EV ambitions spark reinvention at Kia

TOKYO — Kia's new global boss, Ho Sung Song, has embarked on a five-year plan to realign the South Korean automaker's world business around electric vehicles and new mobility, all while building a younger customer base and moving upmarket.

And if that makes its bigger sibling Hyundai a little uncomfortable? Well ... so be it.

"I'm just thinking about our strategy," Song told Automotive News last week in his first interview with a Western media outlet. "We want to be more dynamic, stylish and inventive."

It is a breakout moment for Kia, and there may be no one more attuned to the new action plan. Song, previously in charge of global operations and former head of Kia Europe, spent nearly two years developing it before being handed the reins as company president in April.

The new strategy is called Plan S, with S standing for "shift."

Song, 58, says he's laser-focused on making Kia stronger.

And to underscore the makeover, Kia will embark on a brand "relaunch" in January that dumps the company's long-in-the-tooth oval logo in favor of a completely restyled corporate emblem to herald a new Kia in a new era of industry upheaval.

"We need something to initiate or drive that business paradigm into the new world," Song said of the new logo. "These days, we are transitioning to a new industry paradigm."

As the junior partner of Hyundai Motor Group, Kia has seen its sales rapidly gain on Hyundai's, and it has won accolades for quality and design. Song's mission will be to build on that momentum.

The new direction, unveiled in January, targets a mass ramp-up of EVs through 2025 and a rapid expansion into what the company calls purpose-built vehicles, or PBVs. These are runabouts dedicated to new mobility enterprises such as ride-hailing, robotaxis and on-the-go e-commerce.

The markets for these next-generation businesses are still in their infancy. But Kia says it is making a "preemptive transition."

"We have to prepare ourselves with advanced countermeasures for all these," Song said.

The cost of all that preparation: $25 billion in new investments through 2025.

Song said the rush of EVs will help Kia reach a different, more upmarket target customer.

"We will try to set up our new customer target together with our brand relaunch," he said.

Under Plan S, Kia will build an EV lineup of 11 models by 2025, and it will have seven EV-only products by 2027. Kia plans to sell 500,000 battery-electric vehicles by 2026, and move another 500,000 hybrids, plug-in hybrids and other eco-friendly offerings in that time frame.

In doing so, Kia wants EVs to generate 20 percent of its worldwide sales by 2025 and a quarter in 2029. Kia's first dedicated EV will be delivered next year. It will be built on a new Electric-Global Modular Platform, or E-GMP, shared with Hyundai.

Song said Kia's EVs will achieve price parity with internal-combustion vehicles as early as 2025, if the total cost of ownership is taken into account. That means adjusting for higher fuel and maintenance costs in traditional gasoline-powered cars.

Kia sees brisk growth in PBVs, thanks to the expansion of new mobility businesses. Today, Song reckons, PBVs account for just 5 percent of global vehicle demand. But that is expected to swell to 25 percent in 2030. Key to Kia's strategy is branching into mobility hubs.

These centerpieces of tomorrow's PBV traffic are envisioned as urban transfer stations where commuters from the suburbs switch to electrified new mobility vehicles from their old-school, gasoline-burning ones. Long term, Kia plans to operate robotaxis and on-demand roboshuttles from these mobility hubs.

In the U.S., Hyundai and Kia are now neck and neck in the sales race. Kia's sales declined 7.2 percent to 428,350 vehicles in the first nine months, while Hyundai sales fell 12 percent to 443,425. A decade ago, Hyundai was outselling Kia by nearly 200,000 vehicles a year in the key market.

While Kia's move upmarket has long encroached on Hyundai's territory, Song says he's not building his company's plan around Hyundai's. The new midterm plans of both companies have very similar EV expansion targets. Hyundai wants to sell 560,000 EVs by 2025, for instance.

But Song said Kia will dive faster and deeper into EVs as a proportion of its overall business. Kia, for example, had a global EV market share of about 3.1 percent in 2019. But under Plan S, it targets a 6.6 percent share by 2025.

"We have to proactively put more concentration on the EV world, maybe more than Hyundai, earlier than Hyundai, in the balance of the weight of our business," he said.

And whereas Kia will dive into PBVs as a kind of commercial vehicle of the future, Hyundai is staking its new mobility claim in the areas of robotics, urban air mobility and autonomous driving.

Song still has some homework. Kia's brand image trails Hyundai's. In this month's Interbrand ranking of the best global brands, Hyundai landed at No. 36, while Kia finished at 86.

Kia's global operating profit also tanked 48 percent in the first half of 2020, as the COVID-19 pandemic hammered sales. And Kia warned this month it will take a hit of 1.2 trillion won ($1.11 billion) in the third quarter to cover warranty provisions related to a costly engine recall.

Operationally, Plan S targets a 6 percent operating profit margin in 2025. But that is a big jump. In the first half of this year, Kia's operating profit margin was only 2.3 percent.

In the U.S., Kia's biggest market, Song expects the brand's sales to slide about 6 percent this year to around 580,000 vehicles. But market share should rise to 4 percent as it outperforms rivals. Song is looking for more gains in 2021, saying U.S. market share should exceed 4 percent.

"That means we are ahead in the business compared with our competitors," Song said. "I think we have a very strong surge of momentum at the moment."

Song said it is too early to give details about the upcoming image overhaul. Internal communication of the strategy begins this fall, with information going public in January.

Kia has been using variants of its current logo, with the word Kia in capital letters encircled by an oval, since 1994, with minor tweaks in 2004 and 2012. Song declined to say what the new logo will look like, but recent filings with South Korea's patent office provide a hint.

The newly registered trademarks show a badge that adopts a stylized, almost runic, script in which the capital letters K-I-A are joined with a modern flare. Kia also teased a version of it on the Imagine electric concept car it showed at the 2019 Geneva auto show.

The point of it all, said Song: "We are shifting our business into the future."