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.
Hyundai Motor’s earnings marred by tariff impact
Headquarters of Hyundai Motor and Kia in Seoul / Courtesy of Hyundai Motor Group
By Lee Min-hyung
Carmaker's operating profit drops 30.8 percent in Q1
Hyundai Motor reported a double-digit decline in operating profit for the first quarter of the year, as U.S.-imposed tariffs on imported vehicles continued to weigh on the Korean automaker's earnings, the company said in a regulatory filing Thursday.
The carmaker's sales rose 3.4 percent to 45.94 trillion won ($31 billion) between January and March, compared to the same quarter last year, thanks to an increase in prices. Its operating profit, however, fell 30.8 percent to 2.51 trillion won during the same period, putting sustained pressure on the firm’s profitability.
The U.S. began imposing a 25 percent tariff on Korean automobile imports in April last year, before lowering the rate to 15 percent in November. U.S.-imposed tariffs caused the carmaker an estimated 860 billion won in losses in the first quarter.
The carmaker sold 976,219 vehicles in the first quarter, down 2.5 percent from a year earlier, hit by sluggish demand from major markets.
Hyundai Motor said they expect unfavorable business conditions to persist in upcoming quarters as competition in emerging markets intensifies and macroeconomic uncertainties continue here and abroad.
The carmaker is moving to offset tariff risks by increasing production in the U.S. Hyundai Motor Group Metaplant America, which started operations last year, is at the center of its drive for localized production.
Hyundai Motor plans to increase its annual production capacity to 1.2 million vehicles by 2030, by which time it believes 80 percent of its U.S. sales can be produced locally.
Hyundai Motor's IONIQ 6 all-electric sedan / Courtesy of Hyundai Motor
The carmaker was also exposed to heightened uncertainties due to armed conflict in the Middle East.
“Prices for raw materials, such as steel and lithium, turned upward in the first quarter due to the aftermath of the Middle East crisis,” Lee Seung-jo, executive vice president at Hyundai Motor, told investors during a conference call.
An official from Hyundai Motor said the company’s global market share rose despite the unfavorable external business conditions.
“Despite a slowdown in global demand driven by geopolitical issues and temporary factors that undermined profitability, Hyundai Motor’s global market share increased by about 0.3 percentage points, from 4.6 percent to 4.9 percent,” the official said. “In the U.S., our market share also rose by 0.4 percentage points, from 5.6 percent to 6.0 percent.”
Hyundai Motor said it has been responding flexibly to shifting market demand through a diversified powertrain strategy that encompasses eco-friendly vehicles, including electric vehicles and hybrid cars.
The company plans to simultaneously boost sales and improve profitability by strengthening its core lineup and introducing upgraded models with enhanced features.
Hyundai Motor said will continue to respond flexibly to market changes by accelerating its transition to electrification, expanding high value-added models and implementing region-specific strategies tailored to local demand.