Already discounted, the KIA Sportage is selling for another lakh less

When Lucky Motors decided to drop the price of their car, the Stonic, by an astonishing Rs 15 lakhs overnight they knew there would be shockwaves all over the country. But perhaps even they didn’t realise that the entire market for cars would come to a grinding halt. 

In the initial days of the announcement, KIA dealerships were overwhelmed by requests for the Stonic and sold around 700 cars in the blink of an eye. Since then, they have closed bookings for after September and are waiting to open them up again. 

But the Stonic effect has also spooked potential car buyers. Almost immediately after the price fell, there was rampant speculation about why this had happened and what it could mean. Theories from the crash of the dollar to the entire industry getting desperate started making the rounds. Whatsapp forwards were rife and all in all an environment developed in which everyone seemed almost certain that other cars would drop their price too. 

So obviously, people waited. 

As of now, that hasn’t quite happened. But in a car market that has been flattened by the 15 lakh price drop, one car that in particular is an interesting case study is the KIA Sportage. You see, even before KIA decided to drop the Stonic Bomb, the Sportage had been lagging behind. Once the shining star of the car market, the Sportage had plenty of competitors and was in a pricey segment of cars. Its competitors like Changan Oshan X7 was already offering a limited time discount to boost the struggling sales volumes plaguing the overall industry. Similarly, even before the Stonic’s price drop, KIA had actually put a Rs 3 lakh discount on the Sportage. So when the Stonic’s price fell, people immediately thought KIA would go for the Sportage next. 

The rumours were so rampant that KIA actually had to release a statement that they would not be revising the price of the Sportage, so that potential customers would not sit around waiting for the price to change. KIA has stayed true to that statement, but the Sportage has still found a way to sell for less. 

Go to any KIA dealership in your area and you will likely be able to get the car for another lakh or so less than it is going for right now — on top of the Rs 3 lakh discount KIA had announced a few months ago. But why exactly is this happening? Mostly because car dealerships have found themselves pushed into a corner where they have no other option. 

Recapping the discount 

This has been covered by Profit in quite some detail a few weeks ago. But the story of the Stonic is a very simple one. The car hit the markets for the first time in 2021 and was to compete with the likes of the Toyota Yaris and the Honda City. And even though it is a smaller car (under the subcompact crossover SUV category for the motorheads), it is billed as an SUV. 

As a result of this, KIA priced their car higher than the Yaris and the City. Higher by around 10 lakhs in fact. 

Over time, all cars started increasing their prices, and the difference between the Stonic and these other cars was at least 8 lakhs throughout these periods. The real game changing moment came in March 2023. In that month, the government made a notification announcing that all cars that were either above 1400cc or categorised as SUVs in Pakistan would have a 25% sales tax on them instead of the previous 18%. Even though Stonic’s engine size was slightly below the 1400cc threshold, this was a hit for the Stonic since it billed itself as an SUV. As a result, the price of the Stonic in March 2023 went up to nearly Rs 60 lakhs in April 2023. KIA was having to pass down this new tax to its customers. Meanwhile, the price of the Honda City and the Toyota Yaris remained absolutely stable throughout this period with the exception of one Rs 2 lakh increase by Toyota.

This is where KIA had a decision to make. They could either continue keeping the manufacturing of the Stonic down and keep it at its price, or reduce it significantly. Toyota and Honda had already brought their prices down to around the same level with the difference of less than a lakh. KIA chose the latter, bringing it down by an astonishing 24% to Rs 47.67 lakhs after tax at the end of April 2024, just last week. The real hit was the Suzuki Swift. In March when the notification came, Suzuki had decided to initially pass on the price to the consumers and the car’s price rose to a staggering Rs 54.3 lakhs — more than Toyota Yaris and Honda City. Amongst the three, the car that had started as the cheapest was now the most expensive, and that too by a margin. So when KIA decided to slash the Stonic’s asking rate, Suzuki had to eat humble pie and go back on the increase within a month and bring their price back down to Rs 47.2 lakhs.

KIA’s bold move hits the showrooms

The response was immediate pandemonium. People quite literally started queuing up outside KIA dealerships to try and get a shot at buying the Stonic. The logic was simple. For three years, the Stonic had positioned itself as better than the Honda City, the Suzuki Swift, and the Toyota Yaris. It had claimed to be an SUV so it was naturally better. 

Buyers did not take the bait at the price, but the perception had been created. So when there was a sudden drastic price decrease, people immediately thought it was a great deal. On top of this, the car market has been immobile in Pakistan for a while. So the injection of this new option gave people a reason to go out and spend their money. As a result, KIA sold 700 cars and people are eagerly waiting for bookings to open up once again. 

But there was a catch. While the KIA Stonic was flying high, the Sportage wasn’t doing as well as it once used to. 

The King dethroned? 

The KIA Sportage will go down in the history of Pakistani cars as one of the most significant vehicles to hit the road. That is because when it was launched in 2019, it was a top line Crossover SUV that was available at only marginally higher price point than that of the top variants of Honda Civic and the Toyota Corolla sedans. 

But over time the stock of the Sportage has fallen. Sales have fallen by 57% from 7600 in 2022 to 3200 in 2023. There are a number of reasons for this. For starters, inflationary pressure has cut the car market down significantly. On top of this, competition is also high. Cars like the Haval H6 (especially its hybrid variant), MG HS, Hyundai Tuscon, Changan Oshan X7, and other SUVs have given the Sportage a run for its money. With more options, people are less inclined to buy the Sportage. 

And then the Stonic also dropped its price by 15 lakhs. As we’ve mentioned at the beginning, this threw a spanner in the works for all car manufacturers. It especially affected cars that had already not been performing well, and of those the Sportage was the first one to be hit because it was also a KIA car. People started thinking if the Stonic’s price goes down, why not the price of the Sportage? 

While the numbers for sales of the Sportage are not available after the price drop, the proof can be found at the dealerships. KIA has not officially dropped the price of the Sportage but the dealers are offering discounts to sell as many as they can. 

You see, the way KIA dealerships (official ones) work is that the cars are all owned by Lucky Motors. The dealer simply gets a cut on every single car that they sell. The margin that the dealership has on every single KIA Sportage is around Rs 1.25 lakhs. This is the margin that the dealers are now playing with. For anyone not in the knowhow looking to buy a Sportage, the dealership will not mention they are willing to part with this margin. But for anyone that goes into a KIA showroom, say looking for a Sportage or asking around, the dealership will be willing to cut the price by around 1 lakh. This is on top of the Rs 3 lakhs discount that KIA had already been making. Needless to say, that KIA dealers are not the only ones offering discounts from their commissions. Contrary to what consumers would generally believe, apart from certain models that are doing well, prices of automobiles are very much negotiable. if nothing else, you should be able to get a full tank from the dealer’s margins.

Coming back to Sportage, some showrooms have found creative ways of advertising this. Take a major dealership in Karachi for example. They are offering that if a customer buys a Sportage, they will provide them with Paint Protective Film free of cost— this is something that covers the car and saves it from being scratched. Normally, the PPF of a car like the Sportage can cost as much as Rs 2 lakh. But the dealership is probably providing the service that comes at a cost to them of around Rs 1 lakh, which is their margin. This means in one way or another, despite KIA not giving this their blessing, they are managing to give maximum incentive to buyers to pick the Sportage. 

But why are dealerships going so out of their way to sell the Sportage? 

KIA’s bargaining chip 

It is a simple equation. The Sportage, like a lot of the other cars nowadays, is not in demand so dealers are not selling many. Now, Lucky Motors like all other companies have targets for their dealerships. Say a dealership is supposed to sell 10 Sportages a month but only manages to sell 5 or 6. Not meeting targets for one or two months is fine, but what if a dealership continues to miss the targets consistently? What will the company do? 

They could start withholding payments of the commission until the 10 car quota is met. Or possibly they will threaten to give the franchise to someone else, which would cause whoever opened the dealership a significant loss in their investment. This, however, is not possible in the current scenario. As dealers have told us, the dealership business is pretty much breakeven these days. So even if a car assembler takes away a franchise, they won’t find people lining up to take the franchise from them. 

But there is one thing Lucky Motors in particular can do. You see, bookings are about to open up again for the KIA Stonic. And the car dealerships know that the quota of the Stonic they will get will depend on how well they have done in achieving targets on other KIA cars, like the Sportage.

All of the dealerships want the Stonic. When the next 600 or so bookings are opened, they expect them to sell and sell fast. To make sure they get as many Stonics as possible, the dealers are incentivising the Sportage as much as they can without the company officially announcing a proper discount. 

The discounts and perks on the Sportage are there until the end of May and expected to be renewed for June. Of course, KIA will ideally want the Sportage to sell naturally. The only problem is, Lucky Motors might face a situation where its once prized Sportage is no longer its flagship car. The only question is, will the Stonic be able to reach the same highs and stay on top longer than its older sister did?