Autos

David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

(Updated )

The factory where the world's highest-quality cars are made isn't full of white-gloved Japanese workers and doesn't have a billionaire watching each vehicle come off the production line.

In fact, it was Kia Motors that came top in this year's J.D. Power initial quality study, an annual U.S. ranking that tallies the number of problems reported in the first 90 days after purchase.

That suggests there's more to the Korean automaker than quirky sedans and, um, hip-hop hamsters:

It's the first time in 10 years that J.D. Power's top spot hasn't been taken by either Porsche or Lexus -- an embarrassing state of affairs for premium brands that charge a lot more than the $14,000-odd Americans pay for the cheapest Kia models.

Overtaking
Kia has seen the most rapid quality improvement of any major carmaker in recent years
Source: J.D. Power
Note: Shows problems reported within first 90 days of ownership.

Making great cars is all very well, but Kia's investors are entitled to ask what they get in return. Korean carmarkers' share of global auto sales has stood still for years and volumes in the U.S. are going sideways, in part due to the absence of a blockbusting SUV design to match the most successful domestic and Japanese marques.

Not Changing Lanes
Kia has failed to repeat the explosive sales growth it enjoyed in the years up to 2012
Source: Bloomberg

Coming up with a winning new model is hard work, akin to divining next summer's cinema hit or number one record. But there are more certain things Kia can do in the meantime. As Gadfly argued in April, further improving its warranty terms, already the best among major automakers, would help underline the lead that's been staked out in quality.

Even before Vice Chairman and CEO Hyoung-Keun Lee runs the numbers on that, he needs to start sending more checks to Madison Avenue. Kia spent just 2.5 percent of its 2015 revenue on advertising, and its chaebol stablemate Hyundai paid out 2.3 percent, according to a Gadfly analysis of the companies' annual reports -- below all three of Detroit's major carmakers.

Spend Money to Make Money
Advertising as percentage of automotive sales
Source: Company reports, Bloomberg calculations

The chaebol is moving in the right direction, poaching sponsorship rights to the National Football League from General Motors last year and blitzing the 2016 Super Bowl with no fewer than five separate commercials. Kia's marketing budget could still do with a few more hamsters on the wheel: Raising its advertising-to-sales ratio to the level of Fiat Chrysler, the median of Detroit's big three, would result in a 29 percent increase in spending.

Lee and his predecessors have gone to great lengths to turn Kia into an automaker that's not just reliable, but sexy -- hiring Audi's former chief designer Peter Schreyer from Volkswagen in 2006 and giving him the sort of in-house guru role Jony Ive enjoys at Apple. 

Halo Effect
Interbrand's 2015 valuation of major automobile brands puts Kia well behind the major players
Source: Interbrand

That's yet to produce the sort of tangible benefits you'd hope for -- consultants Interbrand reckon the Kia brand is worth just $5.7 billion, not much more than subsidiary marques such as Mini, Land Rover and Chevrolet, and well below the big league.

Today, Lee can give himself a pat on the back for beating the likes of Porsche and Lexus at their own game. Tomorrow, he needs to get back to work and remember: The core business of an automaker isn't making great cars -- it's selling them.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Corrects erroneous reference to Kia in eighth paragraph.)

To contact the author of this story:
David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net