[Concall] Hyundai Motor "Expanding Production Outside Russia"

[Asia Economy Reporter Yoo Hyun-seok] Hyundai Motor Company announced plans to minimize damage by expanding production to regions outside Russia in response to decreased sales caused by the Russia-Ukraine conflict.

On the 25th, Seo Kang-hyun, Vice President of Hyundai Motor, said during the first-quarter earnings conference call, "Industrial demand in Russia has fallen by more than 30% compared to the previous year, and Hyundai Motor's sales also decreased by 25% year-on-year on a retail basis."

Hyundai Motor decided to suspend operations at its Russian production plant starting in March due to economic sanctions against Russia, which disrupted the smooth supply of key parts, including semiconductors. Vice President Seo explained, "We will flexibly reallocate parts exported to Russia to other regions and promote production expansion outside Russia. At the same time, to protect the profitability of the Russian subsidiary, we are working on reducing factory operating costs and costs, as well as cutting sales expenses including incentives and marketing costs."

He added, "The current wartime situation continues, raising the possibility of a prolonged conflict, making it difficult to accurately predict Russia's future business environment. However, Hyundai Motor has established various contingency plans to quickly respond to rapidly changing business conditions."

In addition, to strategically respond to recent raw material price increases, Hyundai Motor has set up a dedicated department for continuous monitoring and response measures. Vice President Seo stated, "Regarding key raw materials for finished vehicles, we understand that prices are continuously rising due to increased industrial demand following economic recovery and supply instability caused by production disruptions such as risks in China. We are also closely monitoring whether there will be additional price increases due to concerns about raw material supply related to the Russia-Ukraine conflict."

He emphasized, "We have established and are operating a dedicated organization for strategic management of key raw materials and have built and applied a system that automatically calculates profit and loss impacts based on raw material market fluctuations. Through the establishment of a company-wide consultative body to address raw material price increase issues, we have created and are operating an integrated and organic response system from design to price increases."

Hyundai Motor expects overall demand in the automotive industry to remain robust. Executive Director Koo Ja-yong explained, "Due to the semiconductor supply shortage last year, unmet demand has continued into this year, and overall demand in the automotive industry is expected to remain strong. As of the end of March, the domestic undelivered inventory was 520,000 units, an increase of about 29% compared to the previous quarter."

He added, "However, since the semiconductor supply issue has not yet been fully resolved, sales growth is also expected to recover depending on the speed of normalization of the semiconductor situation."

He also expressed expectations for continued growth in the electric vehicle market. The global electrification market is expected to maintain steady growth, supported by strengthened environmental regulations in major countries including Europe and the United States, as well as increased infrastructure investments such as charging stations.

He said, "Despite sales contraction due to COVID-19, Hyundai Motor confirmed strong electric vehicle sales. As of the end of the first quarter, Hyundai Motor's electric vehicle sales were about 52,000 units, with the Ioniq 5 accounting for about 30,000 units. With European manufacturers accelerating electrification transitions, we expect to maintain growth momentum this year."

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