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KG Mobility's flagship electric sport utility vehicle, the Torres EVX (KG Mobility) |
KG Mobility, a stalwart in the South Korean sport utility vehicle scene previously known as Ssangyong Motors, has set an ambitious total sales goal of 147,000 units for this year, a 26.6 percent increase from last year, as it aims to penetrate overseas markets in Europe and Southeast Asia, away from its home turf dominated by Hyundai-Kia.
By doubling down on its legacy of tough-looking, rugged SUVs, the company is incorporating cost-effective production strategies, including electrification, and targeting the niche market for pickup trucks.
Profit rebound via global sales
Last year, the company celebrated its first annual operating profit in 16 years, selling 110,699 units, with sales split similarly between domestic and international markets. The company credited its growth to vigorous marketing strategies across Europe and Latin America.
The international success of its 5-seater flagship SUV, the Torres, played a significant role in this achievement, marking the company's highest overseas sales volume since 2014.
The Torres has been well-received for its blend of classic ruggedness and modern aesthetics, offering spaciousness and the latest tech at competitive prices. Despite the hurdle of lower brand recognition and achieving cost-effectiveness abroad, KG Mobility's renewed market position and ambitious strategies now present a clearer path toward capturing overseas demand.
Electrification push in Europe
The European market has emerged as a crucial focus for KG Mobility, accounting for nearly half of its international sales last year, a notable increase of over 50 percent on-year. Eastern Europe, in particular, saw sales of 12,095 units last year, with Belgium and Hungary leading the way in May achieving sales of 1,432 units.
“We’re taking KG Mobility global by playing to our strengths and ensuring we fit into the local scenes. Europe's big on the EV scene, and we're diving in headfirst with our Torres and the upcoming electric version, the EVX. We are syncing up with local dealers to go all-in,” said KG Mobility Chairman Kwak Jae-sun during the launch of the Torrest EVX last year.
In anticipation of the Torres' global arrival in the first half of the year, KG Mobility has ramped up its worldwide service capabilities. In 2023, the company hosted four training workshops for quality and service managers from 23 key export markets, including Europe, at its Pyeongtaek Technology Center in Gyeonggi Province.
Vietnam's knock-down plant kickstarts, eyes niche pickup market
KG Mobility is also set to boldly enter the Vietnamese market by starting local knock-down production in Da Nang's Thua Thien Hue Industrial Park in the third quarter of this year. In collaboration with the FUTA Group's Kim Long Motors, this move navigates around the high shipping costs and steep auto tariffs in Southeast Asia.
The company plans to start with 15,000 vehicles and aims to boost production to 60,000 units by 2029, leveraging Vietnam's rapidly growing automotive market, which is projected to hit 500,000 annual car sales by 2025. The plant will first roll out its leading models, including the Torres, Tivoli, and Korando, and plans to add the Rexton and Musso pickup trucks to the lineup next year.
Expanding pickup truck production signals tapping into a niche, yet promising and profitable market for KGM. Despite accounting for a smaller segment in Korea, its Musso series, also known as Rexton Sports and Rexton Sports Khan in Korea, dominates the Korean pickup truck market with an 87 percent share.
“There’s a growing appetite for affordable pickup trucks in Southeast Asia, and KG Mobility is uniquely positioned to meet this demand,” said Lee Hang-koo, director of the Jeonbuk Institute of Automotive Convergence Technology
Pricing challenge
But KG Mobility faces the task of keeping its prices competitive internationally, for example with its Torres EVX, which stands out in Korea for its affordability. Despite its domestic success, where it undercuts competitors like Hyundai's Ioniq 5 by around $3,000, the company now confronts rising shipping costs and stringent regulations overseas.
A sharp uptick in the Shanghai Container Freight Index, a barometer for ocean freight rates, primarily illustrates this challenge. The index, which reflects the cost of shipping containers, surged from 1010.81 in December of the previous year to over 2200 by September, signaling a significant uptick in logistics expenses critical for KG Mobility, particularly given the pivotal role of the Port of Shanghai in global shipping dynamics.
Despite a robust financial performance in 2023, with an operating surplus of 12.5 billion won ($9.4 million), up from a 2022 loss, KG Mobility's cost structure and profitability remain especially vulnerable to logistics costs.
“KG Mobility's strategic adjustments will still pay off, at least in the short term. The Pyeongtaek plant is back on track after last year's fire, and with the positive reception of the Torres EVX, along with the anticipated launch of a new Torres model, the company should be on track to hit its sales targets,” said Song Sun-jae, a researcher at Hana Securities.
