Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Kia’s profit halves amid expanded US tariff shock
Headquarters of Hyundai Motor and Kia in Seoul / Courtesy of Hyundai Motor Group
By Lee Min-hyung
Carmaker set to diversify hybrid lineup, increase EV sales to mitigate tariff risk
Kia has extended a losing streak in its quarterly earnings between July and September, bearing a large-scale loss stemming from the 25 percent auto tariff set by the United States, the carmaker said Friday during a regulatory filing.
The carmaker suffered a bigger earnings shock than Hyundai Motor, which saw its operating profit decline almost 30 percent from the same U.S. tariff issue.
Kia reported an operating profit of 1.46 trillion won ($1.02 billion) in the third quarter, down 49.2 percent from the previous year. Its sales, however, increased 8.2 percent to 28.68 trillion won during the same period.
The carmaker explained that it achieved record third-quarter sales thanks to growing demand for its hybrid and electric cars across the globe, but ended up reporting a sharp profit fall due to the aftermath of the U.S. auto tariffs, increased global incentives and an unfavorable macroeconomic environment.
Kia, a fast mover in the global electric vehicle (EV) market, achieved solid EV sales growth in the global market. Data from the carmaker showed that the carmaker’s eco-friendly vehicle sales jumped 32.3 percent to 204,000 vehicles during the same period.
Kim Seung-jun, senior vice president and chief financial officer at Kia, remained optimistic over its sales growth despite the tariff-sparked profit decline.
“We were exposed to the full-scale U.S. tariff shock in the third quarter,” Kim told investors during a conference call, adding that the carmaker had to pay 1.2 trillion won to cover the tariff.
“However, Kia achieved meaningful sales growth particularly in the U.S., and our sales figure is on a track for rapid growth globally,” Kim said.
Kia's EV3 compact electric SUV / Courtesy of Kia
Kia is also widely expected to attain a major earnings rebound in the fourth quarter, as Korea and the U.S. recently reached a detailed tariff agreement. This allows Kia to pay a reduced auto tariff of 15 percent when exporting vehicles to the U.S.
Even if the U.S. tariff still comes as a major risk factor to the carmaker, it shared plans to tackle the unfavorable trade environment by increasing sales for highly sought-after hybrid cars and value-added SUVs with higher margins.
“We will particularly build a flexible production system in the U.S. to rapidly deal with any changes in the local auto demand and regulatory landscape,” an official from the carmaker said. “Kia will also continue to equip popular models with hybrid powertrains in line with strong demand for the eco-friendly cars.”
In Europe, the carmaker said it will keep enhancing its brand identity as a competitive EV maker with diverse lineups ranging from the compact EV3 electric SUV to the midsized EV5 family SUV.