Auto Stocks Slow Down... Taking a Brief 'Breather'

Hyundai Motor, 5.28% Rise This Month Among Top Market Cap Stocks Despite Weak Uptrend
Q3 Loss Due to Provision Impact
Overseas New Models Could Drive Rebound Next Year
Kia Also Maintains Optimism Despite Strike Uncertainty
Expectations Remain for Next Year's New Model Effect

[Asia Economy Reporters Song Hwajeong and Lee Minwoo] Despite the KOSPI reaching an all-time high and continuing its strong performance, automobile stocks have not been particularly noticeable. Although they experienced a strong upward trend in the second half of the year, they seem to have entered a pause recently. Given the growth of the electric vehicle market and positive outlook for next year, there are expectations that stock prices will prepare to rise again.

According to the Korea Exchange on the 26th, Hyundai Motor closed at 179,500 KRW, down 0.83% from the previous trading day. While the KOSPI rose 13.10% since the beginning of this month, Hyundai Motor only increased by 5.28% during the same period. Among the top 10 companies by market capitalization, it showed one of the weakest performances alongside Naver (-2.45%) and LG Household & Health Care (1.11%).

This contrasts with other top 10 market cap stocks that recorded double-digit gains. Celltrion (34.97%), LG Chem (26.48%), Samsung SDI (22.27%), and SK Hynix (22.11%) all rose more than 20% during this period. Samsung Electronics, the top domestic market cap leader, also hit a new high with an 18.75% increase. Compared to Kia Motors, Hyundai’s growth rate is modest. Kia Motors closed at 59,000 KRW the previous day, up 15.56% from the 2nd of this month. On the 13th, it surged to 61,800 KRW intraday, marking its highest price since August 6, 2014.

The sluggish performance is attributed to recording a loss in the third quarter due to large-scale provisions. Hyundai Motor posted an operating loss of 313.8 billion KRW in Q3 this year. This is a significant decrease compared to the operating profit of 378.5 billion KRW in Q3 last year. Although the company reduced costs across the board to cope with the recession caused by COVID-19, it had to set aside a large provision of 2.1352 trillion KRW related to the Theta2 engine recall.

There is a forecast for a rebound starting next year when new car launches overseas become full-scale. From next year, new models such as the GV70, GV80, and G80 will be actively sold in overseas markets. Moon Yongkwon, a researcher at Shin Young Securities, said, "The Genesis lineup, which is entirely exported from Korea, and the 'E-GMP' platform electric vehicles will raise the domestic export ASP next year," adding, "Representative models like Avante and Tucson will also contribute to profitability improvement as overseas sales normalize after COVID-19."

Kia Motors has shown a pause after hitting a record high on the 13th. As of 9:45 AM on the day, Kia Motors was trading at 58,400 KRW, down 1.02% (600 KRW) from the previous day. This marks a decline of over 1% for two consecutive days. Compared to the record high, it has fallen by 5.5%.

Despite recording solid results in Q3 including quality costs and reflecting expectations for new cars, Kia Motors, which was close to entering the top 10 by market capitalization, appears to be negatively affected by recent strike impacts on its stock price. The previous day, Kia Motors announced that partial production disruptions for all models would occur until the 27th due to a partial strike related to labor-management negotiations. The sales amount for the affected production areas is 33.8578 trillion KRW, which corresponds to 58.23% of recent sales.

Although there is uncertainty due to the strike, expectations remain high for the effect of new cars next year. Kim Junsung, a researcher at Meritz Securities, said, "The proportion of new car sales, which will benefit from the launch of the Sportage, Carnival, and Sorento, will expand to 60% next year," adding, "This is the second-highest level ever, following 62% in 2011, and the ongoing improvement in operating indicators will be further strengthened."

In particular, the global automobile market is expected to enter a boom phase next year, which is positive for Hyundai and Kia Motors. Jang Moonsu, a researcher at Eugene Investment & Securities, analyzed, "Despite COVID-19, the global automobile market will enter an unexpected boom next year," explaining, "The reasons are a stronger-than-expected demand rebound and eased market competition due to supply reductions."

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