SEOUL, July 23 (Yonhap) — Hyundai Motor Co. and Kia Motors Corp. — South Korea’s two biggest carmakers — on Thursday reported a sharp drop in their second-quarter earnings as the new coronavirus outbreak drove down overseas demand for their vehicles.
But on their home turf, Hyundai and Kia performed well helped by new models and tax cuts.
For the three months that ended in June, Hyundai’s net profit fell 62 percent to 377.27 billion won (US$315 million) from 999.30 billion won a year earlier, and Kia’s declined 76 percent to 126.31 billion won from 505.39 billion won during the same period, according to the companies.
Their net results were higher than local brokerages’ median forecasts of 176 billion won and 60 billion won for Hyundai and Kia, respectively.
“Robust sales of new models in the domestic market and a reduction in individual consumption taxes helped the company fare better than its global rivals,” Hyundai Motor Vice President Lee Dong-heun in charge of the carmaker’s global market research group said in a webcast.
The new high-margin models include Hyundai’s Grandeur sedan, the G80 sedan and GV80 sport utility vehicle sold under Hyundai’s independent Genesis brand.
The executive said the global automobile market will be able to return to pre-pandemic levels in 2023, as the COVID-19 virus is still spreading in major markets such as the United States and developing countries like India.
“We will focus on boosting sales of new models, like the high-end G80 sedan and the GV80 SUV, through online shopping channels in the U.S. market,” Senior Vice President Kim Sang-hyun in charge of Hyundai’s finance and accounting division said.
On Thursday, Hyundai jumped 5.1 percent to 124,500 won, and Kia advanced 2.5 percent to 36,700 won, outperforming the broader KOSPI’s 0.6 percent loss.
Analysts said the stock prices reflected the fact that the carmakers performed better than their global rivals such as Daimler AG, which posted an operating loss of 1.68 billion euros ($1.9 billion) in the June quarter amid the pandemic.
“Faced with the same crisis, Hyundai and Kia definitely performed better than most of their bigger rivals in the past quarter,” said Kim Jin-woo, an analyst at Korea Investment & Securities Co.
In particular, Hyundai’s new platforms and Genesis models will help it cut costs further and improve its product mix in the next one to two years, the analyst said.
Hyundai and Kia suspended most of their overseas plants from March amid virus fears. All of their overseas plants returned to operations early in May, though not in full production. Production at their domestic plants has yet to get fully back on track.
To revive sales, Hyundai plans to launch the upgraded G70 sedan and the GV70 SUV in the domestic market later this year, while aiming to begin sales of the GV80 SUV in North American markets within this year.
Kia plans to launch the new Carnival minivan in the domestic market and the new K5 sedan and the Sorento sport utility vehicle in overseas markets later this year.
Hyundai’s operating profit fell 52 percent to 590.32 billion won in the June quarter from 1.24 trillion won a year earlier. Sales were also down 19 percent to 21.86 trillion won from 26.97 trillion won during the same period.
Kia’s operating profit declined 73 percent to 145.16 billion won from 533.62 billion won during the cited period, with sales down 22 percent to 11.37 trillion won from 14.51 trillion won.
From January to June, Hyundai’s net profit dropped 52 percent to 929.95 billion won from 1.95 trillion won in the year-ago period, and Kia plunged 66 percent to 392.28 billion won from 1.15 trillion won.
In the first six months, Hyundai’s vehicle sales fell 24 percent to 1,607,347 units, and Kia’s declined 15 percent to 1,164,735, bringing their combined sales to 2,772,082.
Hyundai and Kia, which together form the world’s fifth-biggest carmaker, set their sales target at 7.54 million vehicles in global markets this year.
Analysts expect they won’t achieve the target as the coronavirus outbreak does not show signs of slowing down.