Hyundai Motor Co. on Thursday reported its worst quarterly profit margin for this year, despite delivering its highest-ever revenue for a third quarter, on the back of a drop in sales volume and aggressive sales promotion in overseas markets.
Sports utility vehicles and high-end cars such as Genesis and hybrid models led its sales higher as the softening Korean won made its vehicles more affordable than other foreign brands.
But hefty sales incentives it offered in the US and Europe, including the warranty extension for the Santa Fe SUV, ate away at its profit margins, while rising inflation increased labor costs.
Its operating profit slid 6.5% on-year to 3.6 trillion won ($2.6 billion) in the July-September quarter on a consolidate basis, down 36.5% from the same period of last year. It missed the market expectation of 3.9 trillion won.
Operating profit margin came in at 8.3%, compared with 9.5% in the second quarter and 8.7% in the first quarter of this year.
In comparison, its revenue rose 4.7% on-year to 42.9 trillion won ($31 billion) in the quarter, in line with the market consensus. It marked the strongest revenue for a third quarter in its history.
(Graphics by Dongbeom Yun)
Hyundai Motor’s global sales decreased by 3.2% on-year to 1,011,808 units in the third quarter. Hybrid vehicles accounted for over 10% of them.
In North America, the warranty extension for Grand Santa Fe (Maxcruz) was blamed in large part for profit margin falls, incurring additional liabilities of 320 billion won.
In the domestic market, its sales edged up 1.8% to 169,901 units, led by SUVs and hybrids such as the revamped Santa Fe hybrid.
(Graphics by Dongbeom Yun)
Hyundai gave a cautious outlook, citing a slowing economy, the won’s weakness and interest rate cuts, as well as escalating geopolitical risks such as the conflict in the Middle East and the prolonged war between Ukraine and Russia.
The intensifying competition with Chinese electric vehicle makers will pose a threat to Hyundai amid a prolonged EV chasm, or a slowdown in demand.
As part of cost-cutting efforts, Hyundai is considering replacing some EV batteries with lithium iron phosphate (LFP), cheaper than ternary batteries, a Hyundai Motor executive said on its earnings conference call.
The facelift of the Santa Fe SUV was launched in 2023
GUIDANCE
It sticks to its operating profit margin guidance of 8-9% for all of 2024.
“Taking into account the fourth quarter, we believe we can meet our operating profit margin guidance of 8-9%,” the executive added.
It has decided to pay 2,000 won in dividend per share for the third quarter, matching its dividend payments in the first and second quarters.
By Jae-Fu Kim
hu@hankyung.com
Yeonhee Kim edited this article
