Kia Motors' Cheap Chic

Thanks to German design chief Peter Schreyer, the Korean carmaker is making a splash at home and plans to do the same in the U.S.

Seoul - When Shin So Hyun shopped for a compact car in April in Seoul, it didn't take her long to go for an $11,200 Forte from Kia Motors. "Of the cars in my budget, the Forte has the best design," says Shin, an insurance company planning manager in her late 20s. Few drivers would ever say that in the U.S., where Kia is generally seen as the opposite of style. But thanks to its new German design chief, Kia is making a splash at home and has hopes of doing the same in the U.S.

While Korean car sales plunged 15.2% in this year's first quarter, Kia's rose 6.7%. That has boosted its domestic market share to 31% from 24.6% the previous year, mostly at the expense of General Motors (GM) and Renault. Kia is also a star on the Seoul bourse, with its share price more than doubling so far this year, vs. a 27% gain for the benchmark Korea Composite Stock Price Index. "There's no question Kia's new design is improving its brand image," says Suh Sung Moon, auto analyst at brokerage Korea Investment & Securities in Seoul.

Kia will find out whether cheap chic has broader appeal as it rolls out its newest models in North America and Europe over the next couple of years. The first, the Soul, a boxy crossover vehicle that looks like Nissan's Cube and Toyota's Scion xB, just went on sale in the U.S. in April for $14,000 to $18,600.

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The U.S. marketplace may be ready for Kia, with buyers turning to lower-priced vehicles. Kia's share stands at 3.1%, up from 2.4% a year ago. Style could give it a further selling point. Analysts say the company could poach from Korea's other carmakers and America's Big Three. Daniel Gorrell, president of Auto Stratagem, a research and consulting company in Tustin, Calif., thinks even Honda and Toyota could be vulnerable.

But Kia has to prove its vehicles are as well-built as they are good-looking. "They need to get people past the cheap Korean car image," says Gorrell.

At the heart of Kia's makeover is chief designer Peter Schreyer, whom the company hired away from Volkswagen 2 1/2 years ago. Schreyer, 55, who tends to dress all in black at official functions, made his name during his eight years as design chief at Audi. A repeat award winner in Germany, he was the one who shaped the TT roadster and the 1997 Audi A6 sedan, cars that raised the brand's status.

In Korea, Schreyer's latest product, the Sorento, is creating buzz. Even before the redesigned SUV hit showrooms in May, more than 5,000 drivers had put in orders. The base model will cost a bit more than $20,000 in Korea, about 5% more than the previous model. The new Sorento, which will be the first vehicle to be built in Kia's plant in West Point, Ga., is scheduled to go on sale in the U.S. early next year.

Schreyer has assigned designers at the automaker's three studios--in Los Angeles, Frankfurt, and Namyang, south of Seoul--to compete with one another to complete the rest of the lineup by 2011. When they're done, Kia's cars will still be low-end, but they won't necessarily look like it.

Business Week