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KIA’s Australian boss, Damien Meredith, has warned that the landed cost of cars into Australia is rising rapidly and that car buyers are going to have to get used to higher prices.

Mr Meredith, Kia Australia’s chief operating officer, said at the recent launch of the Kia Niro: “The cost of anything – doesn’t matter if it’s a coffee table or a percolator – its landed cost in Australia is going up and up and up.” 

“We’ve got to control the mechanisms of that to ensure the consumer is still looked after and that the pricing is still acceptable to the marketplace, but it is getting more and more difficult with the implosion of variables where the cost is just going up and up and up. 

“It’s not just the raw costs, it’s the logistics that’s absolutely killing [our ability to get] some consistency in price modelling and structure.

“I think just about everything will be due for a price rise. I don’t think you can sugarcoat it.”

KIA’s Australian boss, Damien Meredith

Nine days after Mr Meredith issued that prediction, his company announced a $4600 price rise for its EV6 electric car: an impost it put down to an increase in the costs of raw materials, production and freight. 

Electric cars are particularly sensitive to price rises, especially as they use considerable amounts of lithium, cobalt and copper compared to conventionally-powered cars, and all of those resources have recently been trading at multi-year highs. 

However, everything is under upward pressure for the foreseeable – not just EVs.

Increasing interest rates and inflation both at home and abroad will continue to increase the cost of business for the world’s OEMs, with the brunt of that cost to be borne by the consumer. 

New car buyers have had to exercise extraordinary patience to secure a new car over the past couple of years, but now they’re going to need deeper pockets as well. 

Mr Meredith isn’t alone in his assessment – a recent Ifo Institute survey in Europe found that French, German and Italian OEMs all see price hikes as a virtual certainty, the last thing the region needs as it records its worst June sales figures since 1996.

If there is a silver lining to this forecast, it’s that inflation will likely temper demand for new cars, which should at least see a reduction in waiting times in the near future. 

Many importers have sought to combat long waiting lists  by stripping chip-heavy features out of select vehicles. A similar strategy may be employed to offset inflation-related cost increases.

Kia Niro

To date, BMW, Audi, Jaguar, Mitsubishi, Mercedes-Benz, Polestar, Skoda, Volkswagen, Renault and more have removed features from selected models to ensure they can still deliver enough vehicles to satisfy demand. Those features range from infotainment hardware and safety gear, to more prosaic items like auto-up power windows. 

Curiously, Mini has even stopped taking orders for cars equipped with a six-speed manual transmission, despite the manual being less electronically integrated than the automatic alternative. Such is the complexity of the supply chain disruption right now.

Kia, however, says it will resist the temptation to strip content out of its cars at all costs.

Roland Rivero, Kia Australia’s general manager of product planning, told GoAutoNews Premium: “We’re not decontenting. If anything, probably the closest to decontenting that we would go is to introduce a [lower-specified model] as a limited edition. We would give it a different name, it would have a different badge on it.” 

“The mindset of the customer is that a GT Line has everything. It’s got a sunroof, for example, and I don’t want to have to bring in a GT Line that suddenly takes a sunroof away, because then I’ve got these weird specs that I’m throwing into the marketplace. I’d rather talk them down into a Sport Plus or a Sport variant. I’m not a fan of decontenting because I think it just throws your whole product plan out of whack.”

The EV6’s price bump is evidence of Kia’s resolve to keep the product uncompromised, even if it means tweaking the window sticker higher. Unfortunately that strategy may put some prospective customers off-side, as those with outstanding EV6 orders at the time that car’s increase was applied either needed to stump up the extra $4600 to keep their spot in the queue, or abandon their order entirely.

For Kia, its days of playing the bargain card are well and truly over. It’s not allergic to the idea of increasing its prices, and its upper management are resigned to the fact that things are simply going to get that little bit more expensive – at least for the interim.

However, the challenge of keeping product competitive in a global climate that’s becoming ever more hostile to those simply wanting to build and sell cars is no doubt becoming more and more daunting by the day, and product planners everywhere will be wrestling with how to balance the need to keep ledgers in the black with keeping customers happy.

By Tony O’Kane

AdTorque Edge