Market Insight: Seven years of success for Kia warranty

IT’S called the seven-year itch – that moment roughly seven years into a relationship where people realise the grass is probably greener somewhere else and hastily abandon ship.

 

But when applying the ‘seven-year-itch’ phenomenon to Kia’s market-leading seven-year warranty – set to celebrate its seventh anniversary on October 1 – the union between brand and backing remains as steadfast as Uluru.

 

This is despite manufacture and design having overtaken warranty coverage as the main reason for purchase among Kia customers for the first time around a year ago, the aftercare package having been cited as top decision-maker by a majority buyers since 2015.

 

Speaking at the recent Cerato facelift launch, Kia Australia chief operating officer Damien Meredith said he expected the brand to achieve “around 67,000” sales this year, a comfortable all-time record for Kia in this country.

 

“We’re looking at 6.7 per cent market share for 2021,” he said.

 

Yet the foundation for this market penetration can be traced back to the introduction of that industry-leading warranty. 

 

“It has been incredibly successful for us, there’s no question about that,” said Mr Meredith.

 

“It’s helped develop our sales (and) it’s helped develop our brand in Australia. We’re very happy that Korea, nearly seven years ago, gave us the go-ahead to put it into play because it’s helped us sensationally.”

 

Kia was already on a steady climb in Australia, achieving 20,000 annual sales and 2.0 per cent market share by 2007, but its upward sales trajectory really began to gather momentum once the seven-year/unlimited-kilometre warranty was introduced in October 2014.

 

In 2015, Kia’s 33,736 sales and 2.9 per cent market share were comfortably its best to date, which Kia Australia general manager of marketing, Dean Norbiato, attributed to the fact that more than 40 per cent of buyers said the main reason for their choosing a Kia was “that validity of the seven-year warranty”.

 

With the seven-year warranty garnishing Kia’s rapidly improving product line-up, big-name manufacturers began to fall. In 2016, Kia’s sales jumped 26 per cent to 42,668 units, booting Honda out of the top 10, then in 2017 Kia overtook Subaru with sales up another 28 per cent and market share increasing by a full per centage point (to 4.6 per cent).

 

By 2018, Kia was in seventh place (with 58,815 sales), overtaking Nissan and Volkswagen, followed by Holden in 2019 and Ford year-to-date in 2021.

 

In May this year, Kia even managed to outsell its own stablemate, Hyundai – finishing third overall with 7124 sales for the month and 7.1 per cent market share.

 

Yet the purpose of Kia’s seven-year warranty has changed over time.

 

“Instead of it being used as an opener with a customer, it’s now used on the showroom floor as a closer,” said Mr Norbiato. “So we’re now no longer using it to get people in the door.”

 

Mr Norbiato said that in mid-2020, manufacture and design overtook seven-year warranty coverage as the number one reason for customers to purchase a Kia.

 

“So it’s done a really good job and it’s still performing a really good job, it’s just playing a different role.”

 

According to Kia Australia’s head of aftersales, Phil Murray, the only price Kia has had to pay for instigating a seven-year warranty coverage is popularity. “It’s been an absolute blinder of a success to be honest, and certainly from a warranty/cost-ratio point of view, it’s not going up in a dramatic sense.

 

“We did a full cost analysis when Damien (Meredith) first mentioned he wanted a seven-year warranty in Australia. We supplied that to the factory for their support, and they gave us a tick,” he said.

 

“In fact, some of the vehicle warranty costs were actually going down year on year through production efficiencies of these parts … so we’ve had a very good run. And we’ve had a number of car (models) now that have made it to that seven-year period without any major dramas.”

 

Given there was already a precedent with Kia offering a seven-year warranty in Europe as early as 2006, Mr Meredith made the extended coverage one of his first priorities after being appointed chief operating officer at Kia Australia, unsure how long the process may take.

 

“It took six weeks,” he said. “It had to be that quick because we had to keep it quiet from Hyundai – that’s the honest truth!”