The two heavyweights of the sub-$20,000 small-car class – Kia and Suzuki – have pledged to continue selling vehicles in the most affordable end of the market, as an increasing number of rivals have vacated the segment.
Honda says it will not replace the Jazz hatchback when the current model reaches the end of the line, Mitsubishi now only has one entrant in the sub-$20,000 category, and Ford has been out of the price-sensitive segment for more than a year.
The departure of mainstream brands from the sub-$20,000 category has enabled Kia and Suzuki to acquire a greater slice of the shrinking market. Chinese newcomer MG is also making inroads with a sub-$20,000 hatch.
When asked about any plans to vacate the affordable end of the new-car market, the boss of Kia Australia, Damien Meredith, said “absolutely not”.
“We have no plans to leave the sub-$20,000 segment,” said Mr Meredith.
Kia has two models in the sub-$20,000 segment – the Picanto and Rio hatchbacks – which start from $16,490 and $18,990 drive-away respectively.
Mr Meredith said affordable new cars were often a “stepping stone” into the brand and could lead to customers buying another Kia afterwards.
“Hopefully, if we do a good job, if the dealers do a good job, then we keep them in the brand for the cars that follow,” said Mr Meredith.
When asked if currency pressure or a greater push for profits was forcing some brands out of the sub-$20,000 category, Mr Meredith said: “I am little bemused by the fact rival brands are either leaving the segment or increasing their prices dramatically (but) we believe that’s given us some clear air.”
Mr Meredith added: “Competition can come from the top and come from behind you and you’ve got to be respectful of all competition.”
The automotive industry veteran conceded it was tough but not impossible to sell small cars profitability.
“The long term challenge for the car industry has always been small cars equals small profits,” said Mr Meredith. “I think what’s happened is SUVs have given manufacturers an opportunity to make money elsewhere and they don’t necessarily need to rely on small cars or always have a small-car offering.”
However, Mr Meredith said, “we believe it’s really important that you give early buyers, young people, and retirees an opportunity to buy a safe, economical and affordable new car.”
As an increasing number of manufacturers are now focusing on SUVs and utes, Kia says it has forecast growth in passenger car sales in the coming years.
“We have forecast there will be still be some volume gain up to 2024 in passenger cars with Picanto, Rio and Cerato,” said Mr Meredith. “We think we can still get growth out of those cars in what’s left of the passenger car market.”
Meanwhile the boss of Suzuki Australia, Michael Pachota, said the Japanese car maker had no plans to depart the sub-$20,000 sector.
“We have three strong sellers in the sub-$20,000 segment and we see it as the core of our business,” said Mr Pachota.
“We’re not going anywhere. In fact we continue to invest in our range at a time when other brands are leaving the segment.”
In the sub-$20,000 segment Suzuki sells the Swift, Ignis and Baleno small cars and has a sizeable slice of sales in the class.
“There is still a steady demand from consumers looking for a safe, reliable and economical new car in that price range,” said Mr Pachota.