by Kia is ready to sacrifice profits to fight Chinese competitors
Kia has found itself in a situation with no room to retreat. Faced with pressure from Chinese automakers in Europe, the Korean brand is forced to lower prices. This decision has already led to an increase in global revenues due to higher sales volumes. Kia’s management believes that when state support for Chinese cars begins to wane, the company will have an advantage in a battle that will largely determine the future of the entire automotive industry.
Price war and rapid growth of BYD
The Korean manufacturer plans to reduce the price gap with Chinese models in Europe to 15-20%, whereas previously it was 20-25%. This needs to be done urgently, as registrations of new BYD cars in Europe surged nearly 150% in March, significantly outpacing the 6% growth shown by Kia.
Survival strategy and use of financial reserves
Despite the existential threat from brands such as BYD, Chery, Great Wall, Geely, and Leapmotor, Kia CEO Song Ho-sung says the company can use its profits to provide additional incentives to lure customers away from Chinese competitors, reports Reuters.
These efforts have led to a quarterly decline in the company’s profit, but Kia shows no concern, noting that it should “continue to adhere to the growth strategy, using our financial reserves.”
Chinese offensive and changing market conditions
“Chinese companies have launched an aggressive offensive with cheap electric vehicles, and in some European countries their market share is growing much faster than we expected,” Kia admitted during the latest earnings conference.
Last October, the Chinese government hinted at a possible cancellation of subsidies for electric vehicles due to the problem of oversupply in the country, which could hit these brands hard.
“Because they will no longer be able to receive support from the Chinese government, Chinese automakers will not have enough resources to continue their advance,” Song added.
Sales decline in China and new challenges
Although sales in Europe are growing, overall new car sales in China have fallen. In particular, sales of new energy vehicles decreased by 15.2% in March compared to last year, demonstrating some of the difficulties facing the market.
The situation in the European market is escalating: Kia is betting that it can weather the aggressive price expansion of Chinese manufacturers thanks to its financial reserves. However, the success of this strategy will depend on how quickly Chinese brands can adapt to the possible termination of state subsidies and whether they can maintain their positions without artificial financial support. At the same time, the decline in electric vehicle sales in China itself indicates that even in the domestic market, Chinese companies are facing serious challenges, which could weaken their push in the European direction.
