By on July 27, 2013

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Despite low inventory levels that affected sales in North America and their home market of Korea, Hyundai Motor Co. announced near record profits for the second quarter of 2013, powered by good results in China. Hyundai reported net profits of  2.52 trillion Korean won ($2.26 billion), down just slightly from last year but beating analysts expectations. Operating profit was 2.41 trillion won ($2.16 billion) on revenues of 23.18 trillion won ($208.39 billion).

Bucking a slowing Chinese market, Hyundai sales there were up 36% in the first half of 2013 following the start of production at the company’s third Chinese assembly plant, the launch of a local version of the Elantra, and decreased sales of Japanese brands due to the dispute between China and Japan over the Senkaku/Diaoyu islands.

Sales in its home market of South Korea fell 0.7% while U.S. sales were up slightly 1.2%. Hyundai sales in both of those markets were hampered by a labor dispute over wages and overtime affecting their Korean operations, reducing supply. Also, competitors in the critical compact and midsize segments have introduced many new models, while Hyundai’s bread and butter Elantra and Sonata are among the oldest in that segment. To move the metal, Hyundai has cut prices and increased incentives. The relatively flat results in North America means that the company has been losing market share.

In Europe, where sales are at the lowest point they’ve been in 20 years, Hyundai’s sales were off 9 percent.

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11 Comments on “Despite Inventory Issues in Korea and U.S., Hyundai Reports Near Record Earnings As China Sales Surge...”


  • avatar
    romismak

    Great H1 results from Hyundai, China up 36% was main factor for their succes, with NA, EU, Korea struggling. 2nd part of the year will be much tougher. Won is stronger how time goes, China´s growth will be much slower – generally market, new restrictions + Japanese coming back, Hyundai is expecting 7% sales increase in 2nd half of the year in China, also last year´s numbers were great in 2nd half, because Hyundai benefited from anti-japan riots. In Brazil they are succesfull too, but 2nd half will be much tougher for them, i still wonder how much they will improove or loose in US, Canada, Australia, EU, they want to make their brand more valuable and having better renome so maybe they don´t want go for volumes in mature markets, but rather building name and quality.

    • 0 avatar
      bd2

      Despite the market conditions in Europe, Hyundai and Kia are doing fine there as they have a market-share that is the same as the Toyota, Nissan and Honda combined and output at their Czech and Slovak plants have reached maximum capacity as they are exporting to other markets (like Australia, which previously have been supplied by factories in Korea; sales of the Kia Sportage have shot up in Australia as supplies have increased).

      Ironically, where H/K are having the most trouble is in their home/domestic market where increased competition from imports, esp. for luxury autos, has forced Hyundai and Kia to lower prices for the Equus, Genesis and Quoris/K9 sedans.

      This a part of the reason why the next generation Equus and Genesis are being developed for the world market, as Hyundai seeks to increase sales of their luxury offerings overseas as they face increased competition domestically.

      Hyundai was successful in Brazil b/c they started local production (as well as developing models specifically for the Brazil market) whereas Kia was hurt due to not having local production and thus being hit with the high import tariffs.

  • avatar
    doctor olds

    Hyundai-Kia are doing very well indeed! Quarterly sales correctly convert to $20.8B, not $208B.

    • 0 avatar
      romismak

      Actually not and yes, yes good numbers, but their decision was to not build any new factories in markets where they can sell more, for example in NA they could sell more but it is impossible when their factories are running over 100% capacity + won is stronger so exporting from Korea to NA is not big win these days.But they focus now on quality, brand image and such things so we will see if it pays off. Kia was down everywhere besides China where they were growing faster than market, but 2nd half will be tougher, overall auto sales will be slower + Japanese will come back + high numbers from last year and Kia´s factories in China are also running at full capacity. 2nd half will be much tougher for Kia, Hyundai is bigger and growing faster so they are in better position, but for Kia 2nd half will be tough. Basically we can say take away China results from HK and they were down in H1 globally. Also Hyundai´s growth was helped by 3rd factory, so now they have combined 5 plants in China 3Hyundai 2Kia, running at full capacity, Japanese will come back stronger and their results can´t be so much better comparing to great 2nd half of 2012 + whole chinese automarket should slow down in 2nd half.

  • avatar
    wmba

    Have to echo doctorolds comments, particularly the KR won to US dollar conversin of revenue. It’s only about $21 billion US. That does mean, however, that the profit to sales ratio is over 10%, which beats the BMW benchmark. Is any other automaker as profitable?

    Apparently heated steering wheels and ventilated, cooled driver’s seats don’t cost as much as many might have guessed.

  • avatar
    Ron

    Just so that everyone is clear, inventory levels are irrelevant to profits. Automakers do not record sales and profits when the car is sold by a dealer — they record sales and profits the moment that the car leaves the factory.

    • 0 avatar
      Dimwit

      But it also means that there is a potential of lost sales. Hyundai and Kia have hot models that are in short supply. Particularly in NA if the model is not available on a timely basis, someone else will get that sale. How many Ford Foci and Fusions or Chevy Cruzes and Malibus have been sold because they’re available and on the lot?

      • 0 avatar
        bd2

        Hyundai/Kia have made a mistake in not planning for another factory in North America, whether it be in the US (somewhere in the SE, taking advantage of the close proximity to the current US plants) or Mexico (to take advantage of FTAs with Europe and much of South America).

        Due to continued labor troubles in Korea, it would be advantageous for Kia to build the new Forte in the US – which should also be a much bigger seller for Kia.

        Hyundai at its Alabama plant shifted production to the Elantra and they still can’t meet demand while Sonatas continue to be in short supply.

        But even more so is the supply of the Santa Fe Sport which Kia builds for Hyundai at its GA plant. Even with Kia allocating a bit more production to the SFS (which has hurt Sorento sales), SFS sales are well below what they would be if H/K had more production available.

        A 3rd NA plant to build the SFS, Santa Fe LWN and Sorento would be up to maximum capacity in no time (production at Ki’s GA plant would then shift to build the Forte, Forte hatch and Koup alongside the Optima).

        Sales are up in China b/c Hyundai had added capacity with a 3rd plant and Kia will soon follow suit.

        Even while sales in Europe are a bit down, Hyundai and Kia have expanded production at their Czech and Slovak plants (now at maximum capacity) due to increased demand elsewhere and expansion of capacity at Hyundai’s Turkey plant seems to be on the horizon.

        A lot of the growth in the US auto market is due to sales of CUVs (and trucks) and H/K are seriously handicapped due to the lack of capacity.

  • avatar

    If there are production constraints in USA why they are slapping incentives to move Sonatas and other cars as mentioned in article and sell so many car to rental companies. I hear production constraints argument for several years already. In Europe Kia and Hyudai are considered being a better value than Japanese cars. Japanese cars are simply overpriced for what they offer.

    • 0 avatar
      Dimwit

      Those cars have either unwanted options or not enough of the “good stuff”. The big problem with overseas imports is misreading the market. You bring in the wrong product mix and you have unmoving cars and a shortage of cars.
      Chrysler did the same thing with the Dart. First production run was heavily weighted to manuals and the intro stiffed. Unsaid was the reason why they would do such a thing when the US market is notoriously biased to automatics. I think there was a production difficulty that they wouldn’t admit but there you go. Dart stumbled out of the gate and really, hasn’t recovered.

  • avatar

    Although I like the good news I do have reservations based on admittedly anecdotal observation.
    I think a lot of people were holding on to their 9 and 10 year old vehicles until the life ran out of them.
    I have a bunch of friends and neighbors who depend on some sort of truck to conduct business, and none of them have bought anything.
    If this is truly a economic up-tick, this car buying trend should last several months, maybe even a year before leveling out.


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