Even as Ford, GM exited India, newbie Kia India turns profitable within two years of sales

South Korean carmaker Kia’s Indian business has turned profitable in its third year of operations – a feat not even achieved by most incumbents with a higher market share – proving that carmakers can make profits in India if they get their strategy right.

Kia India registered profit after tax of Rs 1,111 crore for the year ended March 2021 against a loss of Rs 329 crore in FY20, according to the company filing with the corporate affairs ministry (MCA) shared with ET by business information platform Tofler.

Despite it being a Covid-hit year, Kia’s total turnover grew 87% to Rs 20,290 crore last fiscal year. This is equivalent to 10% of the total estimated passenger car industry revenue last year. The firm’s volume sales grew 90% year on year to 196,000 units in FY21.

The maker of Seltos and Sonet SUVs has recouped nearly half of the total loss it incurred in the four year of capital investment in India.

Kia’s success comes at a time when global automotive giants like Ford and GM have exited the Indian market.

An email sent to Kia Motors India did not elicit any response as of press time Tuesday.

Led by optimum plant utilisation and higher realisation from its SUVs, Kia has been able to grow its revenues by over 80% and operating profits by over 400% in FY21 despite the Covid-19 pandemic and resultant lockdowns.

This has enabled it to close differences with legacy incumbents.

Kia’s India revenue in FY21 is equivalent to 30% of market leader Maruti Suzuki and half of number two Hyundai India. Its net profit is equivalent to 26% of that of Maruti Suzuki, and the number of vehicles it sold was around 13% of the market leader’s sales volume.

With a sustained demand for its models, the company is sitting on a healthy orderbook of over 50,000 units, with waiting period running into three months.

India operations accounted for 5.8% of Kia’s global revenue in 2020, compared with 3.8% a year earlier, according to a presentation by parent Kia Motors.

A tight cost control despite cost inflation and positive operating leverage impact helped Kia to post operating profit per vehicle of Rs 91,390, the highest among the mass market car makers in India, and nearly Rs 9,000 less than leading luxury carmaker Mercedes India.

Kia Motors India operations enjoyed the highest return on equity (RoE) ratio of 22.79% in FY21 among Indian carmakers – a figure that may make some global carmakers rethink their India strategy and reconsider the notion that India is a value conscious market where return expectations should be kept low.

Kia’s average realisation per vehicle is Rs 10.43 lakh, which is 2.26 and 1.46 times of Maruti Suzuki and Hyundai Motor, respectively.

Its cumulative sales have crossed 300,000 units in two years and just ahead of the festive season, the company has said it will be able to sell the next 100,000 units in the rest of FY22.

Kia’s current plant in Anantapur, Andhra Pradesh, has been readied to deliver an annual volume of 300,000 with a new MPV codenamed KY on the anvil. The company is likely to add a third shift soon to speed up production.

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