Hyundai Motor posts record profit on strong US sales

Seoul — Hyundai Motor reported record quarterly profit and revenue on Thursday on strong sales of high-margin cars and said it would expand hybrid line-ups to brace for possible changes in US electric vehicle (EV) policies following the election.

Its forecast-beating performance helped ease mounting investor concerns over slowing consumer demand for cars that have battered some of its rivals including Ford, Japan’s Nissan Motor and Tesla in the April-June quarter.

But Hyundai also warned of an uncertain outlook due to intensifying price competition as inflation and high interest rates squeeze consumers.

“As consumer demand for autos is weakening, we expect there will be more competition and the amount of incentives is also likely to increase … creating a tougher business outlook,” the world’s No 3 automaker by sales, along with affiliate Kia Corp, said in an earnings release.

Hyundai reported a net profit of 4-trillion won ($2.9bn) for the April-June period, up 23% from a year earlier and easily beating the 3.4-trillion won average of 21 analyst estimates compiled by LSEG SmartEstimate.

The net profit was its highest quarterly since the previous record high set in the Q2 2022.

Hyundai outperformed some of its rivals by boosting sales of premium SUV models and hybrid vehicles in the US, a move that also helped it offset a prolonged sales weakness in the domestic market.

Domestic vehicle sales in South Korea, Hyundai’s second-biggest market, slumped 10% in the second quarter, extending from a 16% drop in the previous quarter, as consumers continue to grapple with surging inflation and a weak economy.

US UNCERTAINTY

Hyundai said it would expand hybrid line-ups as demand for EVs eases globally and uncertainty mounts over US EV policies.

Former President Donald Trump, the Republican candidate, is critical of the EV policies of Democrat President Joe Biden and has said he will “end the electric vehicle mandate” if he wins.

“Even if Trump wins the election, we don’t expect the Inflation Reduction Act (IRA) to be scrapped,” Hyundai chief financial officer Lee Seung Jo told analysts on an earnings call, referring to Biden’s signature clean energy policy.

Lee said the company continues to monitor possibilities and plans to increase hybrid line-ups “to prepare for possible shrinking of the IRA package”.

Hyundai said profitability of its hybrid models was similar to that of gasoline cars, highlighting the segment’s growing contribution to the bottom line, as sales of pure EVs dropped almost by a quarter.

Hyundai’s vehicle sales in the US edged up 2.2% in the second quarter. High-margin SUV sales accounted for about 80% of the total while hybrid vehicle sales jumped 42% from the same period a year ago, Hyundai said.

The favourable exchange rate in the second quarter had also helped Hyundai’s profit growth.

The won slumped 4.3% against the dollar in the quarter from a year earlier, boosting Hyundai’s repatriated overseas sales and profit.

Shares in Hyundai closed down 2.7% before the results.