Hyundai Motor and Kia Deliver Surprise 2Q Earnings Amid Semiconductor and COVID Crises (Comprehensive Report 2)

Hyundai Motor Q2 Operating Profit 1.88 Trillion Won, Up 219% YoY
Kia Q2 Operating Profit 1.48 Trillion Won, Record Quarterly Profit Achieved

[Asia Economy Reporters Changhwan Lee and Jehun Yoo] Hyundai Motor Company and Kia recorded surprising earnings in the second quarter that exceeded market expectations. They showed significant performance improvements thanks to the base effect from COVID-19 and increased sales of key models such as SUVs (Sport Utility Vehicles) and Genesis. In particular, Kia achieved an astonishing record by setting the highest quarterly sales and operating profit ever.

Hyundai Motor’s Q2 Operating Profit Increases by 219%

Hyundai Motor announced on the 22nd that its sales in the second quarter reached 30.3261 trillion KRW, and operating profit was 1.886 trillion KRW. Compared to the previous year, sales increased by 38.7%, and operating profit rose by 219.5%.

This is the first time Hyundai Motor’s quarterly sales exceeded 30 trillion KRW. It is also the first time since the fourth quarter of 2014, when operating profit was 1.875 trillion KRW, that quarterly operating profit surpassed 1.8 trillion KRW. The operating profit margin rose by 3.5 percentage points from the same period last year to 6.2%, marking the highest level in 19 quarters since the second quarter of 2016 (7.1%).

A Hyundai Motor official explained, "Operating profit continued to recover despite semiconductor supply shortages and unfavorable exchange rate impacts, driven by increased sales volume and profitability-focused sales. Although the sales mix slightly deteriorated due to recovery in emerging markets such as India and Latin America, profitability improved through a sales strategy centered on profitability."

Hyundai Motor sold 1,031,349 units globally on a wholesale basis in the second quarter, a 46.5% increase compared to the same period last year.

In the domestic market, sales were 200,682 units, down 11.0% year-on-year. This decline was due to a significant increase in sales in the same period last year caused by individual consumption tax cuts and reduced production due to semiconductor supply shortages.

In overseas markets, sales reached 830,667 units, up 73.6% year-on-year, driven by a significant increase in sales in major markets due to the COVID-19 base effect last year and the new model effect of key vehicles.

Kia Achieves Record Highest Quarterly Performance

Kia achieved its highest-ever quarterly sales and operating profit in the second quarter. Kia announced on the 22nd that its consolidated sales in the second quarter were 18.3395 trillion KRW, and operating profit was 1.4872 trillion KRW. These figures represent increases of 61.3% and 924.5%, respectively, compared to the same period last year.

According to Kia, total sales in the second quarter were 754,117 units (wholesale basis), up 9.3% year-on-year. Overseas sales increased by 70.9% to 605,808 units.

Strong recovery was seen in Europe, India, and Latin America, where the impact of COVID-19 was severe last year, with increased sales of core models. In North America, industrial demand recovery and new model effects from the Sorento and Carnival drove sales growth. However, sales declined in China due to aging models of key vehicles such as the Zhipao.

Domestic sales were limited to 148,039 units, down about 8.2%. Kia explained, "Domestic sales decreased compared to the second quarter of last year, which saw a sharp increase due to the individual consumption tax cut effect. This year, production disruptions occurred in domestic sales models due to the global semiconductor shortage, making it impossible to avoid a sales decline."

Additionally, the cost of sales ratio improved by 3.5 percentage points year-on-year to 81.3%, due to increased sales and improved product mix leading to higher average selling prices. The operating profit margin was 8.1%. The company also noted that the proportion of high-profit leisure vehicles (RVs) increased by 2.8 percentage points to 56.5%, contributing to profitability improvement.

Hyundai Motor Group Headquarters, Yangjae-dong, Seoul / Photo by Hyunmin Kim kimhyun81@

Semiconductor Supply Shortage Expected to Improve from Q3

Regarding future business environment prospects, Hyundai Motor expects demand recovery to continue due to economic improvements in major countries and the base effect from COVID-19. However, it anticipates that difficult business conditions will persist due to delays in global semiconductor supply normalization, rising raw material prices, and global inventory shortages caused by fewer business days in the third quarter.

Regarding the global semiconductor shortage for automobiles, Hyundai Motor expects the situation to gradually improve from the third quarter after peaking in the second quarter, but full normalization will take a long time. The shortage of some semiconductor items is expected to continue through the third quarter and gradually improve from the fourth quarter.

In response, Hyundai Motor plans to increase production in the second half of the year to compensate for some production disruptions in the first half by ▲ mobilizing company-wide capabilities to secure additional supply ▲ proactively securing inventory through annual orders ▲ promoting partnerships with major semiconductor companies.

Furthermore, external factors such as increased exchange rate volatility centered on emerging markets and rising raw material prices are expected to pose challenges to business activities in the second half of the year.

Meanwhile, Hyundai Motor emphasized that despite the ongoing external risks and difficult business environment, it will strive to maintain profitability and competitiveness improvement trends through the successful global market launch of key new models such as the GV70, Santa Cruz, and Genesis-exclusive electric vehicles.

Additionally, Hyundai Motor stated that from the second half of the year, it will continue to expand sales of eco-friendly vehicles by normalizing production of the Ioniq 5 and launching Genesis’s first dedicated electric vehicle, thereby strengthening its position in the global eco-friendly vehicle market and actively responding to environmental regulations.

A Hyundai Motor official said, "With rising vaccination rates in major countries and continued economic stimulus measures by governments, automobile demand in major global markets is expected to continue recovering. Although the impact of the global semiconductor shortage is somewhat easing, shortages of some semiconductor items are expected to continue into the third quarter, and full normalization will take a long time."

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