With an increase in the number of dealerships and ambitions to double sales in 2015, SsangYong Motor UK is confident at a time when private sales growth is slowing down. Sotiris Kanaris talks to chief executive officer Paul Williams

---

SsangYong, which in Korean means double dragon, is Korea’s oldest and fourth-largest automotive manufacturer. Launched in 1954, the company originally built vehicles to supply the Korean army and as a result focused on 4×4 cars. Today, it also produces sports utility vehicles (SUVs) and multi-purpose vehicles (MPVs).

In 2011, Mahindra & Mahindra – an Indian engineering conglomerate – became the manufacturer’s majority stakeholder, having acquired a 73% stake.

Since SsangYong entered the UK market in 1994, it has changed various distributors as the parent company was sold a number of times. At one point, for example, its products were sold under the Daewoo badge because the company was acquired by Daewoo group.

Yet despite the fact that the brand has been operating in the UK for over two decades, it still remains relatively unknown.
After the manufacturer’s global relaunch under new ownership in 2011, the UK independent distributor was renamed SsangYong Motor UK and started to see growth in its sales and dealership.

Despite the overall sales volumes remaining low – 1,739 units were sold in 2014 – the distributor is content with its growth rates and targets more than doubling sales to 3,650 units this year.

Chief executive officer Paul Williams tells Motor Finance that the manufacturer does not aim to go mainstream, but to become a specialist producer in SUVs and crossovers.

Williams says: "Our plan for this year is to sell between 3,500 to 4,000 cars. This can be achieved through an aggregate of factors, including the expansion of our dealer network, widening our product range and creating new sales channels like contract hire and leasing."

Benefits and challenges for entrants to the UK market

Williams continues: "The UK market is quite demanding in terms of what it expects from manufacturers, in regards to products and services. However by the same token UK buyers are generally quite open minded and they would consider foreign brands; more than some of the more nationalistic mainland Europeans."

He explained that consumers in countries with powerful domestic automotive manufacturers, like Italy and France, are more likely to choose cars which are produced nationally.

Williams suggests the strength of the UK market benefits all players, as even when the market underperforms, sales volumes remain high.

"The UK economy is relatively stable, but even if the market was to go back by 5% or 10%, it would still be a market of two
million cars. We inherently have a strong car market," he says.

SsangYong’s UK dealer network is mainly in rural and semi-urban areas. This is primarily because of the products, which are mostly orientated for people who use 4×4 cars for their work.

Another reason behind the lack of dealers in urban areas is the high cost of operating in UK urban centres. Williams believes this cost makes it difficult for most new entrants to establish themselves in these areas.

"Our dealer network’s presence is low in big urban areas like central London. We’re looking for dealers in Birmingham, Manchester and Leicester. Big urban centres are the areas where traditionally most small or developing brands have struggled. The shear cost of operating in some of those markets, makes it a barrier to smaller players," he adds.

New products and expansion of production volumes

The first new vehicle under the Mahindra & Mahindra ownership was presented at the Geneva Motor Show this month. The Tivoli model, will enter the B-segment – also known as subcompact-crossover market.

Through production of this model, SsangYong hopes to broaden its product range and enter a growing market.
Williams states that the market for this category of vehicle is growing significantly in Europe and is expected to sell 150,000 units in the UK alone this year.

The distributor is confident Tivoli can gain a ‘reasonable share’ of the market.

"We think we can fill a gap in the market. We will be announcing our final prices and specifications soon. We will have an advantage in price specification, warranty and technical ability over many of the players in that sector. I feel strongly there’s an opportunity for us to make a profitable niche within that market," he says.

The medium-term aspiration of SsangYong Motor UK is to raise overall sales to 10,000 units.

In terms of volumes, SsangYong’s sole factory aims to reach its production capacity of 240,000 vehicles a year by 2016. The Tivoli will have a big impact in manufacturer volumes but there are also plans for other products. Mahindra & Mahindra aims to release a new car every year until the end of the decade.

According to Williams, the improvement in production volumes will have an indirect impact on the manufacturer’s profitability.
Dealer network

"A key component of success for any brand entering a market is how good its dealer network is. It’s really important to get that right as soon as you can," comments Williams.

SsangYong’s UK dealer network currently stands at 60 and is expected to rise to around 75 by the end of the year. Williams says that as the volume expands, and if there’s sufficient opportunity, the number of dealerships could increase even further.

He talks about the importance of looking at dealerships in qualitative terms rather than merely in regards to their overall number. He stresses that for any new entrants in the market, it may be more important that their dealers possess the right attitude rather than other more conventional factors.

"Quality should not be measured in how much money they have, or whether they have perfect premises or location. It’s whether they have the can-do attitude and approach to business and their customers.

"Often people will buy from retailers they already know and have confidence in. The fact that they have got another brand [SsangYong] will help to cement the sales," he said.

Brand awareness

SsangYong Motor UK acknowledges that the brand still remains relatively unknown. This year as the new product is launched, the company intends to invest heavily in communications to promote Tivoli as well as increase brand awareness.
Williams tells Motor Finance that this year the distributor intends to spend more on marketing than in any other year in the company’s history.

"We’re not going to expand without strengthening the brand", he says adding: "When Tivoli goes on sale in June, it will be launched with a national TV campaign and a complete across the board proposition. I think that will raise awareness. We will probably spend more this year than we have done in the previous three years put together."

He also mentions that additional revenue from sales is going to be reinvested into marketing, as the company is taking a more long-term approach.

At the same time dealers are being encouraged to rebrand and re-equip their own retail premises to provide a better representation.

Residual values

"De facto, better residual values allows you to be more competitive. Unless you have good residual values, you haven’t got a firm base on which to build a future business," says Williams.

According to Williams, SsangYong’s residual values have improved and became more widely recognised.

Part of the company’s strategy for the next 24 months is to present a robust and consistent residual value position.

Williams comments: "I’m extremely confident that our residual values are going to improve and this will increase our competitiveness against other manufacturers."

He also states that by demonstrating strong residual values alongside good sales figures, SsangYong vehicles will become more attractive to leasing and contract hire companies.

Finance

GMAC Financial Services provides SsangYong’s dealers with their wholesale funding, but also with demonstrator funding as well as used car funding. On a retail basis, it provides dealers with conditional sale personal contract purchase.

"At the moment, we’re increasing the credit facilities available to our dealers," says Williams.

"We’re increasing the range of PCPs that we offer to our dealer network, to make sure we stay competitive and take advantage of the market."

According to the distributor, there’s been a growth in the number of people using this type of finance. Coming from a relatively low base in terms of PCP sales, SsangYong UK saw a 60% growth over the last 12 months.

Despite the increase, PCP sales figures remain low compared to other original equipment manufacturer finance programmes. Williams attributes the past and current low volume of PCP sales to the type of vehicles the company offers.

However, he believes that with the new Tivoli model sales through this finance avenue can increase.

"Our current range isn’t totally the right profile for PCP," says Williams. "The new Tivoli product absolutely is. We’re working with our dealer network to build up experience and skillset regarding PCP, as it will be a big feature when the new car goes on sale."
Developing its market

SsangYong Motors UK aims to develop its market in the short term and medium term with PCP, contract hire and leasing.
In recent years many of the manufacturers operating in the UK market have encouraged PCP sales. Williams claims that it’s ‘natural’ as it can be a build-in retention tool, allowing companies to recycle their customers sooner and retain their customer base.

He also believes PCP has been successful in the country because of the characteristics of UK consumers.

"We’ve always had imaginative and progressive acquisition methods and I think that will continue to be the case," says Williams.

"London isn’t the financial centre of the world for nothing; I think British buyers are open to smart ways of funding cars.

"I think there’s a lot of people who become more comfortable with the differentiation between ownership and paying for usage, and I think we will see that trend continuing," he adds.

On the other hand, he clarifies that manufacturers always want to strike a balance in terms of financial products, as they don’t want to expose themselves to residual risk.