Hyundai Motor, which closed overseas factories due to COVID-19, says "Difficult to expect a quick V-shaped recovery"

[Asia Economy Reporter Suyeon Woo] Hyundai Motor Company forecasted that a rapid 'V-shaped earnings recovery' would be difficult due to the economic downturn caused by the novel coronavirus infection (COVID-19). While the Korean and Chinese markets, where COVID-19 has relatively stabilized, remain solid, other overseas markets face increased uncertainty due to a sales cliff and production disruptions.

On the 6th, Hyundai Motor held an investor relations (IR) briefing for domestic and international analysts to explain the current sales status and key concerns, conveying this outlook. The briefing was organized to review the domestic and international situation after the COVID-19 outbreak and to explain to investors the causes and prospects of the stock price decline amid recent financial market volatility.

On this day, Hyundai Motor anticipated that the rapid 'V-shaped recovery' initially expected would be practically unattainable due to production stoppages at all overseas plants except those in Korea and China. This is because Hyundai, which had been confident in 'consolidating performance' this year following strong sales momentum in the domestic and U.S. markets since last year, encountered the obstacle of COVID-19 in the first quarter of this year.

Hyundai Motor's global sales (wholesale) in the first quarter were recorded at 1.03 million units, down 12.5% year-on-year, with the decline deepening to 22.4% in March. By country, March sales decreased in all countries except Korea and Russia, including China (-50%), Europe (-41%), India (-40%), and South America (-38%).

Hyundai Motor Company Global Wholesale Sales Status in March 2020 (Unit: Thousand Units, %)/Source: Hyundai Motor IR

However, it is positive that signs of recovery appeared in the Chinese market based on retail sales. While the overall Chinese automobile market's retail sales in March are expected to decrease by 54% year-on-year, Beijing Hyundai sold 34,890 units, down 22%. This decline is significantly less severe compared to February (-79%), when production at Chinese plants was halted due to COVID-19.

The domestic market also continues to show resilience due to the effect of new models and prompt individual consumption tax reductions. A Hyundai Motor official said, "There is a backlog of 44,000 units of Grandeur, 23,000 units of Palisade, and 22,000 units of GV80 in the domestic market," adding, "The decline in operating rates related to exports in April will be offset by the domestic market."

The problem lies in overseas markets such as the United States, Europe, India, and South America, where overseas plant shutdowns are prolonged. Hyundai Motor expects industrial demand in April to worsen further as most U.S. dealerships have ceased operations. In Europe, proper business activities are difficult for the time being due to state-of-emergency declarations by country, and in India, both production and sales have been halted nationwide due to movement restrictions.

Therefore, Hyundai Motor plans to focus on sales recovery and liquidity management mainly in regions with overseas plant shutdowns. Additionally, through smooth communication with domestic labor unions, the company intends to secure production flexibility by changing production plans on a weekly basis. A Hyundai Motor official stated, "Despite operating rates remaining below 30% in China, we are securing stable liquidity," and added, "Based on cash holding capacity, we will monitor liquidity risks by utilizing credit lines within U.S. and European subsidiaries."

New investments are expected to be delayed for the time being to manage liquidity. The official said, "As the situation is rapidly worsening, we are reviewing measures to prioritize investments and adjust budgets," but added, "However, we will try not to reduce essential parts for future mobility as much as possible."

Furthermore, despite liquidity concerns, Hyundai Motor emphasized that there will be no changes to workforce restructuring or shareholder return policy directions. Amid the COVID-19 impact, global automakers have recently shown signs of workforce restructuring. In contrast, Hyundai Motor stated, "We believe it is still premature to reduce personnel in domestic and overseas subsidiaries," and added, "We are not considering adjustments to shareholder return policies such as dividend changes at this time."

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