on current differentiation between the products? Frankly, when I look at the Kia products, I see a products that are “Sporty, yet sensible and reasonably priced.” That “niche” also describes where the following manufacturers once made their hay … Pontiac, VW, Oldsmobile, BMW, Saab … and oddly enough, they all pretty much vacated that niche.
In many regards, Hyundai = Buick.
That’ll be a darned shame. I see Kia as competing against VW with their more teutonic designs, while Hyundai does battle with Toyota et al. Sales and demographic figures may tell a vastly different tale, but that’s my personal impression, especially with really nice looking models on Kia’s horizon – Sportage, Optima, Cadenza.
IMO right now there’s enough styling differentiation in the actual vehicles to support both brands irregardless of the similar price points. What the future brings is dependent on what Hyundai/Kia do for upcoming models. I’m missing something in why Hyundai is concerned with Kia’s Korean success. They own both brands thus are profiting from both so why do they care which brand sells what? To me that’s the best competition you could have-yourself. Another thing that factors into the U.S. market is their dealer network although they probably could give a lot of the Kia dealers a Hyundai franchise if they decided to kill Kia. Speculation that Kia may cease to exist short term is about the last thing I expected to read about.
“I’m missing something in why Hyundai is concerned with Kia’s Korean success. They own both brands thus are profiting from both so why do they care which brand sells what? ”
Hyundai only owns 40% of Kia. I think that is the missing piece to your puzzle.
John,
You’re absolutely right I thought Kia was 100% owned by Hyundai.
Let me be clear, Hyundai only owns about 30-40% of Kia. The rest of Kia, about 60% IS OWNED BY KIA. Look it up. Keep in mind too, its mathematics, Hyundai needs Kia. Who is Hyundai going to get to buy all those 500,000 engines and transmissions (among other 1000’s of parts) that go into Kia cars every year? Just because Ford and GM are cutting down the brands, DOES NOT mean Hyundai-Kia will. Sure there are model overlaps, and some differentiating to be done. But, bottom line, just because Hyundai is the “parent” doesn’t mean they are better or likely to stick around…ever think it may be Hyundai that gets smaller and Kia gets bigger, like people have said? It may very well be a Kia buyout of Hyundai.
I really don’t see this. First of all, a tremendous amount of energy has been put into Kia’s latest designs, and they look great and have caught a lot of attention. Why delete a brand that is just starting to get attention for more then their price tag?
Also, until recently Hyundai and Kia were better seperated. Hyundai = Toyota-like conservative styling a smooth-riding refinement (last gen Sonata). Kia is more cheap, sporty and harder-riding (like the new Soul). One targets Honda, Mazda and some Nissan products. The other targets Mitsubishi, Toyota, Ford(ish) and GM, in terms of driving dynamics and image.
What is keeping Kia from becoming the Korean Mazda? Not looks or price tag, thats for sure. What is keeping Hyundai from being the luxurious-refined brand? Not much, but they need to decide where their ride-bias sits (i.e., why does the new Tuscon ride so hard?). The pricing doesn’t need to be hugely different, since people can decide what they want to buy for in either of the two brands.
Absolutely, like what I said, only much better.
I really don’t see this. First of all, a tremendous amount of energy has been put into Kia’s latest designs, and they look great and have caught a lot of attention. Why delete a brand that is just starting to get attention for more then their price tag…
-Agreed. Though everyone thought that Pontiac and Saturn were finally on the right track just before the hammer dropped…
Pontiac and Saturn had been dead brands walking for years, one relied on an image it never deserved (importer fighter) and the other relied on a sporting image they had long ago forgotten for the world of plastic molding. Neither were any different then buying a Chevy. Given Kia’s relatively new status in the marketplace…this is the perfect time to make it what they want.
24/7 Wall Street doesn’t know what it is talking about. Kia is an independent company which is only 40% owned by Hyundai. Hyundai doesn’t even have the option of unilaterally killing off Kia even if it wanted to.
Hyundai should, on the other hand, consider how much it wants to help an affiliated company if that affiliate is primarily taking market share away from the very company which is providing the underlying platforms and technology. Apparently, this question is being asked at Hyundai HQ as well.
+1
+1 there’s a little more to the story. yes, hyundai owns 40% of kia but it’s not out of choice. during the asian currency crisis the korean gov’t forced hyundai to buy kia because they didn’t want it to fall into american hands. hyundai can’t unwind from kia until the gov’t says it’s ok. that will require that kia’s factories stay open and that they are not taken over by foreigners. the gov’t is still stinging from the recent bankruptcy of ssangyoung brought on by that company’s chinese owners.
Which is why there is so much overlap. Hyundai can’t dictate what Kia designs and how it markets. It’s healthy competition. Each takes the basic building blocks and comes up with a unique design.
It seems like Hyundai comes up with the basic design, then Kia tries to one up them in features and price. I think the competition goes back and forth. i think Hyundai wins the midsize race – the Sonata being anicer deisgn than the new Optima, but Kia wins the compact CUV with the Sportage being a cleaner design than the Tucson. I think the Forte has the edge over the Elantra for a few more months until the new 2011 comes out.
It goes back and forth. There’s room for both to succeed.
It is ironic that Hyundai now has the problem of losing market share to a company (Kia) that depends on Hyundai for major technology like drivetrains and sells similar looking but cheaper vehicles. Back in the eighties, Mitsubishi had the same problem with Hyundai. Hyundai cars (eg Excel) used Mitsubishi engines and transmissions, and competed with and undercut Mitsubishi for economical small/mid size car market share. IIRC, Mitsubishi owned a slice of Hyundai, too. Now, Mitsubishi is faring poorly and Hyundai is doing well. Perhaps Hyundai leadership fears history could repeat itself with Kia.
In many ways these inefficiencies could be to the advantage of both companies as they on one hand share some underlying development costs, but on the other push each other to do better. GM worked that way in the 1950s and 1960s. Starting in the 1970s, GM began “rationalizing” its efforts. In so doing, they kicked off a long term market share loss trend which has yet to stabilize. Back when Chevy, Pontiac, Buick and Oldsmobile were both competing fiercely with each other whist at the same time sharing platforms and corporate R&D they all did pretty darn well. But, by the 1980s the bean counters had “rationalized” the divisions so much that they no longer had individual reasons to exist.
Hyundai-Kia may have stumbled on to some “good inefficiencies”.
This to me is the Chevy vs Buick problem, but worse. Chevy and Buick are closely priced and optioned, Buick being more of both. Kia and Hyundai fall into this same category. To fix it, both up market brands have to be more up market than they currently are.
Some quality canned “light” tuna better than the garbage peddled nowadays, of the quality a “white tuna” charges could bear the Kia label and be of great benefit to humanity.
And how do u explain to the existing dealer networks?
how much to pay them off, In Uncle Sam country going to court is a very very expensive thing especially if your defense is not convoluted at all.
This is so silly as to be retarded. Hyundai is in such an enviable position only recently. Their quality drive and model mix has matured but that will only pay dividends in the future. They need to hold onto the current gen as much as possible to cement the rep.
The next gen of vehicles will be where they start to pull away from KIA where, it must be said, that that rep is very new.
It’s going to be about 5 years before all these positive signs stick and are really associated with each brand. They can’t stumble or fracture the message. After those 5 years have passed watch what Hyundai does. The marketplace will have radically changed and they’ll be one of the dominators on the scene. Ask about where KIA is compared to Chryco, GM, FIAT, Mitsub then.
Hyundai should, on the other hand, consider how much it wants to help an affiliated company if that affiliate is primarily taking market share away from the very company which is providing the underlying platforms and technology.
There is some danger in that approach. If they were to cut off platforms and technology from KIA, KIA could come back at them with their own platforms and technology that could possibly be better than Hyundais – and we’ve already seen what kind of marketing they’re capable of. What’s that saying.. keep your friends close and your enemies closer or something to that effect.
Yeah, Hyundai could cut Kia loose, but it largely depends on whether Hyundai bungles Kia’s marketing as badly as the domestics. At one time, Chevy/Pontiac/Oldsmobile, Dodge/Plymouth, and Ford/Mercury all coexisted quite well. Of course, everyone knows how GM, Chrysler, and Ford all fouled-up the situation, resulting in the loss of some storied nameplates that need not have happened. Kia could easily fall prey to the same sort of stupidity but let’s hope Hyundai learned from the Americans’ mistakes.
Hyundai doesn’t run Kia’s marketing.
I don’t see this happening at all. As Hyundais’ quality continues to rise, so will its prices, and its price points will no longer be an advantage. Kia could quite possibly fill that void.
Even if Hyundai “cuts Kia loose”… they’re still bound to share technology in some form.
Every Kia that leaves the lot is another engine sold for Hyundai. Same with some Mitsubishis and Chryslers. If you take into account all the different makes that use Hyundai’s new “world engines”, their market share becomes distnictly higher.
Kia is not too big too fail. It’s just too profitable to fail. They’ve already got their Mazda on… their new cars are relatively fun to drive (especially compared to what has come before) and sportily-styled.
Hyundai’s marketing and design direction treads the fine line between Toyota-ness and Buick-ness… The styling is getting better, though, and it’s very distinct compared to Kia.
If you have H-K work out with a Ford-Mazda synergy, things should be fine.
Chrysler makes its own version of the 4 cylinder World Engine. Perhaps Hyundai is getting some royalties, but I don’t think Hyundai derives any manufactured product income from Chrysler’s production. Going forward, expect to see Chrysler and Fiat sharing drivetrains and Hyundai left out of that loop.
I’m not sure about Mitsubishi, but who cares about them anymore? The Global Engine Alliance has been torn apart with the various pieces going to to old alliance members.
IMO it’s Chrysler who should be getting licence fees over the engines.
And once those engines get the Multiair, Turbo and GDi technologies, Hyundai and Kia will be left in the dust.
And Fiat will also bring their automated manual gearboxes…
Seeing the new Pentastar V6 numbers WITHOUT direct injection, I can only guess how many HP it will do once they implement that technology, then turbo or Multiair or any combination of the 3.
Kia’s not going anywhere.
The problem with keeping them both (or not splitting Kia back on its own, while its hot), is that they are in most ways the same company. Right now, Hyundai has parlayed enough rep to move a bit further up-market (it may well be above Chevy and even with Ford). Kia is still at the “car as commodity” level, but are they willing to stay there? Kia got cooped up when they had no rep at all (just the Sportage, and a couple captive imports). Now they are looking to build a rep, are they going to move up? Likely.
Hyundai/Kia isn’t so much Buick/Chevy, its Austin/Morris. They are two very similar rivals, forced into a sort of merger by forces beyond their control. They each have their own “style” (though I suspect they share a lot of parts), but they are still in the same markets, and likely to compete with each other (the cars may be different, their customers likely aren’t and it is not efficient to use your marketing budget to beat yourself).
I don’t think they will be able to continue like this. Eventually they will either have to truly merge, or cut Kia loose. Now, with their market segments strong would be a good time, but I doubt it will happen until things get tight again (and they will, eventually).
Hyundai as Buick? For all of its recent advances, that’s too much of a reach. More like Toyota+. Or VW with higher aspirations.
The overlap between Kia and Hyundai is pretty silly. It looks like adolescent over-exhuberance. Hey, let’s create the next GM!
Perhaps it is not logistically possible at this point, but I don’t see a reason for two brands — at least here in the US.
This forecast by 24/7 Wall St. came out a few weeks ago and is a major FAIL (well, at least w/ respect to Kia).
It’s as if someone wrote the Kia portion 10 yrs ago and forgot to update it (the Sorento isn’t exactly “low rent” anymore w/ a well-loaded EX trim going for around $32-33K; and it’s battling neck and neck in sales w/ the Pilot and Flex).
Kia is the 8th best selling auto brand in the US (Hyundai is 7th); and is not only growing in the US, but Europe and China as well.
Not only that, in their home market, Kia outsells Hyundai in many segments.
There is room enough for both in the US market.
Hyundai is going after the more mainstream market (i.e. – Toyota and Honda) while Kia is going after the smaller, more sport-oriented market (i.e. – Nissan and Mazda).
Aside from the Kia equivalents being tuned for a sportier ride, the two brands are now quite distinctive w/ regard to design (Hyundais having the somewhat busy “fluidic sculpture” design language w/ Kia having the cleaner, more Teutonic designs).
Some people love the look of the Sonata; some hate it w/ others having mixed feelings.
Otoh, most people seem to really like the look of the new Optima – so it’s good that Hyundai and Kia offer two distinct looks.
In all likelihood, the Genesis and Equus, along w/ a couple of other models in development, will be spun off into a new luxury brand.
The notion that Kia will be the “cheap” brand is a false one, since Kia will not only have the Kia Cadenza (upscale, FWD full-size sedan), but a higher-end (altho smaller) RWD sedan as well.
Anyway, it’s a moot point since (as others have already noted) Hyundai is only a minority stakeholder in Kia these days.
I would much rather see Kia dissappear than Mercury, Pontiac or Saturn!
Not me! Kia actually has some vehicles I could consider buying.
How ironic that the acronym KIA – killed in action – could apply to the Kia nameplate. But I also don’t see that happening anytime soon.
This is nonsemse. To compare Kia/Hyundai to what GM squandered with it’s brands and Ford and Chrysler never had the balls to do with Mercury,Plymouth and Dodge is comical.
Similar prices but not the sort of Ford/ Merc re-arrangement of cosmetic hash or GM’s brand whoring [oops platform sharing…].
At the very least Kia offers the customer an alternative to what other brands have including Hyundai. The Optima/Sonata are really the only pair I can see that use the old style Detroit Three “public will never know they’re the same car” sort of camo that Chevy/Pontiac have done for the past 35 years.
It will be a long time before that sort of toxic brand killing strategy will manifest itself in Kia/Hyundai. From what I could tell, Hyundai doesn’t offer a clone of the Soul and the Forte is fresh and new compared to that[what I found to be]nasty and underwhelming Elantra. Even the Rio and Accent look different from each other and have different pricing. They are unique offerings from each manufacturer even at the very bottom of their ranges.
Could you ever say that about the Escort/Lynx ? The Js, Ns, As and Xs of GM ? Or the Neons/Ks/Volaspens or Omnirizons?
John Horner: you had it right again comparing the two to GM’s policies of intra mural rivalry to keep the divisions on their toes and unique in the 50s and 60s. + 1 here.
Dweezil is right. This is nonsense. Now that Ford is finally sending Mercury to the glue factory, TTAC needs another dead horse to beat. It’s Kia’s turn. The trouble is that there’s no there there. Congratulations, Mr. Niedermeyer — we all fell for your ploy!