SEOUL — Han-woo Park says Kia Motors Corp. is graduating from its traditional role as a fast follower of the international auto industry.
These days, the South Korean carmaker is a leader in such areas as design and quality, the global CEO says. Stylish cars such as the sporty Stinger are turning heads, while Kia's quality ratings topped the charts of J.D. Power's Initial Quality Study two years in a row, in 2016 and 2017.
But Park, 60, is quick to concede that Kia has some catching up to do, especially in the light-truck segment. Like its Hyundai sibling brand, Kia was slow to follow the consumer stampede away from cars to crossovers and SUVs. But next year, Kia wants make up lost ground by introducing two new crossovers, a subcompact at the bottom of the lineup and a full-size model at the top.
Park spoke with Asia Editor Hans Greimel here last month about Kia's burgeoning lineup and his views on production plans, trade tensions, incentive spending and more.
Q: Will Kia's U.S. sales increase next year?
A: Yes, a slight increase. Not a high increase, because overall market demand is going down slightly. Now, we are selling almost the same number of vehicles as last year.
What is your outlook for the U.S. market?
SUVs are going up, but we are suffering from a shortage of pickup trucks in our lineup. But we expect our performance in the U.S. market to rebound soon as we focus on expanding our product lineup, strengthening the Kia brand image and enhancing dealership profitability.
We will continue to strengthen our SUV lineup with a range of new model introductions with both the full-size Telluride SUV and a compact A-segment SUV in 2019.
Does Kia have enough capacity to deliver more light trucks to the U.S.?
The full-size Telluride SUV will be produced in our U.S. plant. The small SUV, we'll export from Korea to the U.S. market. We have enough capacity in the U.S. The maximum capacity is 360,000. Operation this year is around 250,000 units. After launching the new Telluride, it will reach around 290,000 or 300,000.
How much pressure does Kia face to localize in the U.S. because of trade tensions?
That is one of our concerns recently. We have a U.S. plant and a Mexico plant in North America. I'm still not clear on the definitions of the U.S.-Mexico-Canada Agreement in detail. Once the details are clear, I'm confident we will meet that kind of regulation.
How does the revision of the Korea- U.S. free-trade agreement affect Kia?
I don't think it will have that much effect. We have some restrictions on exports from Korea to the U.S. market for pickups. That's all. But a different matter is the 232 national security matter [Section 232 of the 1962 Trade Expansion Act, which allows for national security tariffs]. We hope there is nothing happening with that. Korea already has a free-trade agreement. But Japan and Europe still don't. The question is about the national security 232 act.
What are Kia's plans for eco-cars, given the lackluster demand for them?
We have to meet some carbon dioxide regulations, including California zero-emissions regulations, to sell our cars. All automakers have declared they will increase their eco-car lineups by around 2020 to 2022. We plan to introduce 16 eco-friendly models worldwide by 2025, including hybrids, plug-in hybrids and all-electric and fuel cell vehicles.
What is Kia's timeline for introducing autonomous driving systems?
Safety is always our primary concern when developing and deploying these technologies. We already have Drive Wise, Kia's subbrand for autonomous driving technology and future [advanced driver-assistance systems] technology. We will meet Level 4 in 2021. Now we are working toward Level 3 in our existing cars, including the K900. The K900 almost has Level 3.
How has Kia achieved its dramatic improvement in quality?
To enhance our image, we have been working hard over the past 10 years. You can see the results recently. We took first place in the J.D. Power Initial Quality Study for two consecutive years.
To what degree does that allow Kia to reposition the brand image upmarket?
We have much enhanced our brand image through design management. The Stinger sporty sedan is a symbol of our design image. We need some higher brand image. But we are slightly behind Hyundai. We will try to enhance our brand image through design and technology. But it takes some time.
Is Kia able to command higher prices now, or is it getting customers with better credit?
It depends. From 2017 to 2018, we had excess stock levels in the U.S. market. Because of that, we spent a lot on incentives.
This year, we optimized to a normal level of stock in the U.S. market. So, from next year, we will reduce incentive spending and get more profit from our model lineup.
Now, our stock level is around 2.5 months, a normal level. We did the hard work this year to reduce the stock in the U.S. market. We made a strong foundation for next year.
Also this year, we reduced the proportion of fleet sales in the U.S. market. That also will help to increase residual values in the future.
Kia is typically viewed as Hyundai's junior partner, but can Kia pass Hyundai in U.S. sales?
I hope. I will try. We have reached almost 90 percent of Hyundai's sales.
Kia was once seen as fast follower. Have you outgrown that to become a leader in areas?
We are focused on two parts. One is design, and one is quality. In terms of design, simple and straight lines are Kia's design philosophy. We made it so people can recognize a Kia car from a distance or in the dark. A good example is the tiger-nose grille.
That's one point of our competitiveness in the global market, design. The other is quality management. Last year, Kia placed first in the J.D. Power Initial Quality Study. That is clear evidence in quality.
We have worked as a fast follower. But it's time we can lead the industry in many aspects. Design and quality. The next goal for Kia? Autonomous driving. Connectivity. Mobility services. Those kind of things will be popular in the future. We will prepare advanced technologies for the future. We'll catch up, and we will lead some points of those trends.
What kind of risks do new competitors from China or Silicon Valley pose?
In the long term, maybe startups, or Google, Apple, could be our competitors. I'm not sure. But in the short term, maybe the Chinese will be our competitors in the global market, especially the emerging markets. It is too early [for the Chinese] to enter the U.S. and European markets. In the future, they will try to enter. But it depends on their quality levels.
