Hyundai Motor T1 punished by weak domestic sales, steps up efforts on hybrids, India – 04/25/2024 at 11:16

(Automatic translation by Reuters, please see disclaimer

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First-quarter profit beat analysts’ forecasts

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Building gasoline-electric hybrid vehicles at its Georgia EV plant

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He currently sees no signs of “UAW training” at his US production sites

(Adds bullet points, comments from earnings conference call, analyst comments) by Heekyong Yang and Ju-min Park

South Korean carmaker Hyundai Motor Co 005380.KS on Thursday warned of intensifying competition and an uncertain global economy after announcing a 2.4 percent drop in quarterly profit, hurt by a drop in domestic sales.

Hyundai’s cautious outlook and weak performance contrasts with the optimistic forecasts of its U.S. rivals such as General Motors GM.N and Ford Motor Co FN which this week reported strong profit growth due to stable prices and demand for gasoline-powered vehicles.

The carmaker, which outlasted rivals during the Great Recession more than a decade ago, is now facing short-term headwinds from its slowdown in China and weakening demand in South Korea.

“We expect competition among automakers to intensify, which will increase the cost burden… while global macroeconomic uncertainty also increases. We expect difficult business conditions to continue in the coming days,” Hyundai said in a statement.

The world’s third-largest automaker by sales, including its subsidiary Kia Corp 000270.KS , sold 1.5 percent fewer cars, or 1.007 million units, in the first quarter.

Sales in South Korea, its second-largest market after the US, fell 16% as consumers grappled with inflation and a weak economy.

Hyundai said domestic sales have also been affected by a temporary halt in production at its Asan plant, which is being renovated for the production of electric vehicles (EVs).

Auto sales in the US market rose by nearly 10%, following other legacy manufacturers enjoying strong profit growth.

Sales of hybrid vehicles rose 17% worldwide, reflecting growing consumer interest in cheaper vehicles rather than more expensive electric vehicles, prompting EV giant Tesla TSLA.O to announce this month its first decline in car sales in almost four years.

Hyundai said it will continue to expand its electrified model lineup globally by introducing more hybrids and new IONIQ EV models.

Chief Financial Officer Seung Jo Lee said on an earnings conference call that the company plans to add equipment to build hybrid vehicles at its EV plant in Georgia and that production will begin in the second half of this year.

“As we currently see an increase in demand for hybrid vehicles, Hyundai needs to think carefully about how long this trend will continue and how competitive it will be against rivals such as Toyota,” said Shin Yoon chul, an analyst at Kiwoom Securities.

Toyota 7203.T, whose sales rely far more on hybrids than any other major automaker, has seen its shares rise 35 percent this year and is expected to report strong quarterly results next month, driven by sales large hybrid structures.

Asked about the impact of Volkswagen’s Tennessee plant VOWG_p.DE joining the United Auto Workers on Hyundai’s U.S. production sites, Hyundai said it currently sees no signs of “UAW formation” at its production sites.

However, analysts warned that the UAW’s pressure on foreign carmakers’ factories in the US is likely to continue and may lead to Hyundai raising wages to prevent workers from joining the union.

FOCUS ON INDIA

After suffering a severe backlash in China due to increasing competition from strong domestic rivals, Hyundai is redoubling its efforts to establish a foothold in India.

Hyundai, which was China’s third-largest carmaker behind Kia in 2009, sold just 2,200 vehicles in the world’s biggest car market last year, part of its annual sales of 4.2 million yuan.

It will launch its first electric cars made in India by 2025, Hyundai said on Thursday, as it seeks to strengthen its presence in the nascent space dominated by Tata Motors TAMO.NS.

Hyundai Motor Group Executive Chairman Euisun Chung this week visited India, where Hyundai is the second-largest carmaker and is considering an IPO of its domestic unit, to discuss medium- and long-term strategies.

Hyundai reported a net profit of 3.2 trillion won ($2.32 billion) for January-March, down from 3.3 trillion won a year earlier but above the average forecast of 3.0 trillion won from LSEG SmartEstimate.

Revenue rose 7.6 percent to 41 trillion won, thanks to strong exports and a weaker local currency that also boosted repatriated profits.

Hyundai Motor shares closed 1.0% lower, compared with a 1.8% drop in the KOSPI benchmark.

.KS11 . (1$=1,376.4100 won)