In a short span of time, Kia has established itself as one of the most successful automotive companies in the global landscape. Interestingly, Kia is a subsidiary of Hyundai and is one of the leading car manufacturers based in South Korea. With a market capitalization of USD 24.5 billion, Kia is scaling new heights and is posing tough competition to the likes of Toyota, Honda, Maruti Suzuki, and other giants in the global automotive market.
Speaking of production capacity, as per Kia’s corporate information, Kia has an annual production capacity of manufacturing 1.4 million units per annum. Kia has 14 manufacturing and assembly plants based in 8 countries. Moreover, the corporation has employed around 40000 employees in different departments at its manufacturing, assembly, and retail offices.
This article offers an engaging and insightful SWOT analysis delving into the strengths and weaknesses of the company. Further, the analysis assesses the opportunities for Kia in the external environment and also the threats that need to be mitigated.
You can also read about the PESTLE analysis of Kia to see how various parameters in the external environment can affect Kia. So, let’s get started with the SWOT analysis of Kia.
So, let us get started without further ado
Table of Contents
An insightful and engaging SWOT analysis of Kia
- Strong financial performance- As per the annual report, Kia’s sales in 2021 increased as compared to 2020. In 2020, the company generated sales worth 59,168 million KRW which increased to 69,682 million KRW in 2021 and as a result the profits of the company also increased by around 3 million KRW in 2021 to reach 12925 million KRW. The positive news or the shareholders is that the earnings per share will treble from 3710 million KRW in 2020 to 11874 million KRW in 2021. There was an increase in the total cash flows as well to the tune of 1 million KRW.
- Diversified product portfolio- Kia deals in a variety of vehicle types that include sedans, hatchbacks, compact SUVs, and electrical vehicles. The sedans include Optima, K5, Cadenza, etc., while in the hatchback category, Forte 5. Alongside Kia’s compact SUVs such as Seltos and Carnival are also popular and the company is slowly progressing in the EV segment through the launch of EV6.
- Worldwide presence- As per the company, Kia has a worldwide presence and operates in around 172 countries. Further, the company has a wide production network wherein it has 14 manufacturing plants in a total of 8 countries that make 1.4 million vehicles annually.
- Innovation- KIA has invented various features that make the customer experience more seamless. For example, the launch of the Kia Connect app lets users control their vehicle through their smartphone and the customers can derive all the data related to the car and their driving on the phone itself. The app also updates the customers about the fuel prices in the gas stations along with making them aware of the nearby parking spots and the charging points for the EVs. Another exciting feature is the valet parking mode wherein the owner can get the information of the user if somebody else is driving the vehicle and the owner can monitor the location, driving time, distance, and top speed of the car sitting at his home using the Kia Connect app.
- Consistent recalling of vehicles- Kia is involved in the continuous recalling of vehicles and recently it has ordered a recall of almost half a million cars due to the risk of fire rising out of the engines (Krisher, 2022). Furthermore, the company also recalled all of its Cadenza models manufactured between 2014 and 2016 due to the fault in the front windshield wherein the windshield was not properly fixed and it automatically got detached.
- Disputes with employees- Kia has been involved in various types of issues with the employees and recently the workers went on a strike over the issue of the payment of less wages and no guarantee of job security. Further, in one instance the employee was bullied and harassed and he sued the company for discriminating against him on the basis of sexual orientation (Equal Employment Opportunity Commission, 2017).
- More penetration into hatchback and EV segment- Currently, Kia’s share in the EV segment is not huge and the company occupies less than 5% of the electric vehicle market. The company should launch more models with unique designs and extraordinary performance to gain more market share and this would also enable the company to increase its profitability. Further, the company has very less presence in the hatchback category and apart from Forte5 and Rio, the company does not sell any other model so It should launch more hatchbacks as well to offer customers more variety to choose from.
- Enhanced safety features- Although Kia is a popular car brand, there are some safety issues linked to the crash test ratings. By improving the overall safety features of its vehicles and scoring better on crash test ratings by the Global New Car Assessment Program, Kia can win greater trust in the market. Further, this trust will lead to greater customer acquisition and retention.
- Strong rivalry- Kia has an intense rivalry with many companies including Nissan, Ford, Chevrolet, Toyota, etc. Nissan competes with Kia in all segments including sedan, hatchback, and compact SUV. Nissan Kicks is the major competitor for the Kia Sonet. Further, in 2021, Toyota had a 12.2% share in the auto sector as compared to just a 3.5% share held by Kia. Ford is also a major competitor, though it suffered a setback in India and had to close down its operations but still managed to sell 3.9 million vehicles worldwide.
- Changing political scenario- The majority of the vehicles sold by Kia involve the vehicles that run on gasoline and all over the world including the strong auto markets like the US, India, and China, etc., the governments are encouraging the production and sales of electric vehicles through various incentives and announcing phase-wise bans on gasoline vehicles. This can be a major threat to Kia and they can mitigate it by focusing more on selling electric vehicles.
- Trade wars- The trade wars between the countries also have a toll on Kia, the decision by the US government to raise the tariffs by 35% on the import of steel from China and 10% on the aluminum would lead to a rise in the cost of the final output (Al Jazeera, 2018).
- Supply chain disruptions- The manufacturing of vehicles is highly dependent on semiconductor chips and the company has temporarily suspended its production in one of the factories due to the unavailability of chips (Makichuk, 2021). Further, the company’s car sales dipped by 5.7% at the start of 2022 as a result of production issues.
To encapsulate, Kia has a vast presence worldwide and sells its vehicles in close to 170 nations. The company tries to be at the front in the market with continuous innovation and it has an advantage in terms of strong finances wherein the sales of the company are rising as well as the earnings per share are also witnessing a significant increase. The negative aspect for the company can be the weak relations with the employees and the frequent issues in the vehicles. However, the company stands an excellent opportunity to enhance its presence in the market by launching more EVs and hatchbacks. The company needs to find appropriate solutions for the ongoing shortage of chips globally as its production capacity can be significantly impacted because of the unavailability of chips. Also, you can read the PESTLE Analysis of Kia to determine how the macroenvironment factors influence the company or the automotive industry.
Al Jazeera. (2018). Hyundai, Kia costs increase with Trump’s tariffs. www.aljazeera.com. Retrieved 8 April 2022, from https://www.aljazeera.com/economy/2018/3/12/hyundai-kia-costs-increase-with-trumps-tariffs.
Economic Times. (2020). Kia Motors workers in South Korea to stage partial strike over wages, EV plans Read more at: https://economictimes.indiatimes.com/news/international/business/kia-motors-workers-in-south-korea-to-stage-partial-strike-over-wages-ev-plans/articleshow/79300147.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst.
economictimes.indiatimes.com. Retrieved 8 April 2022, from https://economictimes.indiatimes.com/news/international/business/kia-motors-workers-in-south-korea-to-stage-partial-strike-over-wages-ev-plans/articleshow/79300147.cms?from=mdr.
Krisher, T. (2022). Hyundai, Kia recall nearly 485,000 vehicles over fire risk; owners asked to park them outdoor. www.livemint.com. Retrieved 8 April 2022, from https://www.livemint.com/auto-news/hyundai-kia-recall-485-000-vehicles-over-fire-risk-owners-asked-to-park-them-outdoor-11644322382488.html.
MAKICHUK, D. (2021). Chip shortage slams Hyundai, Kia factory lines. asiatimes.com/. Retrieved 8 April 2022, from https://asiatimes.com/2021/05/chip-shortage-slams-hyundai-kia-factory-lines/.