Hyundai Motor and Kia Sigh Despite Strong Performance Due to Semiconductors and Corona Issues

Hyundai Kia's Best Performance in 8 Years... Yet No Reason to Smile

[Asia Economy Reporter Changhwan Lee] Hyundai Motor and Kia posted their highest quarterly operating profits in eight years but are tightening their belts once again. This is due to ongoing concerns over second-half performance amid persistent challenges such as the global shortage of automotive semiconductors and COVID-19.

On the 23rd, Hyundai Motor and Kia reported operating profits of 1.886 trillion KRW and 1.4872 trillion KRW respectively for the second quarter, totaling 3.3732 trillion KRW.

This marks the first time since Q4 2014 (1.875 trillion KRW) that Hyundai Motor's quarterly operating profit exceeded 1.8 trillion KRW, while Kia achieved its highest-ever quarterly performance. Consequently, the combined operating profit of the two companies for Q2 recorded the highest level in eight years since Q2 2013.

The significant improvement in their results is attributed to a base effect as overseas sales, which had declined due to COVID-19 last year, normalized. Hyundai Motor sold 830,667 units overseas in Q2, a 73.6% increase compared to the same period last year.

Kia also sold 605,808 units overseas, up 70.9% year-on-year. Increased sales of high-margin models such as Genesis and sport utility vehicles (SUVs) also underpinned the normalization of their performance.

Hyundai Motor Kia Headquarters, Yangjae-dong, Seoul

Despite this improvement, the outlook for both companies remains cautious.

The shortage of automotive semiconductors, which has persisted since the end of last year, is expected to peak in Q2 and improve from Q3 onward, but full normalization is anticipated to take some time. Hyundai Motor recently suspended operations at its Brazil plant for over a week this month due to semiconductor supply issues.

Hyundai Motor's Chief Financial Officer (Vice President) Seokang Hyun said during a conference call yesterday, "The semiconductor shortage has not yet fully recovered to normal levels, so some disruption in sales is expected," adding, "The disruptions in May and June will affect local inventory levels and sales." Hyundai Motor is reported to have experienced production shortfalls of 70,000 units in the first half due to semiconductor issues.

Kia also faced production shortfalls of 60,000 units in the first half due to semiconductor supply constraints. Kia's Global Business Management Head (Executive Director) Sanghyun Cho stated, "In advanced markets such as the U.S. and Europe, we have maximized the use of existing inventory, causing global inventory to drop from about 530,000 units at the end of last year to around 410,000 units."

Besides semiconductor issues, rising raw material prices such as steel and increased exchange rate volatility centered on emerging markets are expected to weigh on the second half. The resurgence of COVID-19 also remains a variable.

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