Kia dealers say firm ‘starving’ them out

By Chu Daye Source:Global Times Published: 2017/9/12 22:18:39

Seeking $122m compensation over SK automaker’s ‘hunger game’

Journalists inspect the new Kia Stinger following its debut at a press conference at the 2017 North American International Auto Show in Detroit, the US on January 9, 2017. Photo: VCG

A petition has been filed by 26 Chinese car dealerships to Kia Motors, a subsidiary of South Korea-based Hyundai Motor Group, seeking compensation of 800 million yuan ($122.51 million) and warning that they would drop out of Kia's sales network due to poor sales and "rough handling" by South Korean sales representatives.

Deng Yiming and Lei Jiefu, dealership owners and leaders of the "revolt", told the Global Times in an exclusive interview on Tuesday in Beijing that Kia is cutting car supplies in a "hunger game" that is intended to force them to drop out voluntarily so that Kia has no responsibility.

Deng owns a dealership in Nanjing, capital of East China's Jiangsu Province that exclusively sells South Korea-built Kia cars, while Lei is the owner of a dealership shop in Baotou, North China's Inner Mongolia Autonomous Region.

They said they are speaking on behalf of a group of dealership owners, all members of a working group that is pursuing its rights though the China Auto Dealers Chamber of Commerce.

Their petition comes shortly after production suspensions at Hyundai's joint venture plants in China following its sharp sales decline in the country, the world's largest auto market.

"Since 2014, Kia has been playing a 'hunger game' with its Chinese dealerships. There is an ever-dwindling number of suitable models, and even those are in short supply" for dealers, Deng said.

As a result, many dealerships began to lose money on Kia cars and many have chosen to drop out.

"The number of dealers across China selling imported Kia cars has dropped from 74 in 2011 to 50 listed on the Kia website now. Actually, only about 30 are still operating," Lei said.

"We realized that Kia is following a strategy ... that will force us dealers out and we will die a natural death on our own," Deng said.

Sales of imported Kia cars dwindled from more than 30,000 in 2011 to less than 10,000 last year, according to Lei. Year-to-date, only 6,000 Kia cars have been sold.

Operating a dealership is expensive in China, especially when there are few cars to offer. According to Deng, her flagship dealership cost 160 million yuan to establish in 2011, but it has experienced cumulative losses of more than 40 million yuan.

"I fired half of the staff at my dealership, but I am still booking a net loss of 400,000 yuan each month," Deng said.

"Kia treats its dealers like a burden, and it is eager to get rid of us," Deng said. "If they end the partnership, they have an obligation to compensate us so they're choosing to let us drop out voluntarily.

"It is malicious and we cannot accept it, that's why we're joining forces to drop out and demand compensation," Deng said.

Dealers said that Kia, a member of the Fortune 500, failed to perform its duty as an automaker in what is perceived to be a reciprocal relationship with its dealers.

Deng said that the dwindling ranks of dealers were initially still willing to negotiate with the South Korean company but they were confronted with an indifferent attitude and delays, which eventually angered them and led to a "revolt."

In 2016, Chinese dealers of imported Hyundai vehicles faced a similar situation. They also "revolted," winning compensation and dropping out of Hyundai's sales network.

"Automakers and dealers are supposed to look after and support each other. That's not how Kia treated us," Deng said. Even on June 19, when 18 dealerships presented a document proposing negotiations, the South Korean executive for Kia turned a deaf ear to their petition, Deng noted.

As Deng and fellow owners sought a face-to-face meeting with Kia China President Yoon Taek-ho on September 5, which they believed was their right as dealers of the brand, they were initially denied.

When promised that they could sell their remaining inventory while negotiating with the company, the owners taking part in the "revolt" found on the second day that Kia's sales department had canceled all remaining shipments, Deng said.

She added that the owners believe this action was illegal, as they had not dropped out of the dealer network in a legal sense.

A PR employee at Hyundai Motor Group, who declined to be identified, told the Global Times on Tuesday that the company is not aware of the petition from the Kia import car dealers.

The employee denied that the company had stopped supplying vehicles to its dealers, and said that the company is doing its best for all parties concerned: the company, Chinese consumers and the dealers.



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