Kia "1.2 Million Units Delayed... No Concern Yet Over New Car Demand Decline" (Comprehensive)

Q3 Earnings Conference Call
"Current Trend Expected to Continue Beyond Q4"
Supplier-Dominant Market Expected to Persist
Record High Sales... 23.1616 Trillion KRW, Up 30.5% YoY

[Asia Economy Reporter Choi Dae-yeol] Kia announced on the 25th that the backlog of new car deliveries both domestically and internationally stands at around 1.2 million units. Since incentives paid for new car sales in major markets are expected to remain at low levels for the time being, the company anticipates that the fourth quarter will achieve record-high profitability.

Joo Woo-jung, Vice President and Head of Kia’s Finance Division, said during the third-quarter earnings conference call, "There may be concerns about market demand fluctuations and increased promotional expenses, but incentives were at their lowest levels in August and September, and there has been little change in October as well." He added, "When communicating with each regional market, the first question is about changes in market demand due to economic conditions, but we have not sensed any significant changes."

He continued, "Some segments may decline compared to the peak, but there is no need to worry about an overall demand decrease," adding, "The backlog based on shipments is about 600,000 units domestically and over 600,000 units overseas, totaling around 1.2 million units, maintaining a supply advantage, so there is no reason to offer incentives."

Joo said, "There will be no major trend changes in the fourth quarter, and considering various trends, the fourth quarter is expected to show the best profitability. Next year, we are requesting more volume by region, so it will expand slightly compared to this year."

He explained, "In North America, where incentive fluctuations are significant, interest rate hikes will be reflected, and the market contraction will generally cause incentives to rise, but almost all our models carry a premium. We have strengths in SUV models, so incentives are not expected to increase significantly next year. For the compact sedan segment, other brands have withdrawn, causing supply shortages, so there is no reason to aggressively offer incentives."

According to the third-quarter earnings announced that day, sales volume reached 752,104 units, a 9.9% increase compared to the same period last year. Revenue rose 30.5% to 23.1616 trillion KRW, setting a record high. However, operating profit, reflecting engine quality costs, decreased by 42.1% to 768.2 billion KRW during the same period.

A Kia official said, "Sales increased due to improved parts supply, and the profit structure improved with sales focused on high-margin vehicles based on strong product competitiveness. Favorable exchange rate effects also strongly contributed, but operating profit declined significantly due to engine quality costs."

Sales volume increased by 6.2% domestically to 132,768 units and by 10.7% overseas to 619,336 units. Domestically, sales rose due to the new car effect and partial resolution of waiting demand for major sport utility vehicles (SUVs). Overseas, although the suspension of sales in Russia impacted results, the company redirected volume to more profitable regions, and most regions saw increases due to the transition to a three-shift system at the India plant and the new car effect.

The company cited improved semiconductor supply conditions, the new car effect, price increases due to upgraded vehicle specifications, and exchange rate effects as reasons for the revenue increase. In particular, the increase in operating profit due to exchange rate effects was analyzed to be about 760 billion KRW. The average KRW-USD exchange rate in the third quarter was 1,338 KRW, nearly 16% higher than the same period last year.

The company’s cumulative third-quarter results showed sales volume of 2,171,590 units, a 2.0% increase compared to the same period last year. Revenue was 63.3949 trillion KRW, up 20.4%, and operating profit was 4.6088 trillion KRW, up 18.5%.

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