Here’s an example of a comparable Volvo XC90:
https://cars.usnews.com/cars-trucks/compare?trims=None_14446-414372_14449-413921
Even with a markup the Telluride SX-P in nearly every major feature and rating for basically the same price. The only things an XC90 AWD Momentum T5 has that a Telluride SX Prestige w/ Nightfall doesn’t are: adjusting headlights, HD radio, and wifi hotspot (In Canada the Telluride has a heated steering wheel). But there is one major difference, while both come as 7-passenger, if you want captains chairs on the XC90 you will drop down to 6-passenger. With the Telluride you don’t have that major seating compromise. When you simply compare the all important cargo volume specs, the Telluride is the hands down winner.
The other thing at play with the markups is that luxury brand buyers may be more apt to lease vs buy. If the market value is high and you are considering a lease, the overpayment is less noticeable on a lease vs a payment on an auto loan. Especially if the dealership adds “dealer add-ons” to hide the markup and suggest more value.
More buyers competing for the same vehicle (possibly even trim) means less supply for the demand. But when some of those vehicles come off of lease and show up in used car lots in a couple years then you see a different used car supply and demand curve for the Telluride.
One more type of buyer to consider, luxury minivan buyers. There are very few options out there, but when you price out a fully loaded Sienna, Odyssey, Pacifica or Grand Caravan, the Kia Telluride EX or SX looks like a tremendous value. Without the markup I’ll bet it steals sales from the Sedona SX. I was combing the lot inventories for a new heavily discounted 2018 Sedona SX in early 2019 when I discovered my 2020 Telluride S had more features for less money and I liked the look better so I was sold. I also was coming from a 2011 Sienna with the optional 8-passenger jump seat between captains chars that I never used because loading and unloading kids and dogs with captains chairs was always easier than sliding seats. I didn't bother with the SX because I valued a title in my hand sooner over an added loan payment and more features. I think the S trim was specifically added at the last minute to address the minivan converts.
More buyers shopping for an SX trim walking into the dealership may notice the EX and see value there for an 8-passenger when they were considering an even larger SUV that doesn’t fit well in their garage, where the Telluride checks that box for them when you look at the even fewer 8-passenger midsized alternatives. I think that's why in the MY2021 more options and packages showed up on the EX along with the SX. I think the EX was specifically added to target the 8-passenger large SUV buyer who felt for example, the Tahoe was just a little too big.
You could argue that the Telluride is in the midsized category and the Volvo is in the luxury midsized category. But some buyers may just be comparing a sub-category in larger 3-row midsized SUVs. I don’t think it’s a mistake that the Telluride lettering looks like something you would see on a Land Rover and the rear lights look similar to the Volvo. I think the Kia design center was looking at wide appealing style elements for more US buyers. And if you are new to Kia and sit in that nappa interior, it’s looks like a pretty close comparable to those more expensive luxury brands.
Here is my theory:
An SUV or crossover was originally a new class of vehicle for car buyers not wanting to go all in on a truck but totally against the idea of a minivan and typical truck buyers that needed more seating and cargo but not wanting to drop down to a car. I think the Kia Telluride is a large midsized hit that is crossing over to even more vehicle categories to attract even more buyers than typical midsized SUVs.
My other observation is that Kia has a successful example of breaking into new vehicle markets (post Borrego) if you look at the Sedona. Anyone remember the Hyundai Entourage minivan? Kia had a Carnival in the US as a low budget minivan in the Sedona then in the second generation for a couple years Hyundai rebadged it as the Entourage for a few years. Despite winning quality and safety awards the Entourage disappeared and the 3rd generation Sedona quietly made some heavy traction on Sienna and Odyssey. I think Hyundai and Kia decided it was going to take market share from the two minivan leaders and made a tremendous value minivan that was as good if not better than the two leaders. The Kia strategy appeared to be a lower MSRP on the SX. When you looked at the MSRP comparison with Toyota and Honda, a reasonable buyer could not justify the "brand tax." Whereas some buyers were still stuck on Toyota and Honda being the better brand and they were willing to pay extra. In the case of the Telluride and
Palisade, I don't think they look as similar as the Entourage and Sedona did, so the Telluride and
Palisade could offer styling alternatives to some buyers. If you look at the Telluride being sold as just left hand drive, only manufactured in the US for the US, Canada and Middle East that makes me think that Kia is focusing on these market, while the
Palisade is being scaled up in South Korea for other markets as well as the US. The
Palisade being released in the US after the Telluride could be just an opportunity for Hyundai to take some of the potential spill over from the lack of Telluride supply.
I think the low MSRP on the top end trims was, in part, to not scare off potential new buyers to the brand, but it is also an incentive to some Kia dealers to make more if they can find those new buyers vs. the ones that make more on volume to the patient and more cost conscious buyers. It's just a different strategy, higher risk of alienating some buyers but higher reward when you find that willing buyer. When you look at some American brands of SUVs and Trucks, they have their $11,000+ off sticker price ads, that's not because those vehicles are more expensive to make, it's because the manufacturers set a higher MSRP so there are more discounts to be had (perceived value) if the free market demands and their supply is high. I call it the Heineken beer approach. When Heineken was first introduced in the US, it was a cheap priced beer and not very popular until they changed the bottles from brown to green and raised the price, then people thought it was a more premium beer, in reality it tasted the same and cost the same to make. Of course let's ignore a very poor choice of recent ad campaigns ignorant to the social climate implying that a lighter bottle and beer is better than a darker one.
I see this as an example of the brand consciousness and awareness of Kia deciding to change from the Black Edition to the Nightfall Edition (NightSky in Canada).
I think there is a point where a brand crosses over into general American acceptance. That's when you drive in all different neighborhoods and parking lots across the country and you see people of different presumed income levels driving that brand more and more. I think the
Palisade and the Telluride are those entry market vehicles that have brought the brands into the mainstream consciousness. LeBron James saw that in 2014 when some people thought it was a gimmick and he was just getting paid by Kia to drive a K900 and they would never drive a $66K Kia. Then when you actually read into it you find out that he's a really good businessman who makes very calculated brand and image decisions who saw Kia as an opportunity and decided he would pursue Kia to be a brand spokesperson because he saw the potential. So some of the fans who once thought Kia is a good used car for my teenager are now thinking, wow, Kia is actually a nice car for me. For a long time I drove a Hyundai and heard less informed car people mistakenly refer to Hyundai as the luxury brand of Kia and jokingly referring to it as the "Korean Cadillac". Now that Genesis is a real contender and people are more aware of Kia and Hyundai as different sister brands with different styling, the idea that Kia is just a budget entry level car is no longer a misconception. With more buyers and low supply it doesn't mean that dealer markups over a very low MSRP are ridiculous to everyone because perceived value is a real thing that people make decisions on. That's how housing and stock markets ebb and flow, but those markets have corrections and you end up taking a bigger loss when you overpay right before a correction or dip. With new vehicles people see it as a depreciating asset as soon as it drives off the lot so it comes down to how much are you willing and able to lose to get what you want. Some buyers have more means and a higher acceptable loss tolerance.
If I were a new buyer shopping for a top end EX or SX, I would be patient, but be very aware of getting my MY2021 order in before the MY2022 pricing comes out. Maybe the current pandemic slows down that timeline a little because of production numbers not being where they would have been. I don't see the low end Telluride trims growing, but I do anticipate a lot more options to justify a higher MSRP on the top end now that the free market is dictating the higher MSRP can be justified.
