Kia banks on Malaysia and Asia-Pacific as next stage of growth

PETALING JAYA: South Korea’s Kia Corp is set to intensify its focus on the Asia-Pacific (Apac) region, identifying Malaysia as a growth engine for expansion within the region.

The automaker turned sustainable mobility service provider acknowledges that the Apac region represents a promising frontier, following its success in penetrating advanced markets such as Europe, the United States and India.

Kia Apac president and chief executive officer Kiseok Ahn (pic) says there are markets in the Apac region that show high potential for growth, in view of their economic growth and population of over 900 million, excluding China and India.

To note, Kia saw global sales of 3,085,771 vehicles in 2023, a new annual global sales record, representing a 6.3% increase compared with the same period last year.

Excluding special purpose vehicles, Kia’s 2023 sales in markets outside of South Korea saw a 6.7% rise over the previous year, to 2,516,383 units.

Sales in South Korea totalled 563,660 units, a 4.6% increase from a year ago.

The brand also recorded its highest yearly sales in many of its major markets in 2023, including the United States, Europe and India.

Malaysia: The growth engine

With a total industry volume (TIV) of 800,000 units last year, Ahn says Malaysia stands as a crucial market alongside Indonesia and Thailand.

“Malaysia, without a doubt, holds the greatest potential for growth within the Apac region,” he tells StarBizWeek during an exclusive interview.

Kia’s operations in Malaysia are bolstered by its completely knock-down (CKD) production in Kulim since 2021, which currently focuses on the popular Carnival and Sorento models.

Looking ahead, Ahn says Kia is gearing up for expansion, with plans to introduce additional lineups by the end of the year and beyond.

“Localising operations in Malaysia allows us to ensure our pricing is effective in the market,” he notes.

Currently, the group procures over 40% of its components locally.

In Malaysia, Kia imports its completely built-up vehicles from South Korea, alongside its CKD production, garnering a modest market share of about 2% of its Apac volume, while Australia commands a lion’s share of over 45%.

Ahn identifies Indonesia, Malaysia and Thailand as the region’s three major markets, each with TIV surpassing 800,000 units in 2023.

Additionally, Vietnam, the Philippines and Taiwan are categorised as medium markets, with TIV ranging from 300,000 to 400,000 units each.

“Malaysia will be our home ground. So, we need to expand our business in Malaysia,” he says.

Ahn further emphasises Malaysia’s immense potential, underlining Kia’s longstanding presence in the country and the strategic significance of housing the Apac headquarters here.

“Even our Apac head office is in Malaysia, which is why Malaysia has a lot of potential for our business,” he adds.

In late 2021, Kia expanded into a joint venture (JV) company with Bermaz Auto Bhd (BAuto), wherein BAuto will manufacture and distribute Kia vehicles in Malaysia.

Both the parties formed a JV company named Kia Malaysia Sdn Bhd to oversee the assembly of Kia vehicles in Malaysia, where BAuto will hold a 33.33% stake in the venture, with its South Korean partner retaining the remainder.

Dinamikjaya Motors Sdn Bhd, a unit of BAuto, is the sole distributor of the Kia brand in Malaysia.

“The JV not only serves the CKD operation that facilitates local market and product competitiveness, but also plays a role as a supply to our neighbouring countries,” he says.

Interestingly, Ahn reveals that Kia is in the process of setting up five regional training centres globally, with one slated to open in Malaysia by August this year.

“This will be a training ground for all the 31 countries with Kia’s presence within Apac, manned by local technical expertise trained by our parent company.

“It’s an investment in business and technology transfer,” Ahn explains.

The Malaysia facility will predominantly train the rest of Apac, from sales to technical aspects, housed in Glenmarie, Shah Alam, the country’s automotive hub.

“This is an investment into the business and a transfer of technology and know-how,” he adds

Plan S: Transformation into a sustainable mobility service provider

The South Korean multinational automobile manufacturer Kia, founded in 1944, initially gained recognition for producing bikes and motorcycles.

However, it wasn’t until the launch of compact trucks and sedans in the 1970s that Kia made its bold entry into the automotive manufacturing business.

Since then, Kia has undergone several transformations, updating its logo six times, with the most recent change in 2021, following the group’s Plan Shift or Plan S initiative.

At the core of this rebranding is Kia’s strategic shift towards electric vehicles (EVs) and its venture into a new business area, the purpose-built vehicles (PBVs).

Ahn says previously, up until 2018, Kia primarily targeted the affordable segment of the market but has since repositioned itself towards the premium segment.

Meanwhile, he says the transition to EVs is imperative due to evolving environmental, social, and governance (ESG) requirements, which emphasise net-zero emissions and carbon neutrality.

“This rebranding isn’t just about changing our logo; it’s about transforming every aspect of our company operations. We’ve fundamentally altered the DNA of our company, transitioning from a mechanical manufacturer to a comprehensive sustainable mobility service provider,” he notes.

Undoubtedly, this transformation is costly, with millions spent mainly on EV development.

Moreover, Ahn says Kia aims to achieve 3.2 million vehicle sales globally this year, with the group anticipating this number to rise to four million by 2027.

As part of its evolution, the company plans to transition its vehicle lineup to encapsulate more EVs.

“Businesses cannot continue with diesel or ice vehicles because a lot of the ESG requirements, net-zero and carbon neutrality is pushing companies to change into greener vehicles,” he adds.

EV as a brand shaper

Commenting on the EV industry, Ahn says Kia’s expectations for the EV market align closely with respective governments’ targets, but the Apac market is seen as a slower market to adopt EVs.

“We utilise EVs in this area (Apac) as some kind of brand shaper, not for the mass sale of volume, because my personal opinion is not all markets are ready to accept EVs yet,” he says.

Globally, Kia aims to achieve EV sales of 1.6 million units by 2030.

However, Ahn expects the journey towards these milestones to be non-linear, with anticipated hiccups along the way.

Addressing key challenges, Ahn highlights three pivotal areas: driving range, charging convenience and total ownership cost of EVs.

To combat range anxiety, Ahn says Kia emphasises its commitment to providing EVs with driving ranges exceeding 500km, comparable to traditional internal combustion engine (ICE) vehicles.

Interestingly, he adds that Kia sees a trend where customers opt for shorter-range EVs due to affordability and perceived suitability for city use or deliveries, particularly in advanced markets like South Korea and Europe.

Regarding price parity, Ahn acknowledges that as EV production volumes increase, manufacturing costs are expected to decline, narrowing the price gap between EVs and ICE vehicles.

“At the initial stage, we produced a very small volume of EV, but now we are producing over 300,000 units. With a target of 1.6 million EV units by 2030, manufacturing cost will be dropping down,” he says.

Ahn categorises the EV market into four segments: 10% early adopters, 40% early majority, 40% late majority, and 10% late adopters.

Currently, he says the European market has an EV ratio of 14%, while South Korea and the United States trail at less than 10%. In contrast, China boasts over 40% EV adoption.

However, Ahn emphasises that achieving sales of over 10% EVs necessitates targeting the early majority, which poses challenges due to price points.

He stresses that price parity extends beyond the upfront cost of the vehicle to include running costs and total ownership expenses.

“If we can match the total cost of ownership (of an EV and ICE), including fuel price and registration tax, I think easily (a country) can move to (attracting) early majorities,” Ahn says, adding that charging infrastructure is crucial.

On charging convenience, Ahn acknowledges Malaysia’s push to increase charging stations to 10,000 in volume across the country by 2025, but points out that one downside is the idea of alternating current slow charger.

He says the focus should be on removing the “wait” burden of a person, by installing direct current chargers despite the fact that it costs more.

“With direct current chargers, Kia’s EV lineup can achieve a remarkable 10% to 80% charge in just 20 minutes, with the EV6 model reaching this threshold in a mere 18 minutes,” he says.

As countries strive to match the total cost of ownership between EVs and ICE vehicles, coupled with the expansion of charging infrastructure, Ahn remains optimistic about the prospects of EVs in Apac and beyond.

Launch of EV9, Kia’s electric SUV

Looking ahead, Ahn says the group is excited about the public launch of its EV9, an electric sport utility vehicle (SUV) which has seen promising response in other markets, in Malaysia.

Despite Malaysia’s nascent EV market, Ahn remains optimistic about the groups’ EV9 and other EVs growth trajectory.

“Although the market for EV in Malaysia is small, growth will happen. We have used this opportunity to brand ourselves differently. Create EVs as brand shapers. We positioned ourselves in such a way that we appeal to higher end products with high quality, catering to our target audience,” he notes.

Since its debut, the EV9 has captivated markets worldwide, with its blend of cutting-edge technology, impressive range and spacious interior garnering widespread acclaim

The EV9 has also garnered accolades such as the 2024 World Car of the Year and World Electric Vehicle awards.

When asked about the chance of making EVs in Malaysia through CKD production, Ahn kept the door open without dismissing the idea, but says it all boils down to the demand.

“We have a lot of EV resources and many of the cars can indeed be manufactured in Malaysia, but it ultimately comes down to market demand. When making investments, we must carefully consider return on investment, especially considering the slow uptake of EVs in the market,” he says.

KIA currently offers seven EV models globally, with three already launched in Malaysia. The EV9 is set for a public debut on June 11th at TRX in Kuala Lumpur.

Looking ahead, KIA aims for a robust lineup of 15 EVs by 2027.

In 2024, Kia is targeting global sales of 3.2 million units.

By region, the brand expects to sell 530,000 units in South Korea and 2,663,000 vehicles overseas.

Kia also expects to sell 7,000 special purpose vehicles. — KIRENNESH NAIR