Hyundai Motor to bounce back in Q4
The 2019 Genesis G70 luxury sports sedan / Courtesy of Hyundai Motor
By Park Jae-hyuk
Hyundai Motor, which posted a third-quarter earnings shock Thursday, will likely bounce back in the final three months of the year on strong sales of its new large SUVs and premium sedans, analysts said Friday.
The nation's leading carmaker posted 288.9 billion won ($252.8 million) in operating profit in the third quarter, a 76 percent decline from a year earlier.
The company cited its marketing campaign during the World Cup, recall of airbag control units and development of knock sensor detection system (KSDS) as reasons for the decline, saying the factors resulted in a temporary increase in costs.
The decreasing demand for cars in the U.S. market, concerns about a U.S.-China trade war and depreciation of currencies of Brazil and Russia were also mentioned as reasons.
“The cost of quality in the third quarter includes the introduction of KSDS and expenses for customer care,” a Hyundai Motor official said. “The spending is pre-emptive investments, so we will be able to cut our quality-related costs in the future, improving our profitability.”
Securities analysts expect Hyundai Motor will post 1 trillion won in quarterly operating profit again.
“Based on enhanced capacity utilization of its U.S. factories, the company showed a 14 percent increase in its sales in the U.S. during the third quarter,” Korea Investment & Securities analyst Kim Jin-woo said. “It will post 1 trillion won in operating profit in the fourth quarter, thanks to the increase in business days, sales and capacity utilization of its U.S. factories.”
Analysts say the release of new vehicles in the U.S. market will speed up the automaker's recovery.
“Car sales in the fourth quarter will be satisfactory due to the increase in business days in Korea. Also, Hyundai Motor will reduce incentives in the U.S. market after the release of new vehicles,” KTB Investment & Securities analyst Lee Han-joon said.
Hyundai Motor suffered a decline in profitability in the previous quarter as it offered a huge amount of incentives to North American customers for inventory clearance.
The Hyundai Motor Santa Fe SUV / Courtesy of Hyundai Motor
The company aims to bounce back in the fourth quarter with its new SUVs and luxury vehicles.
“As we will begin selling the new Santa Fe in the U.S. market and will release the Tucson facelift there, we will focus on bolstering sales of our new SUVs. In China, we will also make every effort to increase sales during the peak season,” the Hyundai Motor official said.
“There will be growth in sales of the Genesis brand in the fourth quarter as we will release the EQ900 facelift in Korea and the G70 in the U.S. In addition, vehicles with the smart stream, third-generational platform and new design will go on sale starting next year.”