Interview – Paul Philpott, UK president and CEO, Kia
Kia’s UK President and CEO Paul Philpott has overseen the brand’s stratospheric growth over the past 14 years, having previously shone with big roles in Ford and Toyota’s sales and marketing teams.
Here, he reflects on the challenges of lockdown, the trends emerging from it and looks ahead to what might happen in the months ahead.
Talk us through the rollercoaster of emotions of these past few months.
“To put it mildly, closing down your business in the middle of your biggest month of the year is something we’ll all remember. It’s fair to say March 23 is now a date that’ll stick in our minds.
“At that point we were heading for a record March – on track to register about 18,000 cars. In the end we registered 13,000, so that was 5000 registrations gone. “In April we hit the heady heights of 55 registrations, and in May we found our way to 1000 registrations. They were tough months – but the reopening of English retailers in June and then the other UK retailers from there has unlocked a lot of demand.”
What were your immediate concerns when lockdown began?
“Those first few weeks of lockdown were really about cash flow, and particularly the cash flow of our dealers. We worked really hard with our colleagues in Europe and Korea to support them, and to extend credit lines to help. To say it again, we had 5000 cars that we thought we’d sold sitting in compounds; that alone was a huge cash flow issue.
“After that, we turned our focus to our people. There was a huge amount of work to do in an incredibly turbulent time. We had to make some hard decisions on furlough and so on, and those that remained had to adapt to working remotely. Then we needed to work on bounce-back plans for when dealers reopened.
“Hard though it is to believe now, we initially thought that might be mid-April, then we hoped for a date in May, then June. We are ambitious people and we wanted to be on the front foot, but managing expectations was a major challenge.”
What were the main challenges during that period of no sales?
“Part of the trouble was that we couldn’t freeze the supply chain. Basically, half our production comes from Korea and half from Slovakia. The Slovakian plant was closed for a period, but we had a bit of a challenge from Korea as we had three boats en route which were coming, come what may.
“We throttled them back and saved some fuel, but when they arrived in the UK the port authorities said they couldn’t disembark the cars safely, so we then needed to find an alternative port to anchor them. Thankfully we did, but you can imagine the complexity and cost.”
It must have been a relief when dealerships could open again?
“The comeback was gradual: in May we could open up for some internet activity and deliveries, in June we got going again and now July is looking healthy – surprisingly so, if I’m honest.
“But the question rolling around in my head right now is how long it will last? All the indicators are that the economy is likely to suffer, but when? Most think the crunch will come in September, but nobody really knows.”
How do you now stimulate the market and clear stock without damaging residuals?
“In one word, finance is key. We have to protect residuals, and spreading payments over 36 months is a great way of insulating us and our customers from depreciation. Around 70% of our business is completed on finance, and so if you can do that competitively and demonstrate to customers that they have some equity at the end of the deal, then they are willing to reinvest at the end of the term.
“Throw in the fact that used car supply is seeing some signs of shortage – because rental sales have been non-existent, and lease returns restricted – and you can actually see used car values firming up, which will again help our position.”
Are you noticing any trends in what customers are ordering?
“It’s only six or so weeks since dealership doors opened, but there are some. Everything Niro is strong, be it hybrid, plug-in hybrid or electric; there is a focus on buying larger cars, which makes sense as people re-enter the market and look to renew their biggest car first.
“It’s also clear that some buyers have used lockdown – when it was actually quite hard to spend money – to save up and are now rewarding themselves.”
You mention Niro, and of course e-Niro won the What Car? Car of the Year Award back in 2019. How significant was that?
“We are a challenger brand. We’ve been selling cars in Europe for less than 30 years and we were the first brand to win with a car made outside Europe, so it was a big deal – big enough in fact for the picture of me collecting the trophy to end up on the front page of the Korean Times.
“You have to say that sort of thing gives you – What Car? – kudos, both internally at Kia and externally, where we continue to hear of the award being referenced. You should never under-estimate how strong the What Car? brand is. Collecting that award was the highlight of my 32-year career, no question.”
Could you have imagined being in such a position when you joined Kia?
“It’s true, Kia in the UK was not considered a great place to be back in 2006/7. We lost money, sales were not strong and we had huge staff turnover.
“But there was massive investment coming in that really signalled Korea’s commitment to making Europe work – not least of which was putting Peter Schreyer, a European, at the head of design.
“Then there was the seven-year warranty, which was both a statement of confidence to consumers but also internally about where they believed their product was. There were signs of what was to come.”
You’ve set a strong standard with the e-Niro, but how do you maintain that?
“Kia has set out its Plan S strategy, which includes launching 11 EVs by 2025, as well as some volume goals, so that’s a clear statement of intent. I also think we have some interesting options with hydrogen.
“But in general terms, there are three key directions that everyone will take – reducing cost and charge times and bringing battery capacity up. Doing that against the changing backdrop of public attitudes towards the cars will really move the situation on from where we are today; it’s already clear that buyers aren’t just early adopters any more and that most people who buy an EV won’t consider switching back again as they enjoy it too much.
“Early concerns around the indicated range being unachievable have been overcome by us at least, while resale values of cars like ours are now among the very best – a far cry from some of the residuals on early EVs. The barriers are falling.”
Do you think the retail experience also has to change?
“We are in a period of change, of course, but without wishing to generalise I do think dealers are largely moving towards that change in the right way. They have found ways, mainly online, to supply cars even when their doors are closed – but I don’t see that there is suddenly going to be an explosion in online car purchase.
“To spend the sort of money you do on a car requires confidence, and for most people that comes from seeing and trying the car and talking to experts. But, by the same token, there is obvious merit in helping people narrow down their choices. We operate a live showroom that will answer questions online all day and we can see the value of that very clearly. It’s about finding the right balance.”
And can change also be reflected in the diversity of the workforce?
“Yes, it must be, and I’m committed to that. We have a long way to go – on age, gender, race and more – and I will do all I can to change that.
“This industry has been a bastion of white men for too long. But moving away from that will take time and I don’t think it should be achieved by quotas, as I want the very best people available working for me, regardless of anything but their ability.”
A global pandemic might be enough to deal with, but it is far from your only challenge. How do you deal with that?
“It was a perfect storm of events. First up, the challenge from the pandemic is a long way from being over. Meanwhile, we’re planning for Brexit and the various scenarios that could arise. That requires Plan A, B, C and maybe D in order to handle what may come up.
“And then we have to consider the environmental scenarios that may arise, including if we have to hit environmental targets based on UK registrations alone. We can do it, but of course, it requires planning.
“We just have to take it one step at a time, doing all we can while things are positive to rebalance our cash situation and stock levels and put ourselves in a better position to deal with whatever comes down the road.”
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