S&P: "China Parts Supply Disruption Negatively Impacts Hyundai and Kia Motors' Earnings"

[Asia Economy Reporter Hyunseok Yoo] The international credit rating agency Standard & Poor's (S&P) has predicted that the first-quarter earnings of Hyundai Motor and Kia Motors will be negatively affected due to parts supply disruptions caused by the novel coronavirus (Wuhan pneumonia) outbreak.

In a report released that day, S&P stated, "Due to supply disruptions of the automotive part 'wiring harness,' Hyundai Motor has mostly halted operations on its domestic factory production lines until the 11th of this month, and Kia Motors has also started production cuts," adding, "As a result, the overall production process in the first quarter will face increased burdens, and profitability pressures will intensify."

It continued, "S&P plans to closely monitor whether the impact will materialize on the sports utility vehicles (SUVs) and premium models that have driven the profitability recovery of both companies over several past quarters," and said, "If the two companies inevitably switch their parts suppliers from China to partners in other countries, it will take at least several weeks or more."

Furthermore, it analyzed, "Considering the locations of Hyundai Motor and Kia Motors' local factories in China, the direct impact of the novel coronavirus outbreak will be smaller compared to other global automakers," but added, "However, given the highly localized supply chains and the Chinese government's extension of the Lunar New Year holiday, avoiding production disruptions in China will be difficult."

It also forecasted, "In this challenging environment, the decline in automobile demand could become an obstacle for Hyundai Motor and Kia Motors, who are aiming for a rebound in the Chinese market," and predicted, "The joint ventures of Hyundai Motor and Kia Motors in China are unlikely to achieve meaningful performance recovery until next year."

This content was produced with the assistance of AI translation services.