For Kia Motors Corp., it’s going to take more than improved quality rankings and humorous ads during the NBA playoffs to reverse a stock slide or catch rivals in the U.S.
Kia’s U.S. sales rose 4.1 percent this year through May, trailing GM, Toyota and Subaru -- as well as the overall market. The shares tumbled 14 percent this year through June 29, while South Korea’s benchmark Kospi index gained 7.6 percent.
The company is getting scant help from its NBA sponsorship, a J.D. Power annual new-car quality survey that ranked Kia second only to Porsche or even lavish incentives such as a no-interest loan for as long as 66 months.
One of Kia’s biggest challenges is the lack of a pickup at a time when U.S. buyers, spurred on by low prices at the pump, are snapping them up at the fastest pace since 2007. Combined deliveries of Kia and affiliate Hyundai probably rose 0.6 percent in June, according to analysts surveyed by Bloomberg. Industrywide sales were at their highest in nine years for the month, based on the average estimate. The reports are due Wednesday.
“Kia doesn’t have a dominant position or identity in the market,” said Michelle Krebs, a senior analyst at AutoTrader.com. “Kia’s product portfolio is largely cars, and the market, of course, is going with their money on crossovers and sport utility vehicles. Until Kia diversifies their product line more, they are going to be in this spot.”
The brand’s position as the official automotive partner of the National Basketball Association gave it a lot of exposure, but failed to give buyers a sense of why they need to own a Kia, according to marketing experts. Ads featuring basketball superstar LeBron James tout the K900’s luxury characteristics, which still don’t resonate with buyers. James’s Cleveland Cavaliers team lost in the final round of the playoffs to the Golden State Warriors in a series that had the most viewers in 17 years. Kia also has spots featuring Blake Griffin of the Los Angeles Clippers.
“It’s a captivating message, but only for men and people who watch basketball,” said Christopher Chaney, senior vice president of Strategic Vision Consulting Inc. “People can tell you about what entertained them, but they often times can’t tell you about the product. I think they need to broaden the message.”
Kia did gain share in 2014, its 20th year in the U.S. market.
“This year, we are on pace for our best first half in company history,” Kia said in a statement after declining to make an executive available for an interview. “We began advertising our ‘Summer’s On Us’ sales event in May and promptly delivered our largest ever monthly sales total with the Sedona minivan and Forte family of compacts reaching new heights.’’
Given its lineup, Seoul-based Kia is doing pretty well, said Jim Sanfilippo, a marketing consultant who has worked with Kia, Hyundai and Ford Motor Co.
“They may not be growing quite as fast as the industry, however the industry is growing around trucks and shrinking around cars. They are not the only brand to suffer from this trend,” he said. “I really do think that when the smoke clears, Kia is going to have a respectable year.”
While its U.S. deliveries may be decent, global sales fell 2.8 percent in the first five months this year.
The stronger South Korean won relative to the yen has given an advantage to Japanese rivals, which can be used for marketing, discounts or added content. Toyota Motor Corp. shares have climbed 7.8 percent this year, while Nissan Motor Co.’s jumped 19 percent.
As sales and profit declined, both Kia and Hyundai are making efforts to cut costs, the companies said in June, without elaborating. The automakers also reduced production: Kia cut working hours at its China business this month while Hyundai cut output at its Asan plant in South Korea by 25 percent on May 28 and 29, the companies said.
“Kia probably feels the need to maximize exposure to increase brand identity as it only has a small market share in the U.S.,” said Lee Sang Hyun, a Seoul-based analyst at IBK Securities Co. “That’s why it can’t give up spending on big sports events.”
Despite the currency disadvantage to the yen, the brand is competitive and supporting its retailers, said Rick Case, owner of Kia dealerships in Sunrise, Florida, and Duluth, Georgia.
“The ads are working and Kia is doing what it needs to do,” he said. “Kia has a phenomenal future and great people leading the way. The company is in good shape here in the U.S.”
The positive report from J.D. Power should help boost consideration, said Krebs, the AutoTrader analyst, and it may indicate that buyers are having a good experience that will make them return customers.
The Sorento mid-size SUV and the boxy, little Soul, once known for its dancing hamster ads, each won their categories in the survey of quality in the first 90 days of ownership.
“Kia needs to get back to basics and let customers know that their cars are of good quality,” said Chaney, the marketing consultant. “And maybe they don’t need the flashy commercials to get the message across.”