Frustrated Automobile Stocks Depend on the US Market

Concerns that earnings have peaked and will slow down have caused automobile sector stocks to plummet. Securities firms analyzed that strengthening market share in the U.S. is key to boosting the stock prices of domestic automakers. It is also expected that parts companies with customers in the U.S. will have an advantage.

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According to the Korea Exchange on the 29th, the KRX Automobile Index, which includes stocks related to automakers and auto parts, recorded 2027.56 based on the previous trading day's closing price. This is a 12.33% drop compared to a month ago. It is the largest decline among all KRX sector indices. This performance is worse than the KRX Semiconductor Index (-11.66%), which was affected by recent adjustments in U.S. big tech companies. Hyundai Motor Company, a leading domestic automaker, also plunged as much as 7.75% intraday on the 26th.

On the 25th, Hyundai Motor announced its Q2 earnings, reporting sales of 45.0206 trillion won, up 6.6% year-on-year, and operating profit of 4.2791 trillion won, up 0.7% for the same period. Both sales and operating profit marked record highs on a quarterly basis.

Choi Tae-yong, a researcher at DS Investment & Securities, said about Hyundai's strong Q2 performance, "The launch of the new Santa Fe and the facelifted Genesis GV80 sales were key in North America," adding, "Profitability improved due to sales of sport utility vehicles (SUVs) and hybrid models, leading to growth in the average selling price (ASP)."

Although earnings have hit record highs, stock prices remain sluggish. A financial investment industry insider commented on the recent decline in automaker stocks, "It seems to be influenced by uncertainty surrounding the U.S. presidential election," noting, "If Trump is re-elected, protectionism and import tariffs on foreign cars are likely to be repeated, and concerns about earnings slowdown could become a reality."

To alleviate such concerns and achieve further stock price gains, automakers need to strengthen their position in the U.S. market. Lim Eun-young, a researcher at Samsung Securities, said, "As demand in the U.S. automobile market stagnates at a certain level, competition for market share will intensify," adding, "Automakers' stock prices will be determined by their performance in the U.S. market."

There is an analysis that a selective approach is necessary for auto parts companies. Kim Gwi-yeon, a researcher at Daishin Securities, said, "Among parts companies, those with customers in the U.S. are expected to benefit," explaining, "SL, which supplies most of Hyundai and Kia's U.S.-bound volume, had a North American sales ratio of 34% as of Q1 this year."

Among auto parts, tire stocks are unlikely to recover without demand improvement. Song Seon-jae, a researcher at Hana Securities, said, "The global demand growth rate until last month remains low. There are also no significant factors to stimulate demand in the second half."

Jang Moon-soo, a researcher at Hyundai Motor Securities, also analyzed, "The basis for industry recovery or maintaining strong performance after Q3 this year is unclear," adding, "Current stock prices are buyable from a trading perspective. However, for a sustained rise and recovery, demand recovery, price increases, and easing of cost burdens are necessary."

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