Kia boss Thomas Oh: Volkswagen issues will affect credibility of entire car industry

Thomas Oh, the charismatic executive vice president and COO of Kia Motors, said the issues Volkswagen (VW) faces will affect the trust and credibility of the entire automotive industry. Mr Oh is a car industry veteran who has overseen a period of prodigious growth at Kia since he moved over from Hyundai, which he describes as "an old flame".

IBTimes UK asked Thomas Oh for his thoughts on the unfolding VW scandal, during an interview at Hyundai/Kia headquarters in Seoul, South Korea.

Oh said: "Scandal? Issue − we call it an issue, since we are also in the automotive industry.

"By and large, I think it will affect the total auto mobile industry in terms of credibility, trust-wise between makers and the consumers you know.

"It's a bad thing for everybody involved in the car business.

"I don't know about other brands but, from our side, I'd like to confirm that we have never fitted our products with any kind of software intended to manipulate test results.

"Our policy − we have kept our test regulation and we are keeping our test regulation the same in the future, without any compromising of our driving performance. That's our bottom line."

Kia's is a story of phenomenal growth. Back in 2002 the carmaker's global sales, including its domestic market, stood at less than one million. In 2013 Kia reached the three million mark. And this year Kia was awarded second place in the JD Power Initial Quality survey, behind Porsche at number one. In other words Kia is giving all the biggest car brands a run for their money. So could VW's woes be an opportunity for rising stars in the industry?

Oh answered with genuine respectfulness. "I don't know. I don't have a crystal ball. We will see; we will keep our eyes on it."

In the US, Kia and VW are divided by less than 2%. VW sells around 600,000 in the US, including Audi, all priced at more than $30,000 (£19,400, €26,500). Kia cars, by contrast, cost about $10,000 (£6,466, €8,834) less.

Oh pointed out that this constitutes different demographics and in this sense it is difficult to compare the brands, but he said customers are starting to look at both makers. But he reiterated that VW's clean diesel issues may affect the industry generally, adding that tougher regulations will be used to get back customer confidence.

"That is just my observation. But I don't know with VW what will happen next year − very costly, definitely," he said.

Electric avenues

VW last week announced plans to increase focus on plug-in hybrids and electric vehicles, such as the next-generation Volkswagen Phaeton, as a way to put the clean diesel debacle behind it.

Mr Oh has been outspoken about the shift to electric vehicles. He stated that Nissan was over-confident back in December 2013 when it decided to focus heavily on the battery electric Nissan Leaf, and would have been better served by taking a more diverse approach creating low and zero emissions vehicles.

"I think we have taken a very smart strategy in terms of launching eco-friendly vehicles," said Oh, pointing out such vagaries as the bottoming out of crude oil prices this year.

"Customers will walk away from eco-friendly cars a little bit when they have got very cheap oil pricing."

However, fluctuation in oil prices do not dictate a product plan and Kia made a resolution to develop and provide eco-friendly vehicles, beginning with a hybrid vehicle based on Optima, followed last year with the launch of the Soul electric vehicle.

"This was a turning point for us in terms of eco-friendly vehicle production," said Oh. "This year we are launching a hybrid model, and the next Soul electric vehicle version."

He added that by 2020 Kia expects to launch a so-called normal fuel cell electric vehicle – a car that uses a fuel cell to power its on-board electric motor, generally using oxygen and compressed hydrogen.

China

The slowdown of the Chinese economy is a particular concern for all the Tiger economies; China is Hyundai/Kia's biggest foreign market.

Headlines have also been blaring developments around the Trans Pacific Partnership, in which South Korea has been described as lynchpin economy.

Geo-politicians believe the US administration see the TTP as a necessary counterweight to the rise of China, so it's interesting to know the strategy of a big company like Kia regarding China at this time.

Oh said the China slowdown has affected not only Kia sales also all imported brands. He said another effect has been that local makers in China have become stronger than before with new products. He said Kia is responding with a push into China to counteract this tougher climate.

"This year we are launching a very China-dedicated model and we are also investing a lot in terms of marketing.

"Also we are realigning shops and dealer network to make them stronger than before. Usually we have developed our pillars along the cost in China. Now we are expanding our dealer network.

"We do not walk away."

Russia

Another of Kia's biggest marketplaces is Russia; fourth after the US, China and its domestic sales. Kia has a large plant in Slovakia that produces 350,000 cars a year and serves all of western Europe, and which is particularly convenient for exports to Russia.

IBTimes UK asked how Kia fielded the sanctions on Russia and Putin's response on imports to the country. Oh said Kia had experienced a dent in sales in the region in the wake of the political issues, combined with the Rouble crisis and also from the effect of crude oil pricing on the Russian economy.

However, there were positives, too. Apparently, while the Russian car industry dropped 35% this year, Kia only dropped only 15% to take number one in terms of market share.

"While that happened other competitors dropped more like 35%-40% and actually they are retreating from the Russian market, while we are keeping our market share more than normal, so I think we are doing our best over there."

Mexico and India

Oh said that during his time as an executive at Kia he had two goals in terms of territorial expansion – one was Mexico and the other India.

The first has been achieved: Kia begins local production in Mexico and will be meeting quotas next year. It is a market with over one million in car demand, but obstacles had lay in the path in the form of currency issues and import duties of more than 25%.

"That means I have one resolution resolved," said Oh. "The second is India. So we are looking at the feasibility and possibilities in the future definitely. We have big potential definitely − India is the future once we complete our Mexican quota."

UK

Kia's fifth market and one Oh is very proud of is the UK. He stated that out of the 180 countries Kia is represented in, the UK is "one of our most proud local entities − not only in terms of quantity but also quality-wise".

By September this year Kia recorded UK sales of over 50,000, which is around 3.1% market share. It aims to hit 80,000 by year end.

"This is a great performance in my book," said Oh.

He put the success of Kia in recent years down to a three-pillar approach. Firstly, producing a nice product; the customer must fall in love with the car at a glance. To this end, Kia hired the former Audi design wunderkind, Peter Schreyer in 2006.

Also essential to the product is quality control. Oh said the quality control team have the last say on what can and cannot go into mass production: "They don't move one inch. There is no compromise in quality control across the whole organisation. They get the top priority," said Oh.

The second pillar is an aggressive marketing strategy. In 2002 Kia began sponsorship of tennis and the Australian Open. Today it has added football as its major focus, with deals to sponsor the Fifa World Cup, as well as UEFA, and most recently the Copa América, to complement its moves into Mexico and Latin America.

But he said you can have the best product with all sorts of marketing, it adds up to nothing without the third part, which is a strong dealer network.

"In the firing line are the dealers. If the dealers are not strong enough to sell, you are back to square one. So we have also developed a very strong dealer network.

"There is no short cut to achieving this success. This is our approach and we will do the same thing in the future."