Hyundai Motor lifts full-year outlook as Q2 profit up 15%
South Korea’s Hyundai Motor Co raised its annual sales and profit margin guidance on Wednesday, after recording a 15% rise in quarterly net profit helped by a weaker won currency, robust sales of electric vehicles (EVs) and increased production.
The world’s No.3 automaker by sales together with affiliate Kia Corp forecast 2023 revenue would grow 14-15%, up from its January guidance of 10.5-11.5%, while its operating profit margin was upwardly revised to a range of 8-9% from 6.5-7.5%.
“The company expects to strengthen sales momentum through production improvements as chip and component supplies stabilise worldwide … and enhance profitability despite global uncertainties such as interest rate fluctuations,” Hyundai said in a statement.
Its upbeat outlook comes amid growing concerns about cooling vehicle demand due to high interest rates and economic slowdown, with some of its rivals indicating price cuts to drive volume growth.
Tesla (NASDAQ: TSLA) CEO Elon Musk signalled last week that it would cut prices again on EVs in “turbulent times” to boost sales.
Hyundai expanded operating margin to 10% in the second quarter from 9.5% in the first quarter.
But its annual margin guidance of 8-9% indicates profitability will come under pressure in the second half, as supply chain bottlenecks ease further, allowing production to rise just when demand is expected to start cooling off.
Yet some analysts are upbeat that constrained vehicle production triggered by a global shortage of chips that began during the COVID-19 pandemic would continue, buffeting the industry from overall economic slowdown that has dampened demand for most consumer goods.
“The current supply-demand dynamics where we see excessive demand would likely continue into 2025,” said Kim Jinwoo, an analyst at Korea Investment & Securities.
Shares in Hyundai Motor closed down 0.9% versus a 1.7% drop in the broader KOSPI market.
STRONG U.S. PERFORMANCE
Hyundai said vehicle sales rose 8.5% to 1.06 million units in the second quarter, with EV sales soaring 47% to nearly 78,000 units.
In the United States, Hyundai’s biggest market, sales of green energy cars that include EVs and plug-in hybrids more than doubled to 46,000 units. Sales climbed thanks to increased incentives as Hyundai’s EVs are not eligible for federal tax credits under the Inflation Reduction Act (IRA) as they do not meet requirements.
Zayong Koo, Hyundai’s head of investor relations, told analysts on an earnings call that the size of EV incentives it spent in the U.S. market amounted to around $4,000-$5,000 per vehicle.
The IRA requires 50% of the value of battery components to be produced or assembled in North America to qualify for a $3,750 credit and 40% of the value of critical minerals sourced from the United States or a free trade partner for a separate $3,750 credit.
Overall vehicle sales in the U.S. grew 14% to 225,000 units, led by sedans, while in South Korea, its second-biggest market, sales rose 13% to 206,000 units.
Hyundai said last month it planned to boost EV production in the United States to three-quarters of its total production there by 2030 from just 0.7% now.
The maker of the popular IONIQ 5 EV and luxury Genesis G70 sedan reported a net profit of 3.2 trillion won ($2.50 billion) for the April-June period, missing a 3.3 trillion won estimate from 19 analysts compiled by Refinitiv SmartEstimate, weighted toward analysts that are more consistently accurate.
Revenue rose 17% on-year to 42 trillion won.
($1 = 1,279.1700 won)