Horacio Chávez
Managing Director of Kia Motors México
Kia Motors México
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View from the Top

Brand Awareness Pays off for Relative Newcomer

Sat, 09/01/2018 - 12:20

Q: What key challenge did Kia face as a new entrant in the Mexican market?
A: The biggest challenge has certainly been brand awareness. Two years ago, we were an unknown player but now we are among the 10 most popular brands in the market. We came into the market as a vibrant alternative for the Mexican consumer and we had a strong focus on differentiating our offering. Still, we did not expect this kind of welcome since our initial objectives were conservative compared to the results we have obtained. We implemented an aggressive marketing strategy to make people aware of our products before we launched them. We created high expectations and when people arrived at our dealerships, they were surprised at what they found.  
We have not let our guard down and we are relying on our strong offering. Our cars have an attractive design, they are well-equipped, price competitive and offer high quality supported by our seven-year or 150,000km warranty. Furthermore, we listened to our customers through social media and we adapted our strategy based on their opinions. We moved many of our launches up some months or one year in an effort to keep up with market demand. Our dealerships have also played a crucial role in building our reputation in Mexico. We wanted to have big, attractive showrooms that represented our image as an important brand and a key competitor in this market.
Q: What role does innovation play in your market strategy, both in your portfolio and operations?
A: Our mid and long-term plans are focused on innovation, both with our products and our strategy for the market. Kia manufactures its vehicles in several locations around the world and the company is looking to be one of the main innovators in the industry. Meanwhile, our operations in Mexico must be ready to adapt to the needs of our customers and what they want from us as a brand.
Digitalization has been a key part of our strategy from the beginning. We are among the three main companies in Mexico in terms of Facebook followers and we are among the Top 5 regarding Twitter. Most of our marketing efforts are oriented toward social media. As an Official Partner to the Russia World Cup 2018, we have organized several activities to take clients, journalists and partners to the event and we have done all this through social media. We organized a kids’ soccer tournament featuring 90 teams. The final was held at the Azteca Stadium and the winning team travelled to the World Cup. We also held the Champ to the Arena contest in collaboration with Anahuac University, in which several teams played against each other to select a winner that played against other international teams in Russia.
Q: How are you navigating the global change in preference toward SUVs and larger vehicles?
A: The Mexican market is changing along with the rest of the world. The compact segment, however, is today the largest in Mexico. The volume opportunity is there and we are pleased to have local production of two of our compact models: the Kia Forte and the Kia Rio. The former began production in 2016 and the latter in 2017. By the end of February 2018, Rio stood in first place of the hatchback B segment, while the sedan version made it to the fifth place in the B segment. Forte, on the other hand, reached third place in the hatchback C segment, while the sedan version ended in fourth place in the sedan C segment.
Having said that, the SUV market is the one that is growing in Mexico, especially in the B and C segments, and we have a strong offering with the Kia Soul, the Kia Sportage and the Kia Sorento. The latter was originally our best-selling model, but it has been displaced by Rio. Soul is among the Top 5 best-sellers in its segment, Sportage is in second place and Sorento leads the C segment. Our strategy with Sorento was to offer what no other brand had brought to the market before, which was a four-cylinder C-segment SUV. We intend to keep strengthening our position in the market and in 2018 we will also introduce a minivan.
Q: How well did the market embrace the Kia Stinger, now that the brand is participating in the high-end segment?
A: Mexico was the second market globally to receive the Kia Stinger. Korea made this distinction as a way to recognize the efforts we have made and the brand’s acceptance in the country. We initially expected to sell about 50 units per month but we have already surpassed that target. The response from the public has been incredible and we are confident we will end the year with over 500 Stingers sold.
Q: In 2017, Kia in Mexico reached a 5-percent market share and growth in sales of 50 percent compared to 2017. What comes next?
A: We still have ambitious projects for the Mexican market. Our goal for 2018 is to reach the 100,000-vehicle mark in terms of sales. Regarding production, we expect to end the year with 314,000 cars manufactured at our Pesqueria facility, which would be a considerable increase compared to the 221,000 units we produced in 2017. We are already present in 98 percent of the national market through our distribution network but we think there is still an opportunity to build five more dealerships and to grow our penetration. At the same time, we are developing our distribution model for certified used vehicles. Kia is still a young brand in Mexico so growing this service has been a challenge. However, we think it is the best way to keep advancing in the market. We started the Konfidence program with five pilot dealerships and we expect to close 2018 with a total of 15 Konfidence distributors focused on certified used units.
Q: How much of a risk do you consider the current NAFTA negotiations for your production operations?
A: There is much uncertainty and things change every day. Every company makes investment decisions based on the current conditions of the market but flexibility is important to adapt to conditions such as these. Our head office has been preparing for different scenarios and in Mexico we are participating in all the negotiation rounds together with AMIA to provide our feedback on how the industry is moving. We have faith in our negotiators and we are certain they will do their best to get the best deal for the industry. Our hope is that conditions remain unchanged as much as possible so we can continue with our domestic sales, as well as our production and export operations.
Q: How much do you think the elections will impact consumer confidence and end-of-year sales results in 2018?
A: There are many factors behind the deceleration in light-vehicle sales. We enjoyed uninterrupted year-on-year growth for several years, which cannot be sustained indefinitely. The elections were another risk factor. It is unclear how much this will impact the market by the end of the year but we sensed more caution from clients. However, looking at sales records from previous election years, the market always suffers some sort of disruption. We do not know what will happen by the end of the year but we hope the market is mature enough to maintain its stability.
Q: What are your overall short and long-term goals in Mexico?
A: We closed February 2018 as the fifth-largest brand in terms of sales in the domestic market. In 2015, our goals for 2020 were to reach sales of 100,000 units and a 5 percent market share. We have already achieved one of those targets and now we want to become one of the Top 3 brands in the country. However, we do not want to focus solely on volume. As a leading brand, we have the opportunity to take care of the customer in a way that other companies have neglected to do. The market has become extremely competitive and Asian brands have learned to take advantage of this niche.