Hyundai Motor's Strong Performance, Aiming for 'Operating Profit of 10 Trillion Won' This Year (Comprehensive)

Q2 Records Highest Quarterly Performance Since 2010
Brokerages Revise Upward Forecasts... Expect 10 Trillion Won Achievement
"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 Motor 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 rushing to revise their forecasts for this year following the strong second-quarter results. According to FnGuide, Hyundai Motor'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 Motor'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. Previously, the third quarter was considered an off-season due to fewer operating days and frequent strikes, but this year it is expected to break away from seasonality." He added, "With wage negotiations settled without disputes and supply chain disruptions improving, it is possible to increase production through overtime work."

Yu Ji-woong, a researcher at Daol Investment & Securities, also explained, "High ASP trends are expected to continue into the third quarter. The high growth trend is expected to lead profit momentum, and the environment will be favorable in terms of exchange rates and incentive costs."

Until now, the industry was worried about a 'peak-out' where demand would decline after reaching a peak. It was forecasted that automobile demand would decrease due to consumption stagnation caused by global interest rate hikes. However, Hyundai Motor'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 IR at Hyundai Motor, explained during a conference call, "As of the end of June, we have about 640,000 units of undelivered inventory domestically," adding, "In Europe and the United States, the number of customers waiting to purchase vehicles is also increasing." 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."

[Image source=Yonhap News]

The exchange rate, which influenced the improvement in second-quarter performance, 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 KRW-USD exchange rate to average 1,290 KRW in the third quarter, 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 reached 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, buoyed by the popularity of the G90.

In particular, sales of eco-friendly vehicles are expected to increase in the second half. Hyundai Motor'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 in 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 electric and other eco-friendly vehicles are performing well," adding, "As Genesis is achieving great success in the U.S. market, the acceleration of eco-friendly vehicles and premium brands is expected to increase gradually."

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