[Hyundai Motor Conference Call] 3Q Operating Loss of 313.8 Billion KRW... "Result of Reflecting Quality Provisions" (Comprehensive)

[Asia Economy Reporter Seong Giho] Hyundai Motor Company recorded an operating loss of 313.8 billion KRW in the third quarter of this year, a decrease of 692.3 billion KRW compared to the same period last year. This was due to the decision to reflect quality provision costs in the third quarter results. This is the first time Hyundai has recorded an operating loss on a quarterly basis since adopting IFRS (International Financial Reporting Standards) in 2011. The operating profit margin fell by 2.5 percentage points year-on-year to -1.1%.

Compensation Costs of 3.4 Trillion KRW Weigh on Performance

On the 26th, Hyundai announced its third-quarter results at a management performance briefing: ▲Sales of 27.5758 trillion KRW (automobiles 21.4865 trillion KRW, finance and others 6.0893 trillion KRW) ▲Operating loss of 313.8 billion KRW ▲Ordinary loss of 362.3 billion KRW ▲Net loss of 188.8 billion KRW (including non-controlling interests).

Sales increased by 2.3% year-on-year to 27.5758 trillion KRW. Despite a decline in global wholesale sales, sales increased due to product mix improvement effects from expanded sales of high value-added vehicles such as SUVs and Genesis, and a sales expansion strategy focused on profitability that led to a decrease in incentives.

Earlier on the 19th, Hyundai announced that it would reflect quality cost provisions, including compensation costs related to Theta engine defects, in the third-quarter results. The provisions amount to 2.1 trillion KRW for Hyundai and 1.26 trillion KRW for Kia, totaling 3.36 trillion KRW for both companies.

From the beginning of this year to the third quarter, Hyundai's cumulative operating profit was 1.1403 trillion KRW, down 53.3% compared to the same period last year. During this period, sales decreased by 4.1% to 74.7543 trillion KRW.

A Hyundai official explained, "Operating profit turned to a loss in the third quarter due to the large-scale engine-related provisions," adding, "These engine-related provisions were applied using the most conservative standards, considering proactive customer protection and potential future increases in quality costs." He continued, "Excluding these quality costs, the third-quarter operating profit significantly exceeded existing market expectations."

Hyundai Motor Group headquarters./Photo by Hyunmin Kim kimhyun81@

"Sales Are Recovering... Quality Will Be Further Strengthened"

Global sales in the third quarter were 997,842 units, a 9.6% decrease compared to the same period last year. In the domestic market, despite the impact of COVID-19, sales recovered due to the extension of the individual consumption tax reduction and strong sales of new models such as the GV80, G80, and Avante, resulting in a 21.9% increase to 199,051 units compared to the same period last year. In overseas markets, excluding some markets such as China and India, demand continued to decline due to the ongoing impact of COVID-19, resulting in a 15.0% decrease to 798,791 units compared to the same period last year. Hyundai's cumulative sales for the third quarter (January to September) amounted to 2,605,189 units.

Regarding third-quarter sales, Hyundai explained, "Sales are recovering as global automobile demand improves following the easing of lockdown measures in major countries compared to the second quarter, but still declined year-on-year due to the ongoing impact of COVID-19."

The Genesis 'The New G70' unveiling event is being held on the 20th at the Genesis Suji Exhibition Hall in Yongin-si, Gyeonggi-do. The New G70 is the first facelift model of the G70, which was launched in 2017. Photo by Moon Honam munonam@

Announced Plans to Enhance Competitiveness in the Chinese Market... Genesis Launch Next Year

Along with the earnings announcement, Hyundai revealed plans to enhance sales and competitiveness in the Chinese market. Notably, the Genesis brand will be officially launched in China next year. To boost competitiveness in China, Hyundai introduced measures including new model launches, dealer network improvements, profitability enhancement, lineup adjustments, and strengthening future business.

Lee Kyungtae, Executive Director of the China Support Team, stated, "We plan to launch China-exclusive new models Mistra and Tucson in the first half of next year," adding, "In the second half, we will release a China-exclusive multipurpose vehicle (MPV) and a global electric vehicle."

He continued, "We will optimize dealer scale focusing on excellent dealers through dealer network improvements," and "introduce online sales methods to establish an integrated online-offline channel."

Regarding Genesis, Lee said, "We plan to officially launch the Genesis brand in the Chinese market next year to enhance its premium image," and "We will participate in the China International Import Expo (CIIE) in November this year to introduce the brand and conduct marketing activities ahead of the launch."

Clear Sales Recovery... Established Improvement Plans to Prevent Quality Issues

Regarding future business environment prospects, Hyundai stated that global automobile demand is gradually recovering from the negative impact of COVID-19, showing signs of sales recovery. However, concerns about second and third waves remain, and sales in emerging markets continue to be sluggish, while exchange rates are turning unfavorable.

Hyundai plans to focus on expanding market share and defending profitability through measures such as improving product mix by expanding sales of new models and SUVs with high added value, and promoting regional sales normalization plans.

Additionally, Hyundai intends to establish company-wide improvement plans to break the cycle of recurring quality issues and improve its operational system to detect quality problems early in the market and apply improvement measures from the development stage.

Meanwhile, to actively respond to changes in the automotive industry, Hyundai will launch Ioniq, an electric vehicle-exclusive brand, to further strengthen its competitiveness in the electric vehicle market. Furthermore, leveraging its world-class hydrogen vehicle competitiveness, Hyundai plans to solidify its position as a leading brand in the future electrification era.

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