"Hyundai Motor's Electrification Strategy Falls Short of Market Expectations... 'Execution Plan Is Disappointing'"

[Asia Economy Reporter Lee Seon-ae] The securities industry showed somewhat disappointed views on Hyundai Motor Company, which has presented an aggressive electrification strategy targeting the electric vehicle (EV) market. They believed the company lacked concrete execution plans. However, they unanimously agreed on the positive aspect of the bold growth strategy itself. Although the securities industry's expectations were high, given the significant stock price decline, they generally maintained a 'buy' investment rating.

According to the Korea Exchange on the 6th, Hyundai Motor's stock price has continued to decline this year. On the 2nd, it dropped to 170,500 KRW (closing price), marking a 52-week low. This sharp decline is attributed to the shortage of automotive semiconductors and growing concerns over local operations due to Russia's recent invasion of Ukraine. Consequently, securities firms maintained a buy rating for Hyundai Motor and forecasted limited further downside.

Regarding the '2022 CEO Investor Day' held on the 2nd, where the mid-to-long-term electrification strategy and financial goals were announced, it was anticipated to have little impact on stock price momentum.

Jang Moon-soo, a researcher at Hyundai Motor Securities, stated, "The stock price, which has reached the lower band of the price-to-book ratio (PBR) since COVID-19, is expected to have limited further downside," adding, "We expect performance and valuation recovery as the supply chain instability eases in the second half of this year and the announced electrification strategy, including investments in the U.S., materializes."

Song Seon-jae, a researcher at Hana Financial Investment, said, "The content of this Investor Day alone is unlikely to have a significant impact on stock price momentum," but added, "We believe Hyundai is building strong capabilities as a 'fast follower' in the progress of electric and autonomous vehicles." He continued, "Although the shortage of automotive semiconductors and the direct and indirect impacts of sanctions on Russia pose short-term burdens, it is necessary to focus on the possibility of profit improvement through the combined effects of price and volume as production normalizes in the second half."

This reflects a generally positive evaluation of the bold growth strategy but a judgment that concrete execution plans were lacking. Kim Dong-ha, a researcher at Hanwha Investment & Securities, commented, "The aggressive goals for a 'paradigm shift' from internal combustion engines to electric vehicles and the potential for sustainable growth improved expectations for Hyundai's mid-to-long-term growth," but he also noted, "However, the absence of detailed plans was disappointing as a catalyst for stock price increases."

Kim Jin-woo, a researcher at Korea Investment & Securities, also evaluated, "The announcement conveyed determination and resolve regarding the EV transition, but it was somewhat disappointing for investors expecting specific short-term plans such as factory expansion and conversion schedules, battery procurement strategies, and cooperation with stakeholders including labor unions."

Moon Yong-kwon, a researcher at Shin Young Securities, cited the 2030 EV sales targets of global competitors such as Stellantis (5 million units), Volkswagen (5 million units), and Toyota (3.5 million units) to assess Hyundai's sales targets as somewhat conservative. He added, "It was regrettable that there were no concrete plans for achieving these goals, such as establishing local EV factories, converting internal combustion engine production facilities and workforce to EV, and building a presence in the Chinese EV market."

Kim Pyung-mo, a researcher at DB Financial Investment, said, "Hyundai's new EV sales targets have been raised compared to previous ones but are identical to the figures disclosed through the media at the end of last year," and evaluated, "There were no concrete plans such as battery procurement methods and production facility expansions, and no plans to achieve 30% related sales in mobility services, which have seen no progress in recent years."

Meanwhile, Hyundai Motor set its annual EV sales target at 840,000 units in 2026 and 1.87 million units in 2030, up from 140,000 units last year. The company aims to achieve a 7% global EV market share by 2030. To this end, Hyundai plans to launch more than 11 new EV models and Genesis more than 6 new EV models.

Financially, Hyundai plans to achieve an operating profit margin of over 10% in the EV sector by 2030 and a consolidated operating profit margin of 10%. It also plans to invest 95.5 trillion KRW over nine years from 2022 to 2030. Specifically, this includes 39.1 trillion KRW in research and development (R&D), 43.6 trillion KRW in capital expenditures (CAPEX), and 12.8 trillion KRW in strategic investments.

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