Under the Microscope: We talk to Kia's head of fleet and marketing, John Hargreaves
15 May 2018
Author: Rachel Boagey
Rachel Boagey visits Kia's head offices in leafy Walton-on-Thames to speak to John Hargreaves, the company's head of fleet and remarketing, about sustaining growth and boosting fleet services.
Before jumping out of my car in the car park I was forced to triple-check the sat-nav had the right address for the home of Kia UK's PR team and hadn't led me to the closest Kia dealership instead. But on closer inspection, this three-storey Walton-on-Thames building is not a dealership at all.
Almost four years ago, following a move from offices in Weybridge, just a few miles away, the UK Kia team are now based here. "We were looking to move, because our old office was becoming too small for the number of people we had working for Kia and, with the amount of growth we have seen as a company in recent years, this building was a good bet," Hargreaves says. There is no other way to describe the office building other than 'huge'. So huge that there is actually too much space for the number of staff working there. "It's probably bigger than we need, as each floor is near enough the same size as our entire old office, but what can I say, we're very forward-thinking here at Kia," Hargreaves explains.
The offices represent just that. On the ground floor is the dealership-style car display that is more of a corporate statement; a restaurant and café; and also space for Kia employees to socialise, ranging from table tennis tables to an Xbox, not to mention the room with massaging chairs. Before I had a chance to hand in my CV, I was whisked off to a swanky meeting room where I sat down with Hargreaves to learn more about the company's fleet achievements and goals.
Unlike all the cars on display in the building, Hargreaves is just out of his Kia warranty, having been at the company for a little more than seven years now. His role at Kia is the same as it always has been - he heads the constantly expanding Kia fleet team, and is in charge of fleet and used cars for the UK market. The team now consists of 17 people in total.
The fleet market is crucial to Kia's rapid ongoing rise in the UK. "Just before I joined, in 2010, fleet was around the 17,000 mark and, last year, it was more like 50,000, so it has increased by a massive amount," he says. Now, the fleet-to-retail split for Kia is around 55% fleet, far bigger than it used to be, something that Hargreaves believes is now a healthy balance. "A belief of ours is that we shouldn't be doing too much on the fleet side. We have gone from being very retail dominated to a better balance, but we still have a bigger bias towards retail than most other manufacturers," he says.
Part of this has happened since Hargreaves started working at Kia. "We have had a big push towards fleet in this time and it's clear for everyone to see that the products we're offering now are more acceptable to fleets than they were, say, 12 years ago, where the range was not the sort of thing that would naturally lend itself to businesses, in terms of not only appearance, but also whole-life cost, for example," he says.
Interestingly, Hargreaves says Kia prefers to be slightly stronger on retail and keep its growth in fleet relative to the market. "If you look at residual values, it's a healthier thing not to be doing too much fleet and too much short-cycle rental. We want to grow in fleet, as long as it remains relative to the market," he says.
The growth in fleet is a corporate goal of Kia's and just part of its Vision 100 to sell 100,000 cars in total. When Hargreaves started, this goal seemed like an extremely ambitious one. "But last year, we sold about 93,000 cars compared to the 55,000 when I joined, and this year, it's reached 95,000. We could have probably done that quicker if we were less selective with the channels we chose to go down. However, if we want to get there, we need to do it in the right way."
Another reason for the sustainable growth in fleet is the channels through which the manufacturer has chosen to operate. "Looking at last year, we were trying to do less than 10% of our total volume in rental. Our fleet growth has come from only proper corporate fleet channels and rental. Last year, was less than the year previous; however, it has always been kept relatively constant and never out of proportion," says Hargreaves.
Kia's growth in fleet doesn't come without challenges. In rental, for example, despite a slight move away from it, the manufacturer aims to sell cars, support margins and continue to work well with rental partners.
"We want to make sure the cars are right for them and also right for us when they come back," he says. In Motability, the manufacturer has also seen a challenge in controlling margins as it's a high cost challenge. "It's also important to have the cars available that we want to promote in that area and work with Motability clients to ensure it's going in the right direction," Hargreaves says.
Dealer fleet boost
Kia's fleet focus has been enhanced in recent years through a push to have increased dealership fleet expertise, which it is looking to expand in the future. "We've reached the situation where Kia is one of the best franchises and our fleet programme is quite strong for dealers. We don't make them turn into business centres, but we have a good package for those who want to do these business sales, to help them with the costs of setting them up; our dealer engagement in fleet is greater as well," says Hargreaves.
Out of a total of around 190 dealers, Hargreaves tells us that there are now about 25 fleet centres. The manufacturer is looking to increase that to the 30 mark quite soon. "By natural selection, they're places where there is business, but we try to have a good geographic cover. Some dealers don't want to do it, so it's not perfect, and the challenge is to grow the number by a bit, while making sure the geographic spread is right as well," he says.
The right products
Hargreaves explains that the current generation of Kias are all extremely presentable with massive driver appeal and that's true in fleet for most of the range too. "If you put the Sportage in a choice situation with other cars, people would probably choose it, which wasn't always true for Kia products," he admits.
"The challenge in the corporate arena, in general, is to keep recognising that, for some people, Kia is not the first brand they'd choose. But we're constantly working to change that and increase brand reputation. The reality is that we have great cars with great costs and we need to keep pushing that message all the time," says Hargreaves.
Looking at the overall Kia range, it's interesting to discover that it sells every car to fleets. "The Picanto is a car that we do well with as perhaps a courtesy car or in the bodyshop business, then the Rio is a smaller car and will not really reach mainstream corporate fleet either, but is good for public-sector needs," he explains.
When you get up to Cee'd size, fleet is a bigger part of the equation. "When I came in, the Cee'd was a good workhorse vehicle and visually acceptable, but not class-leading. But then there was a new one and then another, and now there is another one due. It's become a lot better-looking and increased its residual values too, so it has done well with fleet, due to the total cost of ownership advantages," Hargreaves says.
That's not where Kia's offering ends, though, and the Sportage, Kia's most popular car, is a big fleet model for the brand. "It works extremely well in fleet, as it's well placed and the appeal of the car has made it sell in huge numbers. It was a right product, right place, right time achievement and continues to be so."
The right powertrains
In the alternative fuels arena, Kia has not shied away. As well as its plug-in hybrid Optima and Niro options, it has a fully electric version of the Soul. "We've never made it a mandatory part of being a Kia dealer to have it, but what we're starting to do is ask whether dealers want to be EV specialists and have some technical training. Before now, we have never really had that many in terms of supply for them to need that training, but over the past year, we've increased numbers," Hargreaves says.
While the all-electric Soul is still a very small part of Kia sales, Hargreaves points out that it is definitely growing and, when the current Soul model ends in a few months' time, its replacement due next year will only be available as an EV. Hargreaves also admits that the manufacturer has more plug-in hybrid and electric models coming. "We're very much embracing the trend as it's very much part of our future growth," he says.
In terms of diesel, it's going the other way for Kia, like many other manufacturers. "It makes sense that our smaller cars will no longer offer diesel powertrains but, for instance, the new Sportage and the new Optima will. Basically, it will only be offered where it makes sense, as there's no doubt that diesel sales are under pressure in fleet and retail. But for a lot of high-mileage fleet users, in financial terms, it is very much the correct financial decision to be making still," he says. "While I don't see a situation in the near future where diesels will disappear, I do believe they will significantly reduce, so our line-up will reflect that."
The next steps
As for the future in fleet, Hargreaves is confident that looking at Kia's recent growth is a good place to start. "I wouldn't say we're going to do anything significantly different in fleet than what we've done over the past few years, as what we've done has put us in a good position," he says. "We want to grow without doing too much poor margin business and we want to keep control of the rental cars. We will also probably look to expand the number of dealers doing fleet and even those who aren't fleet centres will have a higher level of expertise, which will ensure a promising future for us."
In fact, Hargreaves says that Kia is looking into Business Champions programmes so that almost all of the dealers will have someone that is able to act as an informed business provider. "We have no defined plans to expand the number of people doing fleet at Kia, but we have historically increased at a constant rate and may need to continue doing so," he explains.
Another focus for Kia, which has always been on the radar for the company, is becoming even more credible as a brand. "I believe we're pretty much there on that, but it's never a bad decision to keep improving. In retail and in fleet, we're now a real competitor, and that's only going to go one way," he says.