Adding Insult to Injury
Kia Motors, which is at odds with local dealers due to sluggish sales in the Chinese market, is facing another unfavorable factor. As the Chinese government has decided to allow foreign car dealers to sell vehicles from multiple brands, Kia Motors’ dealers in China may withdraw their businesses.
According to industry sources on April 24, China's Ministry of Commerce will enable dealers to sell cars from multiple brands starting from July in order to promote the fair market competition and strengthen protection for dealers and consumers. Also, automakers are prohibited from assigning sales for dealers and forcing them to meet the sales target. Car makers, which conduct business in China, have had signed a deal with Chinese dealers to sell its own brands. However, the latest decision will allow dealers to sell brands that sell well and profitable.
Accordingly, some industry watchers say that Kia Motors, which is struggling with China’s retaliation against South Korea over the planned deployment of a U.S. Terminal High Altitude Area Defense (THAAD) system, will face greater difficulties in the Chinese market in the future. Early this year, about 100 Chinese dealers of Kia Motors said that they were burdened with inventory due to poor sales and asked for compensation worth 400 billion won (US$352.86 million). So, Kia Motors held a dealer competition to appease dealers but they are still in dispute. In addition, the market situation is becoming worse as Kia Motors saw its sales sharply decline last month. When the business continues to stagnate, a number of its dealers can withdraw their businesses.
An official from the industry said, “With the change of China’s dealer policy, local dealers can change their selling brands anytime. Automakers, who are already suffering from the intense competition, will now need to take care of dealers, facing more difficulties.”