Hyundai to Focus on EVs and Luxury During Raft of Uncertainties | Tech News

Hyundai to Focus on EVs and Luxury During Raft of Uncertainties

Hyundai Motor Co. said it will focus on luxury models, SUVs and electric vehicles to achieve what it expects to be record-high earnings this year.

By:BLOOMBERG
| Updated on: Oct 24 2022, 18:27 IST
Hyundai
Hyundai’s shares fell as much as 3.3% and are on track for their lowest close in more than two years. (Bloomberg)
Hyundai
Hyundai’s shares fell as much as 3.3% and are on track for their lowest close in more than two years. (Bloomberg)

Hyundai Motor Co. said it will focus on luxury models, SUVs and electric vehicles to achieve what it expects to be record-high earnings this year even as challenges such as inflation and fluctuating raw material prices persist.

While supply-chain disruptions continue to stoke uncertainty, and currency volatility and higher marketing costs in the face of tougher competition will be a burden, the global chip shortage should ease in the fourth quarter, Hyundai said Monday as it announced quarterly results that missed analysts' estimates.

Operating profit for the three months through September was 1.55 trillion won ($1.07 billion), the South Korean automaker said, below the 2.7 trillion won average estimate from analysts tracked by Bloomberg. Sales rose 31% from a year earlier to 37.7 trillion won, beating the 35.3 trillion won estimate.

Hyundai's shares fell as much as 3.3% and are on track for their lowest close in more than two years.

Hyundai cut its 2022 sales target to 4.01 million vehicles from 4.32 million, and also trimmed its planned investment for the year to 8.9 trillion won from 9.2 trillion won.

The company said it will “focus on the recovery of sales” through a plan that will “enhance its product mix with SUVs and luxury models.” Its Grandeur EV, named Azera in markets outside Korea, is in high demand following its launch this month and will help spur domestic sales momentum, Hyundai said. The Ioniq 6, introduced in Korea in the third quarter, is also selling well, it said.

Provisions Hit

Hyundai's third-quarter operating profit was down 3.4% from a year earlier, while net income dropped 5.1%. Excluding provisions, operating profit topped 2.9 trillion won, the company said.

“By adding the provisions to the operating profit, you would find that Hyundai is doing pretty well,” said Koh Tae-bong, head of research at HI Investment & Securities in Seoul.

Hyundai and its affiliate Kia Corp. said last week they'd book a combined 2.9 trillion won as provisions in third-quarter earnings due to costs related to Theta engines. More owners than expected demanded replacement engines during the pandemic rather than buying new cars, pushing up warranty costs, the automakers said.

The issue could hurt the companies' share prices in the near term, Nomura analyst Angela Hong wrote in an Oct. 20 note. Kia's shares fell as much as 3.8% Monday, taking their loss this year to 20%. Hyundai is down about 22% this year.

EV Sales

Hyundai said its EV sales rose more than 27% from a year earlier to about 52,000 units, accounting for 5.1% of overall sales volume. Despite the provisions and challenges such as inflation and geopolitical uncertainty, Hyundai expects record-high results this year, it said.

The automaker raised its EV sales target for 2023 by 40% to about 300,000 units, with the Ioniq 6 accounting for about 20% of those sales next year. Hyundai also said it is considering investing a joint venture to make batteries in the US.

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First Published Date: 24 Oct, 18:27 IST
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