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 robotics momentum overshadowed by sales decline
Visitors view Hyundai Motor's booth featuring its Atlas humanoid robot and other cutting-edge motility robots at a transportation technology exhibition at the Coex convenhion center in Seoul, June 24. Yonhap
By Lee Min-hyung
Carmaker forecast to report double-digit drop in operating profit
Hyundai Motor’s stock has surrendered much of this year's robotics-driven gains, as the carmaker's steeply falling vehicle sales shift investor focus back to the firm's core business.
The carmaker earned a spotlight from investors earlier this year on expectations that its robotics business — centered on humanoid robot development and physical artificial intelligence (AI) technologies — would become a new growth engine.
However, Hyundai Motor's shares have retreated sharply, erasing much of the premium that investors had attached to the company's long-term technology ambitions.
Market analysts and industry officials argue that the firm will be able to regain confidence from investors only after displaying a clear vision that its core automotive business can recover from the weakening sales.
Hyundai Motor recorded weak performance in the Korean market in the first half of the year. Domestic sales plunged 10.8 percent between January and June from a year earlier.
Hyundai Motor Group Executive Chair Chung Euisun, right, introduces the firm's vehicle lineup to Nvidia CEO Jensen Huang at the carmaker's headquarters in Seoul, June 8. Joint Press Corps-Yonhap
In April, Hyundai Motor temporarily surrendered the title of Korea's best-selling automaker to its sister carmaker Kia for the first time in nearly three decades.
The company's struggles stand in stark contrast to the rapid expansion of Tesla in Korea.
Tesla Korea's first-half sales jumped 192.2 percent from a year earlier to 56,139 vehicles, driven largely by strong demand for the China-built Model Y electric vehicle (EV).
Hyundai Motor, meanwhile, sold 39,575 EVs during the same period, falling far behind its U.S. rival, even though the Korean carmaker offers a broader lineup of EVs.
The weakening sales outlook comes as Hyundai Motor faces multiple external challenges. The company remains subject to a 15 percent U.S. tariff on automobile imports, raising concerns about profitability in one of its most important overseas markets.
Boston Dynamics' humanoid robot Atlas appears on a stage during a Hyundai Motor media event on the sidelines of this year's CES tech fair in Las Vegas, Jan. 5. Courtesy of Hyundai Motor
At home, labor negotiations are emerging as another source of uncertainty. Hyundai Motor's union has yet to reach a wage agreement with management. Prolonged negotiations could increase the likelihood of a strike during the second half of the year, potentially disrupting production.
The combination of slowing sales, higher trade costs and labor uncertainty has prompted securities firms to adopt a more cautious stance on the carmaker’s earnings outlook.
Kiwoom Securities lowered its target price for Hyundai Motor to 700,000 won ($464) from 750,000 won on Tuesday, saying it is becoming increasingly difficult to expect earnings growth this year following the profit deterioration accumulated during the first half.
Shin Yoon-chul, an analyst at Kiwoom Securities, noted that foreign investor ownership of Hyundai Motor has fallen dramatically.
"Foreign ownership exceeded 35 percent as recently as January, but has now dropped below 25 percent, representing a historically unusual level of foreign capital outflow," he said.
Hyundai Motor's IONIQ 5 flagship electric vehicle / Courtesy of Hyundai Motor
According to Shin, the valuation expansion fueled by expectations for physical AI at the beginning of the year has failed to gain lasting support from foreign investors.
The stock decline marks a sharp reversal from early June, when it climbed to a record high of 783,000 won per share on optimism surrounding the firm's robotics strategy, particularly the commercialization of Boston Dynamics’ Atlas humanoid robots and broader physical AI technologies.
Despite continued confidence in the carmaker's long-term robotics strategy, analysts argue that investors will demand tangible improvements in the company's automotive fundamentals before assigning another premium to its shares.
"The catalyst that brings foreign investors back is unlikely to be expectations for new businesses," Shin said.
He added that elevated oil prices, rising raw material costs and increasingly aggressive competition from overseas automakers entering the Korean market have all weighed on the company's underlying business fundamentals during the first half.
Market expectations for Hyundai Motor's second-quarter earnings have also deteriorated. The brokerage house expected Hyundai Motor to report an operating profit of 2.83 trillion won for the April-June period, down 21.4 percent from a year earlier.