Kia has managed to sell over 3 lakh cars in India within the first two years in the market
In a market as competitive and stiff as India, automakers find it extremely difficult to churn out a profit out of a business that faces several challenges. At a time when established auto brands such as General Motors and Ford quit the Indian market, a new OEM like Kia has set up a thriving business in the country.
The Korean carmaker has managed to turn profitable within two years of the market launch of its first product. Kia India registered a profit of Rs 1,111 crore after tax deduction in FY 2020-21. In comparison, the company recorded a loss of Rs 329 crore in the previous fiscal of FY20 according to the company filing with the corporate affairs ministry (MCA).
Kia India Turns Profitable
Despite Covid-19 still raging across the world, Kia’s total turnover grew 87% to Rs 20,290 crore last fiscal year which is equivalent to 10% of the total estimated passenger car industry revenue last year. In the meantime, the company’s sales volumes grew by 90 percent YoY to 196,000 units in FY21.
The manufacturer has already recovered nearly half of the total loss it has incurred over the last four years of capital investment in India. The question arises how a newbie in such a competitive and low-return market has managed to turn its business profitable in such a short time where other big and established companies had to give up and exit the market.
Secondly, Kia has made optimum utilization of its local manufacturing facility in India. Located in Anantapur, Andhra Pradesh, the plant has a total annual production capacity of 300,000 units. The company is likely to start a third shift soon to speed up production in the wake of addition of new models to the lineup.
Kia India Profit Per Car
Further, a tight cost control despite cost inflation and positive operating leverage impact helped Kia to post an operating profit of Rs 91,390 per vehicle, which is the highest among mass-market carmakers. In comparison, Tata Motors operational profit per car is reported at Rs 45,810.
Maruti Suzuki operating profit per car is lower than Tata. Kia profit is closer to the luxury brands. In fact, it is almost as high as Mercedes India, which has about operating profit of about Rs 1 lakh per car. Kia’s average realization per vehicle is Rs 10.43 lakh, which is 2.26 and 1.46 times of Maruti Suzuki and Hyundai, the leading two brands in the passenger vehicle (PV) segment in India.
Focus on UVs
For starters, Kia has targeted a segment that has been in great demand in the past few years- SUVs. In fact, the company had earlier stated that it will only be focussing on manufacturing utility vehicles for the Indian market in the foreseeable future. The company retail three models as of now- two SUV/crossovers and one premium MPV.
The carmaker is already developing its fourth product for the Indian market which is expected to be a seven-seater MPV based on Seltos and codenamed KY. At the same time, barring Carnival which is a fully imported CBU model, rest of the models including Seltos and Sonet have a very high value-for-money proposition that offer a lot of options at a justifiable price.