Kia to source diesel Sportage from Slovakia

Kia Australia is in talks with the company's Slovakian factory to negotiate supply of the Sportage SUV in diesel variants for the local market.

The initiative is driven by the need to keep the Slovakian factory open and operating rather than any specific advantages to the Australian arm of the company. However, there is a long-term benefit in sight for the management at Kia Australia, according to National Public Relations Manager, Kevin Hepworth.

The news came to light when Mr Hepworth, speaking with Australian journalists during the opening week of the LA Auto Show, explained that the Optima Hybrid could be said to have two chances of making it to Australia...

When it was put to him that a diesel-engined Optima would make a lot of sense as a technology-leader offering low running costs and substantive driveability, Mr Hepworth agreed with the theory it would make sense added to the local product range.

"It could do, but... we have had – and still have – a supply restraint on diesels. At the moment they're doing their best business in SUVs and Europe. Europe gets first call on anything [at] Kia.

"Because [of] the tax advantages in Europe, it's crucial that they have small diesels... We don't get a tax advantage, so therefore it's not as crucial to the marketing department to get that car. There's no incentive from the government, there's no monetary benefit in getting it..."

The tight supply lines for diesel engines may become further constricted if Kia goes ahead with a plant to sell diesel vehicles in the USA, which could have some further impact on diesel availability in local Kia products.

Kia Australia is considering sourcing the diesel-engined Sportage from Europe, a program that Mr Hepworth describes as "being actively investigated".  

A decision on that will be made "by early next year". There is a quid pro quo involved, with the Slovakian plant likely to prefer supplying the Sportage for the Aussie market than bringing the line to a halt altogether, due to slowing sales in Europe.

Bringing in the Sportage diesel from Europe is a question of "getting the relationship going" with the plant in Slovakia, and that will also decide whether the cee'd sportwagon will come to Australia as well, but that car is a distant prospect at this stage.

"I don't know what they're doing with that... I do know that Sportage is being seriously investigated; I know that cee'd wagon is a plan, a thought – but it's not as far advanced..."

The diesel supply issue is not something Kia and parent company Hyundai can easily resolve. It seems that the current facilities are already working full tilt and further demand from the giant market in the US will naturally be given priority over a tiny market like Australia.

"You don't put a foundry in place in six months - it takes a long time," Mr Hepworth explained, so while Kia builds the Sportage in the USA, in Georgia, it would have to procure diesels from the same engine plant servicing other Sportage vehicle assembly plants.

So what we think is happening is this: the engine plant supplying diesels to the Slovakian vehicle assembly plant has to meet a much higher demand from a consortium of European markets and others from around the world than the demand from Australia in isolation. There's more buying power for Kia Australia being part of that consortium, suggesting Kia Australia is protecting itself from having its supply lines for diesel Sportage throttled in response to growing demand from the much larger North American markets.

And there's that added benefit of securing future products from Slovakia as well.

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