Hyundai Motor and Kia's Q1 Earnings 'Soar', Q2 "Needs to Be Watched"

[Asia Economy Reporter Changhwan Lee] Hyundai Motor and Kia, which are about to announce their first-quarter earnings, are expected to deliver an earnings surprise. This is due to the increasing popularity of high-profit models such as Genesis and RV (recreational vehicles), as well as a significant recovery in both domestic and export sales compared to last year. However, it is uncertain whether this positive momentum can be sustained as the impact of production cuts caused by the shortage of automotive semiconductors is becoming more pronounced starting this month.

According to the automotive industry on the 21st, Hyundai Motor and Kia will announce their first-quarter earnings on the 22nd in the afternoon. The financial investment sector expects both companies to report significantly improved surprise earnings compared to the same period last year.

The consensus for Hyundai Motor's first-quarter earnings is sales of 27.6 trillion KRW and operating profit of 1.55 trillion KRW. It is forecasted that sales will increase by 9% and operating profit by 80% compared to the previous year. For the same period, Kia's sales are expected to be 16.3 trillion KRW and operating profit 1.15 trillion KRW, representing increases of 12% and 160%, respectively, compared to the previous year.

For Hyundai Motor, the increase in domestic sales drove the earnings. In the first quarter, Hyundai Motor's domestic sales reached 185,413 units, a 16.6% increase compared to the same period last year.

Genesis sales surged sharply, with domestic sales in the first quarter reaching 32,884 units, a 165.3% explosion compared to the same period last year. The proportion of Genesis in domestic sales also skyrocketed from 7.8% in the first quarter of last year to 17.8% in the first quarter of this year. Genesis exports also improved significantly, increasing from 3,006 units in the first quarter of last year to 11,345 units in the first quarter of this year, a 277.4% rise.

Kia sold a total of 688,409 units in the first quarter, a 6.1% increase compared to the previous year. Kia also saw strong domestic sales, with 130,075 units sold, an 11.4% increase year-on-year. The popularity of high-profit RV models such as Carnival and Sorento drove Kia's earnings.

First-quarter Carnival sales were 23,716 units, a 162.3% increase compared to the same period last year, and Sorento sales rose 169.8% to 20,782 units. Performance in the key export market, the United States, was also strong. First-quarter U.S. retail sales reached 160,000 units, a 25% increase year-on-year.

Although Hyundai Motor and Kia are expected to exceed earnings forecasts for the first quarter, the mood at both companies is subdued. This is because the shortage of automotive semiconductors, which intensified starting this month, shows no signs of easing. Hyundai Motor temporarily suspended operations at its Ulsan and Asan plants this month due to semiconductor shortages, and Kia has also suffered losses by canceling overtime shifts at major plants.

Concerns are growing that reduced production may cause earnings to fall short of expectations. However, since the semiconductor shortage is not a problem unique to Hyundai Motor Group, there is also a possibility that if vehicle purchase demand is deferred, earnings could improve again in the second half of the year.

Jung Yongjin, chief researcher at Shinhan Financial Investment, said, "Production cuts due to semiconductor shortages are unavoidable," but added, "As with last year's COVID-19 situation, the decrease in sales will be deferred to demand in the second half, and flexible production rotations focusing on high-end models will continue, leading to ongoing earnings improvements."

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