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 Q2 earnings dented by supply disruptions
Headquarters of Hyundai Motor and Kia in Seoul / Courtesy of Hyundai Motor Group
By Lee Min-hyung
Carmaker pins hopes on new models to revive sales
Hyundai Motor reported a 20.8 percent decline in second-quarter operating profit Thursday, as production disruptions — caused by a fire at its key supplier's plant — compounded the impact of slowing global vehicle demand.
In a regulatory filing, the carmaker reported an operating profit of 2.85 trillion won ($1.94 billion) between April and June. Its sales edged up 1.9 percent to 49.2 trillion won during the same period.
The weakening profit reflected softer global automobile demand, but was also affected by production disruptions stemming from a major fire in March at its key auto parts supplier. The incident disrupted components supply and constrained vehicle output during the quarter.
Hit by the fire, the carmaker’s domestic sales dropped 16.4 percent to 157,647. Hyundai Motor also reported a fall of 4.9 percent in its vehicle sales abroad amid an unfavorable management environment triggered by shrinking vehicle demand.
Despite the earnings decline, Hyundai expressed confidence in achieving a major rebound in the second half, supported by a broad lineup of new vehicle launches across its major markets.
“The parts supply disruption particularly dealt a particular blow to production of Genesis vehicles, but operations have since returned to normal," Lee Seung-jo, executive vice president at Hyundai Motor, said during a conference call.
"We plan to make up for the lost output by increasing production in the second half of the year."
Hyundai Motor's redesigned Avante compact sedan / Courtesy of Hyundai Motor
The carmaker also pledged to rev up its sales and boost profitability with new models, such as the facelifted Grandeur flagship sedan, fully redesigned Avante compact sedan and new Genesis vehicle, Lee said.
In Korea, the company plans to bolster sales with the facelifted Grandeur sedan, while in North America, it expects redesigned versions of its two cash-cow models, the Elantra compact sedan and Tucson SUV, to drive an earnings recovery in the third quarter.
Hyundai Motor also plans to begin European sales of the IONIQ 3, its entry-level electric vehicle (EV), in the latter half of the year, as it seeks to expand its EV presence in the region amid a toughening rivalry from Chinese competitors.
The carmaker also set a sales target of the new EV at 20,000 this year. The vehicle was designed exclusively for the European market.
Hyundai Motor's IONIQ 3 electric vehicle is displayed during Milan Design Week in Italy, April 20. The model is designed exclusively for Europe. Reuters-Yonhap
“We faced a negative management environment in the second half due to the geopolitical uncertainty and temporary parts supply disruptions, but we will flexibly deal with diverse demand from each market with our region-specific product portfolio,” an official from the carmaker said.
Despite the profit drop, the carmaker’s second-quarter sales reached a record high on robust sales of its value-added lineups, such as hybrid cars.
According to the carmaker, its hybrid car sales set a new quarterly high of 187,661 in the second quarter. The number of all-electric vehicle sales also came in at a robust figure of around 70,000 vehicles.