Hyundai Motor Racing Toward "Operating Profit 10 Trillion"

Q2 Quarterly Record High Since 2010
Brokerages Revise Upward Forecasts
Expected to Reach 10 Trillion Won Range
"Positive New Car and Mix Improvements to Continue in H2... Exchange Rate Effects to Persist"

[Asia Economy Reporter Yoo Hyun-seok] Hyundai Motor Company is challenging an annual operating profit of 10 trillion KRW for the first time in history. Thanks to the effects of exchange rates and an increase in sales of high value-added vehicles, it is expected to achieve record-breaking performance.

According to the automotive industry on the 25th, Hyundai recorded consolidated sales of 35.9999 trillion KRW and operating profit of 2.9798 trillion KRW in the second quarter. This represents an increase of 18.7% and 58.0% respectively compared to the same period last year. This is the highest quarterly performance since the introduction of the new accounting standards (IFRS) in 2010. The exchange rate and mix improvement effects were significant in the second quarter results. The increase in operating profit due to exchange rate and 'mix' (model composition ratio) improvements in the second quarter amounted to 641 billion KRW and 1.033 trillion KRW, respectively.

In particular, securities firms are revising their forecasts for this year one after another due to the strong second quarter results. According to FnGuide, Hyundai's operating profit forecast one month ago was 8.2857 trillion KRW, but it has recently risen to 9.9058 trillion KRW. Some securities firms expect it to reach the 10 trillion KRW mark. An operating profit of 10 trillion KRW would be Hyundai's highest ever.

Shin Dong-ho, a researcher at Shinhan Financial Investment, said, "In the second half of the year, new models, mix improvements, and positive exchange rate effects will continue," adding, "Previously, the third quarter was an off-season due to fewer operating days and frequent strikes, but this year it is expected to break away from seasonality." He emphasized, "With wage negotiations settled without disputes and supply chain disruptions improving, it is possible to increase production through overtime work."

Until now, the industry was worried about a 'peak-out' where demand would peak and then decline. It was expected that automobile demand would decrease due to consumption stagnation caused by global interest rate hikes. However, Hyundai's backlog demand has actually increased. As a result, the outlook for the second half remains bright. Koo Ja-yong, Executive Vice President in charge of Hyundai Motor IR, explained in a conference call, "As of the end of June, we have about 640,000 units of undelivered inventory domestically," adding, "Customers waiting to purchase vehicles are also increasing in Europe and the United States." He further added, "In Europe, the backlog of vehicles waiting for delivery as of the end of June is estimated to be about 140,000 units."

The exchange rate, which influenced the improvement in second quarter results, remains favorable. The average KRW-USD exchange rate in the second quarter of this year was 1,260 KRW, up 12.3% compared to the same period last year. Recently, the dollar has remained strong, with the KRW-USD exchange rate surpassing 1,320 KRW and hovering around 1,300 KRW throughout this month. Securities firms expect the third quarter KRW-USD exchange rate to average 1,290 KRW, so if this level is maintained, it is expected to have a positive impact on performance improvement.

Along with this, growth in major markets and sales of high value-added vehicles are also increasing. Wholesale sales in North America in the second quarter were 241,000 units, up 6.6% compared to the same period last year. Notably, the proportion of highly profitable sport utility vehicles (SUVs) was 75%. Europe recorded 151,000 units, a 2.9% increase over the same period. Meanwhile, the Indian market grew from 116,000 units to 136,000 units, a 17.7% increase. Other regions also saw a 22.4% increase to 131,000 units. Additionally, the Genesis brand recorded a 5.4% sales share, boosted by the popularity of the G90.

In particular, sales of eco-friendly vehicles are expected to increase in the second half. Hyundai's global electric vehicle sales in the second quarter increased by 49.1% compared to the same period last year. In the North American market, Hyundai plans to locally produce the Santa Fe Hybrid (HEV) at its Alabama plant starting this October and launch the Ioniq 6 domestically to meet demand in the eco-friendly vehicle market. Professor Kim Pil-soo of Daelim University said, "Sales of eco-friendly vehicles such as electric cars are performing well," adding, "As Genesis is achieving great success in the U.S. market, the acceleration of eco-friendly vehicles and premium brands will gradually increase."

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