South Korean automaker Kia Motors has become one of the quickest to turn operationally profitable in India's highly competitive passenger vehicle market.
In financial year 2019-20, the first year of its operation in India, the company produced more than 100,000 vehicles and posted revenue of Rs. 108.38 billion (US$ 1.5 billion), when the domestic market delivered its worst performance in a decade.
Kia posted an operating profit, or earnings before interest, tax, depreciation and amortisation, of Rs. 3.08 billion in the year ended March 31, 2020, according to its filings with the Ministry of Corporate Affairs. Interest pay-out and a significant depreciation cost, however, pulled Kia into a net loss of Rs. 3.26 billion for the year.
In the ongoing financial year 2020-21, if Kia manages to attain its target of producing 200,000 vehicles, the company may post a turnover of nearly US$ 2.4 billion, as per a recent analysis by a research firm.
It had sold more than 105,000 units in the last financial year where exports contributed about a fifth of the total volumes.
In a market where global behemoths like General Motors, Ford and Volkswagen struggled to cross a 2-3% market share even after being present for over a decade, Kia has grabbed a 5% market share so far in FY21 and is knocking at the podium just behind Tata Motors and Mahindra & Mahindra.
With just three products in its portfolio, which are all utility vehicles, Kia now has a 13-15% market share in the segment.
The combined turnover of Kia and sister company Hyundai Motor in India was 63% of market leader Maruti Suzuki's turnover in FY20. Their combined market share was about 23-24%.
Kia had invested Rs. 87.71 billion in its Indian operations till FY20, out of which Rs. 25.01 billion was made in the previous year.
Its average realisation per vehicle was Rs. 1.02 million in FY20, which was 1.5-2.1 times that of the top two car makers - Maruti Suzuki and Hyundai.
The revenue of Kia was nearly equivalent to the passenger vehicle division of Tata Motors, however there is a sharp contrast in the operating profit picture of the two companies. Kia posted a margin of 2.9% in FY20, while for Tata Motors, it was a negative 9.8%.
The operating profit margin of Maruti Suzuki and Hyundai were 9.7% and 10.06%, respectively.
A strong volume performance of the Indian subsidiary is helping Kia Motors grow its size in the global operations. Contribution from India grew to 3.9% of Kia Motors' global revenue in the July-September quarter from 1.4% a year earlier, according to a company presentation.
The Indian unit's vehicle dispatches grew 175% in the September quarter, the highest in any market for Kia Motors globally.