For over a decade now, Kia has slowly but surely been moving toward doing the impossible â€”transitioning the brand image from “subprime, budget, shady, and non-desirable” to “a slightly Buick-ized version of Hyundai.” In order to do this, Kia dealers have always relied on the one factor in their favor, which is the ability to sell on price. While the MSRPs on Kias aren’t too far off the competition, the stores have historically dumped new inventory at prices well below the sticker. Looking at an Altima? Why not try this Optima at $3,000 off instead?
Of course, when you operate this way, it makes it difficult for salespeople and managers to make any money, since there’s little to no profit in the deal. For over a decade, Kia has offered sales staff what’s known in the business as a “spin” every time they sell a new car â€” they can call into a number or log on to a website and enter a VIN-specific code for a “spin” and a chance to win a bonus that ranges from $25-500 per car. If you sell Kias for a living, this is likely how you’ve been paying your bills for as long as you can remember.
According to sources within Kia dealerships, a little over a month ago, without warning, Kia stopped its OEM incentive program for management. Then, for October, again without warning, Kia stopped the spin program for sales people, also with no explanation. Rumor has it this decision comes from the new VP of Sales for Kia MotorsÂ America, Bill Peffer, who came to Kia from a dealership group in the Pacific Northwest. Dealers tell me that they’ve repeatedly e-mailed their corporate contacts for explanation, but none is expected.
Other than a sharp increase in the mortgage foreclosure rate for Kia dealer employees, what does this mean for Kia in the States?
Likely, it means that Kia intends to encourage dealers to start selling Kias at actual MSRP, or as close to it as possible. With a lineup of recently revamped cars, including the Rio, Sorento, and others, Kia is looking to compete head-to-head on actual merit, quality, and features. One Kia dealer told me their cars “are as good as anybody’s” and that they no longer have to be the cheapest.
This is, of course, a terrible strategy.
The only Kia showingÂ anyÂ year-over-year sales growth so far in 2017 is the Forte, and it’s marginal. You might say, “Bark, the entire industry is down.” True, but Kia is outpacing the overall industry decline, thanks to a whopping 50-percent decline in Rio sales and double-digit losses in both the Sportage and Sorento, Kia’s contenders in the highly-competitive volume CUV segments.
And, of course, Kia dealers are still gonna Kia.Â The advertisement at the top at this page is running as we speak, even after the removal of the “spins.” They’re still gonna hit customers with every trick in the book â€” foursquares, throwing people in the box, losing the keys to the trade â€” and they’re still going to generally advertise like they’re an automotive flea market.
Yet another issue is the fact that Kia doesn’t have a particularly strong captive finance company, so dealers often are working with credit unions and subprime financers, who base their LTV (loan to value) on actual transaction prices. It’s going to be difficult for Kia dealers to get 520 credit scores bought with zero down at sticker price, as most banks are only willing to go 110 percent of value at most for subprime customers, and every bank knows that Kias aren’t actually worth the MSRP on the market.
So what does this all mean for you as a customer? It’s all bad.
Not only are you going to continue to get hammered with every devious trick by the sales and finance departments, they’re also going to try to hold margin on the front end. And the removal of the spin means higher salesforce turnover, which means a less knowledgeable salesperson trying to tell you about the crumple zones on the Sorento.
One Kia dealer told me that he’s personally excited about the change because his dealership offers competitive pay. “Lots of Kia stores have terrible pay plans, but they make up for it with the spins. Now that the spins are gone, those guys are gonna be looking for work. I’m going to steal a bunch of them.”
But make no mistake â€” Kia dealers are pissed, and they’re deeply concerned about how it’s going to impact their stores.
[Image: Kia Motors]