Hyundai Mobis Q1 Operating Profit Down 26.9%... "Impact of COVID-19"

[Asia Economy Reporter Kiho Sung] Hyundai Mobis announced that it recorded sales of 8.423 trillion KRW, operating profit of 360.9 billion KRW, and net profit of 348.8 billion KRW in the first quarter of this year. Compared to the same period last year, sales decreased by 3.6%, and operating profit and net profit fell by 26.9% and 28.2%, respectively.

Hyundai Mobis disclosed these first-quarter business results on the 24th. The decline in performance is analyzed to be due to the direct impact on its core business of module and key parts manufacturing caused by the novel coronavirus disease (COVID-19). In fact, despite a 22.2% increase in sales of electrification parts, the overall sales of the module and key parts division fell by 5.7% to 6.5361 trillion KRW due to a decrease in finished vehicle production.

As production volume of modules and key parts decreased, the operating profit of this business division turned to a loss of 89.9 billion KRW due to the effects of fixed costs and increased R&D investment to strengthen future technologies. Accordingly, the overall operating profit also declined by 26.9%.

Orders from global finished vehicle customers outside Hyundai and Kia also reached only 380 million USD, about 14% of the annual plan, due to the impact of COVID-19. This was because some order schedules in the global local finished vehicle industry were delayed. Hyundai Mobis plans to strengthen order activities centered on the Chinese market, which is showing signs of recovery from the COVID-19 impact from the second quarter onward.

A Hyundai Mobis official explained, “The biggest impact on performance in the first quarter, which was the early stage of the COVID-19 crisis, was a 55.7% drop in module and parts sales in the Chinese market, but as the situation prolonged globally, there are concerns that the stagnant atmosphere in global markets centered on the Americas and Europe will have a greater impact on second-quarter results.”

He added, “We will continue efforts not only in emergency management and profit improvement activities but also to strengthen core competitiveness during this crisis.”

Meanwhile, Hyundai Mobis also announced plans for new R&D base investments through this disclosure. To respond to technology trends and expand global market share, it plans to strengthen technological capabilities in autonomous driving, connectivity, and electrification fields.

First, about 300 billion KRW will be invested to develop the domestic Uiwang Research Center into a core base specialized in future vehicles, such as electrification parts and module competitiveness. Approximately 42,000㎡ of idle land within the Uiwang Research Center will be purchased to enhance the competitiveness of electrification system unit technology and key parts development over the next three years.

As Hyundai Mobis’s domestic R&D personnel approached 4,000 and research facilities became insufficient, various alternatives were reviewed, and the Uiwang Research Center, which has already been verified as a large-scale safety environment facility, was finally selected. The Uiwang Research Center houses major affiliates researching Hyundai Motor Group’s advanced technologies, which is expected to create synergy, and accessibility to Hyundai Mobis’s global R&D headquarters, the Mabuk Research Center in Yongin, and the Seosan driving test site was also considered.

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