Kia Sees China Gain From Small Engines Eligible for Tax Cut

  • About 70 percent of Kias sold in China are small vehicles
  • China cut small-car purchase tax by half from Oct. 1

Kia Motors Corp. predicted it will gain by adding smaller engines to its models in China, after the government in the world’s largest auto market cut purchase taxes by half for vehicles with smaller powertrains.

The Seoul-based carmaker will begin offering a 1.6-liter turbo engine for its K5 sedan and Sportage sport utility vehicle and plans a new K2 hatchback next year that should benefit from China’s purchase-tax reduction, Chief Financial Officer Han Chun Soo said Friday. Almost 70 percent of Kia’s China sales are small vehicles, he said.

The new engines will be crucial for Kia’s efforts to revitalize sales in China, as declining demand in the market contributed to profit falling 16 percent in the third quarter. Deliveries have slowed for the broader auto industry as economic growth moderated and a stock-market rout deterred buyers.

“We expect our plant operation ratio and market share to recover after benefiting from a tax break on our smaller vehicles,” Han said on a conference call to discuss the carmaker’s earnings. Profitability in China will improve next year thanks to a new Sportage sport utility vehicle in early 2016 and the K2 in the second half, he said.

Kia shares rose as much as 1.8 percent and traded 0.4 percent higher at 54,700 won as of 12:09 p.m. The benchmark Kospi index rose 1.2 percent.

Hyundai Motor Co., which owns 34 percent in Kia, said Thursday that profit fell for a seventh consecutive quarter, as a slump in China deliveries overshadowed gains from SUV sales in the U.S., Europe and South Korea.

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