Weak home sales a blow to Hyundai
South Korean car maker Hyundai Motor warned on Thursday of intensifying competition and uncertain global economic conditions after posting a 2.4% drop in quarterly profit, hit by a domestic sales plunge.
Hyundai’s cautious outlook and weak performance contrast with bullish forecasts from its US rivals such as General Motors and Ford Motor, which this week reported strong profit growth thanks to stable pricing and demand for petrol-engine vehicles.
The once-stellar performer that outdid rivals in the global economic downturn more than a decade ago faces strong nearterm headwinds from its shrinking exposure to China and faltering demand in South Korea.
“We expect competition among carmakers to intensify, raising related cost burden, while global macroeconomic uncertainty is also growing. We expect challenging business conditions to continue going forward,” Hyundai announced.
The world’s No3 carmaker by sales along with affiliate Kia sold 1.5% fewer vehicles, delivering 1.007-million units in the first quarter.
Sales in South Korea, its second-biggest market after the US, slumped 16%, as consumers grappled with surging inflation and a weak economy.
Hyundai said domestic sales were affected by the temporary suspension of production at its Asan plant, which is being revamped for production of electric vehicles (EVs).
Vehicle sales in the US market jumped nearly 10%, tracking other legacy carmakers that are enjoying strong profit growth.
Sales of hybrid vehicles jumped 17% globally, underscoring consumers’ growing interest in more affordable vehicles over more expensive pure electric cars that led EV giant Tesla to report this month its first vehicle sales drop in nearly four years.
Hyundai said it would keep expanding its electrified model line-ups globally by introducing more hybrids and new IONIQ EV models. CFO Seung Jo Lee said in an earnings call that it planned to add equipment to build hybrid vehicles at its EV plant in Georgia. Production would start in the second half of this year.
“While we are currently seeing growing hybrid car demand, Hyundai needs to carefully factor in how long this trend would last and its competitiveness against rivals such as Toyota,” Shin Yoon chul, an analyst at Kiwoom Securities said.
Hyuandai is doubling down on India. The third-biggest car maker along with Kia in China in 2009, Hyundai sold just 2,200 cars in the world’s biggest vehicle market last year, a fraction of its total annual sales of 4.2-million units.
The South Korean group reported a net profit of 3.2-trillion won ($2.32bn) for JanuaryMarch, down from 3.3-trillion won a year earlier, but ahead of an average forecast of 3.0-trillion won by LSEG SmartEstimate.
Revenue rose 7.6% to 41-trillion won, helped by solid overseas sales and as a weaker local currency boosted repatriated earnings. Hyundai Motor’s share price was 1.0%, at the close of trade versus a fall of 1.8% in the benchmark Kospi.