Hyundai Kia 2Q Earnings, Domestic Market Holds Up Despite Direct Hit from COVID-19 (Comprehensive Report 2)

[Asia Economy Reporter Suyeon Woo] Due to a decline in overseas sales caused by the novel coronavirus infection (COVID-19), Hyundai Kia Motors' operating profit in the second quarter sharply dropped to about half compared to the previous year. Although the domestic market, which showed favorable performance due to new car effects, defended the results, it was insufficient to offset the decrease in overseas sales.

On the 23rd, Hyundai Motor Company announced that its operating profit for the second quarter of this year was 590.3 billion KRW, a 52.3% decrease compared to the same period last year. During the same period, sales amounted to 21.859 trillion KRW, and net profit was 377.3 billion KRW, down 18.9% and 62.2%, respectively. Kia Motors also saw its second-quarter operating profit fall by 72.8% to 145.1 billion KRW, with sales of 11.3688 trillion KRW and net profit of 126.3 billion KRW, down 21.6% and 75%, respectively.

This is due to the fact that overseas market sales were virtually paralyzed in the second quarter due to COVID-19, causing a sharp decline in sales volume. Hyundai Motor's overseas sales in the second quarter were 478,424 units, down 47.8% year-on-year, while Kia Motors sold 354,502 units overseas, down 27.8%.

By market, wholesale sales for Hyundai Motor showed double-digit declines compared to the previous year in all markets except the domestic market, including North America (-37%), Europe (-52%), India (-77%), and China (16.4%). Kia Motors also experienced a sharp drop in sales in North America (-40%) and Europe (-50%), with relatively larger declines in emerging markets.

Hyundai Motor Company 2020 Q2 Global Wholesale Sales Status / Source=Hyundai Motor Company

On the other hand, the domestic market, which successfully responded to COVID-19 quarantine measures, saw sales increase during the same period. Hyundai Motor's domestic sales in the second quarter recorded 225,552 units, up 12.7% year-on-year, while Kia Motors sold 161,548 units, up 26.8%.

New models such as Hyundai's Avante, Genesis GV80 and G80, as well as Kia's Sorento, gained explosive popularity, leading to improved profitability. In particular, the Genesis brand showed a good response in the domestic market, recording the highest-ever sales share of 16.2% in the second quarter.

The head of Kia Motors' IR team said, "The continued effect of new cars and the absorption of reduced export volumes from domestic factories into domestic sales had a significant impact," adding, "Profitable domestic sales helped to largely offset losses caused by the decrease in overseas volumes." Buoyed by this favorable trend, Hyundai Motor Group forecasts the domestic automobile market size this year to be about 1.79 million units, a 0.3% increase compared to the previous year.

However, in overseas markets where the impact of COVID-19 continues, market demand is unlikely to recover to previous levels in the short term. Dongheon Lee, Managing Director of Hyundai Motor Group's Global Management Research Institute, predicted, "Since both advanced and emerging markets are simultaneously sluggish due to this COVID-19 situation, the global automobile market is expected to recover to last year's level (87.56 million units) around 2023."

Despite the market slump caused by COVID-19, Hyundai Kia Motors plans to focus on defending profitability through new car launches in overseas markets, improving high value-added mix, and normalizing sales by region. Sanghyun Kim, Executive Vice President and Head of Hyundai Motor's Finance Division, said, "In the second half of this year, we will continue proactive liquidity management while maintaining the successful launch of major new cars, and make company-wide efforts to expand market share and improve profitability during the demand recovery period."

Joojeong Joo, Executive Vice President and Head of Kia Motors' Finance Division, also said, "As of July, dealer network operations in the global market have nearly normalized to 94%," adding, "Internally, we will continue the emergency management system and strive to minimize the impact of external variables while maintaining a stable cost structure."

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