Paul Barker grabs a cuppa and a chat with one of fleet’s most influential figures – Coffee with…Kia’s head of fleet and remarketing, John Hargreaves
Kia is setting sales record after sales record by focusing on true fleet end-user business, with 2019 again likely to beat a record set last year, despite the overall market declining. John Hargreaves talks through the brand’s success.
QThis time last year you were talking about the fact that you were heading for another record year of 95,000 cars overall. How did that pan out?
That was well and truly achieved. This year we set a target for a very modest growth to around 96-and-a-bit thousand cars. Very modest growth because we knew market conditions were possibly changing, but we’re very much on target to do that. In fleet we are 3% up in volume terms year-on-year, and the market is 4% down.
NOT FINE WITH EU EMISSIONS ISSUES
The new EU rules coming from the beginning of 2020 will lead to fines for manufacturers not hitting CO2 emissions targets across Europe.
Kia’s fleet boss John Hargreaves predicts that it could make a difference in terms of how brands approach availability of larger vehicles, depending on how close to their average emission target they are. Vehicles that emit less than 50g/km count double towards quotas in 2020, making them even more important to manufacturers, but disproportionate volumes of less efficient models could be an issue for some brands.
“When we are clear as to how many of the low-emission cars we will be getting, we will then plan our overall volumes accordingly,” Hargreaves tells Company Car Today. “It is possible that there will be a variance between what you might expect next year compared with what we end up planning for, depending on what we get of the lower-emission cars.
“Normally, it’s been the same variables in what you plan to sell – you want a certain volume, you want a profit margin per unit, you want to keep a very close eye on your residual values and you want your dealer network to be happy,” he continues.
“You’ve now got this variable in that you want all that stuff to be right, and then you need to keep your eye on how you are doing against average CO2 emissions.
“It may be profitable, the dealer may love it, it may have a good residual value but if it’s going to involve you in an overarching fine then it’s something else you will have to consider,” concludes Hargreaves.
“The margins are not at the extent where you can just dismiss those levels of fines, it’s a huge amount of money.”
QWhat in particular is driving that success?
New Ceed is doing really well, Sportage continues to do extremely well, Picanto has done very well for us. Everything is doing fine; being a little bit up in a market that’s down is good, we’ve got a 4.3% fleet share. If you go back a bit, it used to be we were more of a retail manufacturer than a fleet manufacturer, but we are now 55% fleet and 45% retail, and the market is currently exactly the same. We’ll definitely do more cars overall this year than last year, I’d think we’ll do late 90,000s, so market share will go up. I would think we are looking at fleet and retail combined between 4.3% and 4.5%, which would be the best market share we’ve ever had in the UK.
If I think back to when I started, we had about a 1.6% market share in fleet. It’s all down to the fact that the products have become mainstream things that people choose, and that when you do a whole-life cost analysis on them they look very solid compared with whatever else is out there. It’s all about the product. And the dealer network behind it as well, but you wouldn’t get that if you didn’t have the product, so that is key. You get the product that the fleet customers will buy, it makes the dealers think they need to get into fleet because now there is proper volume potential ther
QYou’ve had supply issues across some of your electrified products. How is that looking?
The hybrid stuff, and Niro in particular, has suffered a little bit of a supply shortage. It’s doing well in all of the markets and you can only get what you’re entitled to in terms of share of the overall production. It is getting better now, and we’ve just launched a new model Niro so it seems to be easing a bit, but the Niro self-charging hybrid is still a little bit restricted. It’s anything with a battery in, and I’ll be telling you no different to anyone else; it’s quite hard to get the supply. Niro EV is fairly well documented. We launched the car, it got
What Car? Car of the Year, which was fantastic for us, but by the time you take out dealer demos, we didn’t have a huge amount of cars available. Within a few weeks we’d completely sold out of this year’s allocation and, although it could change because we’re always trying to get more of them, if you ordered now you would be looking well into next year before you got it. But we’re working really hard to get more of the production allocated to our market because it’s important in meeting the CO2
challenges for next year.
QHave you had any increased volume already?
We’ve had some extra but only small numbers and it hasn’t really changed that much. We’ve allocated the cars out, essentially to make sure that end-user drivers actually get the car. It’s still in short supply but we are working really hard to get more of them.
HARGEAVES selects his stand-out cars
Alfa Romeo Spider
It’s just style and elegance. Above practicality!
I was going to have one as my company car but it came on to our list the day after I had to order my car. So the next time we speak I will have one! It’s stylish but with practicality combined.
This is completely the way the market is moving. It’s a usable electric car.
QWhat do you think the changing BIK is going to do to electric car demand next year?
Certainly, if you are a standard company car driver and you’re entitled to have an electric vehicle, it’s a huge tax saving. What I do wonder is that the company will get an NIC saving out of them as well, which is good, and when you look at the overall leasing cost if you compare, say, a Sportage petrol versus Niro electric, there is a huge saving for the employee on BIK, significant saving for company on NIC, possibly significant saving with write-down allowance depending on their profit situation. But when you then take a look at the difference in rentals, a lot of those savings to the company would be instantly wiped out by the extra cost of acquisition incurred.
For the employee, they are obviously going to take the electric car, but the accountant in the company may sit down and say what is the justification of doing this? It helps my employees, lovely, helps my NIC a bit, write-down allowance is good but you get that back over time anyway, it’s just accelerated, and the fact is that I’m paying circa £380 a month versus £200 and a bit. It’s list price, after grant applied, that is the issue. The rule of thumb will be a car of a certain size with a conventional powertrain will be £20,000, but when it’s a fully electric car it’s £30,000, and that’s a big rental difference.
There are some other savings, maintenance is good, for example. It’s going to grow, when people are given the choice and the company is funding it, they will often choose an EV. But I think the company itself has still got to look at the overall cost of giving everyone an electric vehicle, and at the moment it would still be higher.
But we are as well placed as anyone, and we’ve also got the new electric Soul coming, which won’t be available for delivery until very early next year, but we should be starting to take orders on that fairly shortly.
QHow has Ceed gone since the launch of the new model last year?
It’s gone down really well. Ceed is an interesting car now. You have Ceed five-door, Ceed SW and Proceed – the new one that used to be a three-door that is now a shooting brake. It’s a really stylish car. And on top of all that we have got Xceed coming in September.
Five-door and Ceed SW have been really strong; we have got tremendous RV uplift against the current model, which is reflected in good holding costs. Proceed has started steadily. It’s a striking-looking car, but certainly in fleet, it’s whether it particularly fits into a niche. SW is very much a workhorse vehicle whereas Proceed is more of a style thing, so it’s not got an obvious fleet niche but it’s doing absolutely fine for us.
QSo how does the Ceed family split volume-wise in fleet, now it’s an extended four-car line-up?
Five-door and wagon combined will make up the majority of the sales, with Xceed also contributing significant volume. Proceed is very much seen as a user-chooser alternative; it will be relatively small in terms of volume.
You’ve seen a fairly steep fall, it’s had a plateau and for a lot of company car drivers with certain mileage parameters, the diesel would still look a very strong proposition. If you did a pure costing on most economical form of transport for service engineers for example, I would expect that to continue.