Hyundai Motor Financial Division Plays Key Role in Strong Performance

Clear Improvement in Financial Sector Performance Despite Semiconductor Crisis

[Asia Economy Reporter Changhwan Lee] Although Hyundai Motor Company is facing difficulties due to the shortage of automotive semiconductors, its financial sector, which handles auto installment financing and leasing, is playing a key role in defending against poor performance.

According to Hyundai Motor on the 31st, the financial sector recorded sales of 4.381 trillion KRW and an operating profit of 530.2 billion KRW in the first quarter of this year. While sales showed little change compared to the same period last year, operating profit surged by 143%.

Hyundai Motor’s financial sector consists of Hyundai Capital, Hyundai Capital America, and Hyundai Card. These cover installment financing, leasing, and credit card businesses. As of the first quarter, the financial sector accounts for about 11% of Hyundai Motor’s total sales, but its share of operating profit reaches 30%, making these highly profitable subsidiaries.

The improved profitability of the financial sector this year is mainly due to a significant improvement in the profitability of the auto installment financing business. Hyundai Capital, which provides auto installment financing, leasing, and credit loans in Korea based on Hyundai Motor and Kia, posted an operating profit of 131.5 billion KRW in the first quarter, a 34% increase from 98.1 billion KRW in the same period last year. The increase in vehicle sales in the first quarter led to more consumers using auto financial products such as installment financing and leasing.

Hyundai Capital America’s earnings also improved significantly. Hyundai Capital America provides financing services such as installment and leasing to consumers purchasing Hyundai and Kia vehicles in the North American region. By proactively writing off non-performing assets accumulated during the recession, Hyundai Capital America’s net profit margin, which was only 1-2% until last year, reportedly surged to 8-10% this year.

The U.S. used car market enjoying an unprecedented boom is also a factor in the improved performance. The U.S. used car index in April was $166.3, the highest since 1953. The rise in used car prices is due to a surge in demand for outdoor activities, travel, and business trips following the expansion of vaccine distribution in the U.S.

The shortage of automotive semiconductors, which disrupted new car supply, also caused used car prices to soar. Hyundai Capital America has a high leasing ratio, so when used car prices rise, the profit from vehicle sales increases, improving overall performance.

Jongjin Jeong, chief researcher at Shinhan Investment Corp., explained, "Although concerns have grown due to the expansion of the automotive semiconductor shortage issue, the financial business division is driving strong performance," adding, "The high leverage effect of the financial business division will further strengthen competitiveness."

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