[GTO]

A brand launch with *near* perfection. I say near, because the recent crash test result has taken a bit of sheen away from brand "Kia". Cars in that segment deserve to get a 4-star rating at the minimum.

That aside, this is a textbook entry of how to aggressively launch a brand in a new country and "think big". It takes guts to commit to 10000+ pieces a month in terms of your own factory & give the same to suppliers when 99% of India doesn't know what Kia is. The variant line-up, pricing & crazy marketing was just awesome.

[fearless_IN]

I have observed that, in India we need to India specific cars. The companies who are doing R&D specific for Indian market, they are successful (Maruti, Hyundai, Kia, etc.), however, the companies who are trying to push their global models with other Asian country R&D (majorly Japanese), they are not able to understand the Indian market (Toyota, Hyundai, Nissan, etc.).

Over the last decade, Indian automobile market has emerged as a very strong market, and the companies needs to target this market by offering India specific models (Just like we have European Market, Chinese Market, and American Market). Pushing other Asian country models will not help to succeed.

This has been well understood by Kia in the first innings (Hyundai must have shared their experience), which is now looks like a success and become the STAR. Kia has also entered in India at the time when every automobile was crying of slowdown due to dilemma of upcoming EVs. Suddenly, Kia has changed this behavior (COVID is also a factor), and made the market competitive again. Today everyone has forget the slowdown due to sales, now every body is trying to put their best efforts.

Good Job Kia. Kia is a very good case study for B-Schools to be included in all subjects (Principles of Management, Marketing Principles, Managerial Economics, etc.)

[vsrivatsa]

I would like to add that Kia could not have done this without the Knowledge Transfer and Resource Transfer from Hyundai. Hyundai backed them up in every step and provided the know-how of the Indian market which Kia was fortunate to receive.

That said, setting up a new factory and dealerships etc. is a huge task and kudos to Kia for having achieved what they did!

Coming to the most discussed topic of Safety - its good that our market has woken up and we are hearing voices that are condemning brands for their step motherly treatment to India and Kia deserves their share of criticism that they are getting on this front. Needs to be seen if they change anything due to this or continue with Business As Usual.

While the Seltos has drawn a lot of flak for Safety I believe Hyundai has somehow escaped this backlash - if the 2020 Creta were to be tested there is a good chance that it would end up with only 2 stars (Seltos touched the 3 star mark with a few decimal points) based on what we have seen in the Structural diagrams on another thread here on Team-BHP!

[andafunda]

For any product company to hit operating profitability (EBITDA) in a tight gross margin category like automobiles is quite an achievement. I wish this was not done by using lower quality and priced materials but I strongly believe it was (ref: Seltos GNCAP ratings). However, Kia merely did what the market demanded - more creature comforts and less safety.

FY2021 (March-end) results will be even better, considering they will get the benefit of Sonet sales as well.

[SoumenD]

GNCAP result of Seltos followed by this news. Kinda makes it clear how Kia managed to achieve this feat. Let’s see if these results affect their numbers in any way. If not, am afraid other manufacturers will start following their footsteps. Forget the stable bodyshell, lets throw in air purifier, sunroof & some more features.

But got to give it to them when it comes to engine/transmission options. Diesel AT specially is something which everyone missed providing specially in the subcompact Crossover segment , but they managed to get it.

I hope TATA and Mahindra don’t get ideas from Kia. Yeah work on your A.S.S part but please don’t get other ideas to reduce input costs

Edit:

Originally Posted by avira_tk

A Seltos or Sonet with 5 star safety ratings would cost another 40% with less kit, and bomb like any product from a new brand.

I beg to differ. If that’s the case how is TATA managing a 5* Nexon or Mahindra manages 5* XUV3OO at lower costs than a Sonet? If we as buyers keep giving them(Kia) leeway this way, I don’t think they will ever bother to improve.

[avira_tk]

Kia delivered what the market wanted and obviously they understand that safety is not something Indians are going to pay for. The November sales point to string demand and the Sonet has a long waiting period.

A Seltos or Sonet with 5 star safety ratings would cost another 40% with less kit, and bomb like any product from a new brand. The whole NCAP thing lasted for one news cycle, with enough sales Kia will bury the story, which is why the media were pushing it in the fist place.

[AJ18]

What Kia has achieved is truly brilliant, especially with the circumstances faced with COVID this year.

[tharian]

Like a member had mentioned few posts back, a lot of success is because of the inputs from Hyundai who themselves had done a lot of homework on which car to launch first and how to market in India when they opened shop. After all, it is a Hyundai company at the end.

Add to that, they knew which segment to target which was the hot selling segment in the market and they hit the nail of the head by launching those models with all the bells and whistles which is what the market was looking for.

The number of Seltos on Bangalore roads, especially in some areas is something to be seen. Goes on to show, people are holding on to their finance for the right car or bling factor.

[srini1785]

It's a great entry without doubt but the question really is will they be able to sustain it?. I still remember the first few days of Hyundai's entry into indian markets ( pre 2000), there was this great hype created around Santro ( their first car ) and how it would beat the hell out of Suzuki. In the end the Japs prevailed , not that Hyundai exited the market. I would associate the euphoria to a new film launch with much fanfare and the film living up to expectations. Question is really whether they would continue to produce "Mass" hits like Seltos. With the NCAP already giving a thumbs down and MSIL/others looking at new launches, it remains to be seen who eats who.

[VVN]

What an innings by Kia. Commendable. Like many here, I was thoroughly disappointed when the GNCAP ratings were made public simply because I was considering the Seltos. Have put that plan on the backburner for now till I find something reliable and safe in that category. But I am not going to digress and turn this into another Kia bashing thread. Enough has been said and we all know how they cheated customers.

Coming to their entry, they did everything right with the launch. They studied the market and launched a car in the segment that was gaining traction. The Seltos was an amazing product (till GNCAP revealed its true colours) and my goodness did they manage to capture the imagination of Indians everywhere. Suddenly everyone in my circle, right from an Alto owner to a GLA owner wanted the Seltos. They hit the right note and reaped rewards.

As next steps, I sincerely hope they don't rest on their laurels and continue to launch good products with an offering in each segment (Sedan, Proper SUV, Hatchback). I also hope they take all the criticism positively and build a safer product for India. Once your brand gets into the negative side of things in India, it is extremely difficult to get back on the positive side. Just ask Tata and Mahindra.

[Rahul Bhalgat]

Originally Posted by SmartCat

Since Maruti is a listed company, they actually mention the cost of raw materials & components in the Annual Report. It is approximately 70% of total sales. That is, average profit margin on a Maruti car is around 30%.

Attachment 2088023

Expensive cars like Seltos will have higher margins obviously

Cost of raw material, components and traded goods does not make up the entire cost of the product. These actually are (some of the) variable costs. There are other costs like labor cost, interest cost, depreciation (all these are fixed costs, irrespective of the volumes) as well as the costs like electricity (major part of which is a variable cost).

So, the "profit margin" is not hefty, of the order of 30%.

[SmartCat]

Originally Posted by Rahul Bhalgat

So, the "profit margin" is not hefty, of the order of 30%.

We are not talking about profit margins of a company. We are talking about average profit margins on a car. If the usage of the word "profit" is inappropriate here, let's just use the phrase "average margins" then.

These actually are (some of the) variable costs. There are other costs like labor cost, interest cost, depreciation (all these are fixed costs, irrespective of the volumes) as well as the costs like electricity (major part of which is a variable cost).

All these are mentioned under separate heads. See the screenshot.

[Rahul Bhalgat]

Originally Posted by SmartCat

We are not talking about profit margins of a company. We are talking about average profit margins on a car. If the usage of the word "profit" is inappropriate here, let's just use the phrase "average margins" then.



All these are mentioned under separate heads. See the screenshot.

Considering the other costs like interest, depreciation, labor etc. the total cost of Rs. 719666 million over the revenues of Rs. 790314 million amounts to 9.8% profit before taxes. And from the "profit after tax", the company gives out the dividend to the shareholders.

What you want to point out as "average margin" is actually the indicating the value addition". Value addition % is [(Sales - variable cost) / Sales] indicated as %. And here, 30% isn't a big deal.

Higher variable cost (as a % of Sales), means that the profits are less vulnerable to reduced volumes.

[andafunda]

Originally Posted by SmartCat

We are not talking about profit margins of a company. We are talking about average profit margins on a car. If the usage of the word "profit" is inappropriate here, let's just use the phrase "average margins" then.

Four levels of profitability that can be looked at:

1. Gross profit - Nets out all direct costs including that of raw material and direct labour. Shows how efficient the company is at (1) realizing value-add for the effort of putting together a finished product. Usually a sign of marketing, branding and sales efficiency (2) running ops and buying raw material.

2. Contribution margin - Nets out all indirect costs associated with manufacturing, selling and fulfilling orders, including marketing. This is the unit level profitability. Ex-marketing can be used to calcuate payback on marketing spends. Breakeven here means you have a sustainable business at a unit level.

3. Operating margin / EBITDA - operating profit, takes into account all overheads including rent, corporate salaries, admin expenses, CEO's private jet () etc. These expenses as a % of sales reduce over time as the costs don't scale in a linear fashion. Breakeven here means you have a sustainable business at an overall level.

4. Net Profit - bottom line profit after accounting for depreciation, finance costs and taxes.

[Turbanator]

Originally Posted by SmartCat

Since Maruti is a listed company, they actually mention the cost of raw materials & components in the Annual Report. It is approximately 70% of total sales. That is, average profit margin on a Maruti car is around 30%.

What about so many other overheads including human resources, royalties etc.

This explains better

https://lga-consultants.com/seven-gl...profitability/

This is how others fair with the one of the most profitable company- Ferrari

https://www.autocar.co.uk/car-news/i...dipped-11-2019