South Korea’s Kia Corp has reduced price gaps with Chinese rivals in Europe this year, its CEO said, signalling a price war as Chinese carmakers ramp up their push into a key overseas market amid slowing growth at home.
The strategy helped Kia, which together with Hyundai Motor is ranked third in global vehicle sales, increase its global revenue and buck a broader market decline, Kia CEO Song Ho-sung said at the company’s Investor Day event held earlier this month.
Starting this year, Kia has narrowed its vehicle price gap with Chinese models in Europe to 15-20 per cent from 20-25 per cent previously depending on markets, Song said, according to a recording of the event obtained by Reuters.
The move highlights how Europe has become a key battleground between legacy automakers and Chinese electric vehicle firms such as BYD, as they pursue rapid overseas expansion amid flagging sales in China and effective exclusion from the U.S. market.
BYD car registrations in Europe grew nearly 150 per cent in March, far exceeding an 11 per cent rise in overall sales and the 6 per cent growth reported by Kia and Hyundai.
The European surge in Chinese car sales has forced rivals to offer discounts and introduce more affordable models.
Song said Kia would be able to leverage its solid profits to compete with Chinese rivals.
The automaker, however, reported on Friday a quarterly profit decline, partly due to its sales incentives in Europe to respond to growing China competition.
“Chinese companies launched an aggressive push with low-priced EV models, and in some European countries their market share has been rising much faster than we had anticipated,” Kia said during an earnings conference call.
Kia did not immediately reply to a request for comment on Song’s remarks.
Song anticipates the restructuring in China’s auto industry would arrive earlier than expected, as Beijing’s strategic focus shifts from autos to other industries such as artificial intelligence and robotics.
In October, Beijing signalled that it is willing to pull the plug on subsidies for its EV industry after years of government support fuelled a boom that has left the world’s largest car market grappling with severe oversupply, a key driver of Chinese automakers’ overseas push.
“Since they would no longer be able to receive support from the Chinese government, Chinese automakers lack the firepower needed to push forward further,” Song told investors.
“It appears the time for restructuring may be approaching. Until then, we should continue pursuing a growth strategy, leveraging our … war chest.”
Hyundai Motor CEO Jose Munoz struck a similar tone about Chinese rivals last week, stressing its ability to grow profitably.
“We are not able to grow at the same pace as they’ve been growing all together, but we’ve been able to grow to be very profitable.”
“We do it all by ourselves. So we only get our own support,” he said.
China’s car sales fell by 18 per cent in the first quarter from a year earlier and are expected to remain flat or down for the foreseeable future.
