Surging New Car Demand Due to Corona... Exchange Rates and Electric Vehicles Also Major Factors

The Driving Force Behind Hyundai Motor Group's First Ever Top Operating Profit in the Business Sector
1.79 Million Vehicles Sold Worldwide in Q1
Increased Share of High-End Electric Vehicles and SUVs
Strong Demand Leads to Reduced Promotion Costs

When Hyundai Motor Group separated from Hyundai Group in 2000, the title of Korea's top conglomerate, which had been held for over a decade, shifted to Samsung Group. At the time, Chung Mong-koo, then chairman of Hyundai Motor, spun off 10 automotive-related affiliates, including Hyundai Motor itself, Kia Motors (formerly Kia), and Hyundai Precision (now Hyundai Mobis), which had been acquired the previous year, to form an independent group. By the following year, Hyundai Motor Group ranked 5th in the domestic business hierarchy. Its assets were about half those of Samsung, and Samsung's earnings were more than six times higher than Hyundai Motor's.

Although the gap varied in degree, the disparity remained consistent thereafter. The smallest annual net income gap between the two groups since Hyundai Motor Group's inception in 2000 was in 2016, when the difference was less than 3 trillion won. In recent years, Samsung Electronics' strong performance, centered on semiconductors, widened the gap significantly. Hyundai Motor Group struggled due to sluggish sales in its former key market, China, among other factors. In 2018, the net income difference exceeded tenfold.

Hyundai Motor Company Yangjae-dong Headquarters

The COVID-19 pandemic appears to have affected the groups with some time lag. In early 2020, when the infectious disease first emerged, most industries faced difficulties; however, shortly thereafter, the IT sector saw a surge in demand for home appliances and computers, leading to strong performance. Recently, Samsung Electronics' results have plummeted due to weak semiconductor demand, impacting the overall group performance. A vicious cycle continues with falling prices and accumulating inventory as demand decreases. Among Samsung Group's 12 listed companies, six are expected to report lower operating profits in the first quarter compared to the same period last year.

In contrast, Hyundai Motor Group, centered on finished vehicles, initially faltered due to production and supply disruptions caused by COVID-19, but profitability improved as pent-up demand for new cars exploded. Global automakers have struggled with parts supply over the past two to three years due to COVID-19 and war, but Hyundai Motor Group is regarded as having managed relatively well. The favorable exchange rate also contributed significantly. In the first quarter of this year, Hyundai Motor and Kia sold approximately 1.02 million and 770,000 units worldwide, respectively. The 'reversal' phenomenon between Hyundai Motor Group and Samsung Group overlaps with Korea's trade balance, where semiconductor trade deficits have fallen behind automobiles.

Recognized for Product Competitiveness in Global Markets
Efficient Inventory Management
Profit Growth Expected to Continue for the Time Being

It is not just an increase in sales volume; a higher proportion of expensive vehicles such as electric cars and SUVs, along with steady demand reducing promotional costs, have collectively boosted profitability. Industry insiders predict that among Hyundai Motor Group's 10 listed companies, all but three will see increased quarterly operating profits. Nam Ju-shin, a researcher at Kyobo Securities, explained, "Hyundai Motor Group experienced fewer production disruptions compared to other automakers during the pandemic," adding, "They have expanded consumer experience opportunities globally and gained recognition for product quality compared to the past."

There is growing interest in whether this trend will continue through the end of the year. For now, recovery in the semiconductor industry is unlikely in the short term due to sluggish demand in upstream industries such as IT and home appliances. Semiconductor performance is highly cyclical, and global competition has intensified. Additionally, the ongoing technological hegemony competition between the U.S. and China complicates decision-making, making it difficult to focus solely on profitability when making important business decisions. However, it is reassuring that Samsung Electronics and its affiliates have sufficient resilience to endure until the industry recovers.

Hyundai Motor Group is expected to maintain its upward trajectory for the time being. It is receiving recognition for product competitiveness in key global markets, especially in North America, allowing it to command appropriate prices. In the U.S., where competition among manufacturers is fiercest, Hyundai Motor and Kia offer incentives at the industry's lowest levels. This indicates that brand value has increased and inventory management is efficient, resulting in lower costs during new vehicle sales.

However, the ongoing tightening policies worldwide, including in Korea, pose challenges. Rising interest rates inevitably reduce consumer purchasing power. Even domestically, just a few months ago, new car orders required waiting several months to years, but recently, waiting times have significantly shortened.

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