(Bloomberg) — Hyundai Motor Co. reported third-quarter earnings that beat analyst forecasts thanks to strong sales of luxury models and electric vehicles, as well as the Korean won’s continued weakness.
Consolidated operating profit for the three months through September rose 146% from a year earlier — when the company booked one-off warranty provisions — to 3.8 trillion won ($2.8 billion), beating the 3.6 trillion won mean estimate from 24 analysts. Sales rose 8.7% to 41 trillion won.
Hyundai said it sold nearly 169,000 electrified models in the period, an increase of more than 33% from a year earlier. Total global vehicle sales topped 1.04 million, rising about 2% outside Korea, helped by strength in North America, Europe and India, it said. But they fell 33% in China.
The company acknowledged a suite of potential threats to its business, including rising interest rates and inflation, an economic slowdown, turmoil from military conflicts and wage pressure tied to union activities. Still, it said sales momentum should gain thanks to improved production, strong demand for key brands and lower inventory levels.
Sales of luxury models, including Genesis and sport-utility vehicles, accounted for almost 60% of the quarterly total, while battery-powered vehicles accounted for 6.3%. The won weakened about 2.4% against the dollar in the quarter.
Hyundai also announced 1,500 won per share cash payout to shareholders, or 0.8% yield for common-stock investors.
Hyundai said it plans to introduce more EV models globally, including the Kona EV, Genesis GV60, Electrified G80 and GV70, as well as its Ioniq 6. The fifth-generation Santa Fe SUV should help sales momentum this year, it said.
Revenue and profit for the year will reach the upper range of its guidance, the company said, as US sales — driven by the popularity of luxury models like Genesis and Palisade and electric vehicles — hit a record high.
“Dealers in US loved our new Santa Fe model, and we expect it to gain popularity later this year,” said Seo Gang-Hyun, a Hyundai vice president, adding that the carmaker is spending less on incentives for gasoline-powered vehicles in the US than rivals. “We have established a successful communication system with our local design center and R&D center to reflect what local consumers want in US.”
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While Hyundai acknowledges the risk of a global recession and slowing demand for EVs, it has no plan to change its production of the battery-powered cars.
“EV sales could be lower-than-expected next year,” Seo said. “But it won’t affect total revenue because of our flexibility in adjusting production” of electric and gas-powered cars, he said.
“We don’t plan to radically reduce our planned sales for EVs,” he said. “We still believe the market is going into EVs.”
The company’s EV approach is noteworthy, said Kim Jin-Woo, an analyst at Korea Investment & Securities.
“It’s impressive that Hyundai maintained its EV strategy, without joining the recent trend of withdrawing or delaying productions,” Kim said. “They are probably confident of EVs because sales of the battery-powered cars don’t account for a large portion of their revenue yet and they believe they are competitive on quality.”
The Israel-Hamas war will hit Hyundai’s earnings in the next quarter, he said, given that it’s one of the top carmakers in the country. The company sells around 5,000 vehicles there per quarter.
Another risk is that the United Auto Workers strike may lead to a wage hike at Hyundai’s plants in Georgia and Alabama, he said.
“We don’t belong to UAW, but probably we should talk to our employees for wage negotiations,” he said. “But although Ford Motor Co. agreed on a 25% hike, that doesn’t mean we should go with the same amount.”
Ford Agrees to 25% Wage Hike in Tentative Deal to End UAW Strike
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A Hyundai Motor Co. Ioniq 5 electric vehicle during a test drive in Tokyo, Japan, on Saturday, Jan. 29, 2022. The last time Hyundai Motor sold a car in Japan was in 2009, when it pulled out after years of dismal sales. Now, South Korea’s top automaker is back, but with a twist: it’s only going to sell electric vehicles, and only online. , Bloomberg
(Bloomberg) — Hyundai Motor Co. raised its target for revenue and profit for this year as favorable foreign-exchange rates and rising popularity of premium models helped growth.
The South Korean automaker is aiming for revenue growth of as much as 15% this year, up from the 11.5% target announced in January. Hyundai also increased its target for operating profit growth to 8%-9%, from an earlier goal of 6.5%-7.5%. The upgrade came after record second-quarter earnings, which beat analyst estimates.
Operating profit rose 42% to 4.2 trillion won ($3.3 billion) in the three months ended June 30, compared to the 3.8 trillion won expected by analysts, according to data compiled by Bloomberg. Sales jumped 17% to 42 trillion won, the Seoul-based company said in a statement Wednesday.
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The shortage of automotive semiconductors has eased, leading to improvement in production, while Hyundai’s inventories in major car markets are still low, the company said. Hyundai expects solid sales growth due to the waiting orders, but geopolitical risks and higher interest rates remain as risks, it added.
“We’ve sold more than 200,000 Genesis cars annually and cemented our leadership in sport utility vehicles,” Executive Vice President Seo Gang-Hyun said on an earnings call. “Even if the global economy slows, we don’t think we will shift to selling cheaper models.”
Hyundai sold a total of 1.06 million cars globally during the quarter, up 8.1% from a a year ago. Sales in North America climbed 11.3%, while European deliveries rose 4.5%. China gained 45%, and India advanced 7.7%. Sales in Latin America dropped 14%.
Retail sales in Russia, where Hyundai used to get about 5% of revenue, declined 32%. Hyundai suspended its plant in St. Petersburg last year.
Sales of luxury models, including Genesis, Palisade and the Ioniq 5 electric car accounted for almost 70% of total sales in the quarter. Sales of battery-powered vehicles accounted for 7.4%.
The combined market share of Hyundai and affiliate Kia Corp. in the US jumped to around 11% this year, compared to 7.3% in 2018, according to Kim Jin-Woo, an analyst at Korea Investment & Securities. Still, for EV sales, Hyundai is paying large incentives of around $5,000 per car to US dealers because it doesn’t qualify for tax credits.
“We are now spending most of our incentives for EV sales,” Seo said. “Tesla is aggressively leading a price war.”
To receive credits from the Biden administration, Hyundai is planning to start operating its own EV plant in Georgia as early as the end of 2024.
Hyundai also unveiled details of its dividend policy that offers cash payouts of 1,500 won per share. The automaker’s one-year forward dividend yield is projected to be 3.6%, higher than the average 2.3% of Kospi 200 members, according to Bloomberg Dividend Forecasts.
Investors are concerned about global growth for 2024, which may hurt demand for autos, according to Hyun-Soo Lee, an analyst at Yuanta Securities Korea. There’s a risk that Hyundai’s union may strike this year, Kim at Korea Investment & Securities said.
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