On July 25, Hyundai Motor released its financial report for the second quarter of this year. Driven by the strong sales of high-margin models, Hyundai Motor achieved record-high profits and revenues in the second quarter. The company also stated it would expand its lineup of hybrid models to respond to potential changes in electric vehicle policies after the U.S. elections.
Specifically, in the second quarter of this year, Hyundai Motor's revenue increased by 6.6% year-on-year to KRW 45.02 trillion, a record high. Operating profit rose by 0.7% to KRW 4.28 trillion, also a record high. The operating profit margin reached 9.5%, and net profit grew by 24.7% to KRW 4.17 trillion, the highest quarterly net profit since the record high in Q2 2022, easily surpassing the average analyst expectation of KRW 3.4 trillion compiled by LSEG SmartEstimate. During the same period, Hyundai Motor's global sales were 1,057,168 units, a slight decline of 0.2% year-on-year.
From a market perspective, in the second quarter of this year, Hyundai Motor outperformed some competitors in the U.S. market by increasing sales of high-end SUVs and hybrid vehicles, which also helped offset the long-standing weak sales in the domestic Korean market.
In Hyundai Motor's second-largest market, South Korea, sales declined by 9.6% year-on-year in the second quarter as consumers continued to struggle with soaring inflation and a weak economy, following a 16% decline in the first quarter.
Favorable exchange rates also helped Hyundai Motor achieve profit growth in the second quarter. The Korean won depreciated by 4.3% against the U.S. dollar compared to the same period last year, boosting Hyundai Motor's overseas sales and profits.
Hyundai Motor plans to solidify its market share by enriching its hybrid and electric vehicle product lines, including new INSTER and IONIQ series small electric cars. Despite macroeconomic uncertainties, intensifying competition, and increasing incentives, the company aims to enhance profitability through various measures, continue to optimize regional and product mixes, improve production processes, and ensure robust profitability to cope with global uncertainties, including interest rate fluctuations.
Hyundai Motor's better-than-expected performance in the second quarter helps alleviate growing concerns among investors who fear a slowdown in consumer demand for cars. Meanwhile, competitors like Ford, Nissan, and Tesla have faced a slowdown in car demand during the second quarter.
However, Hyundai Motor also warned that the outlook remains uncertain as inflation and high interest rates continue to squeeze consumers, leading to more intense price competition. "As consumer demand for cars weakens, we expect competition to become fiercer, and the number of incentives may increase... Thus, the business outlook could become more challenging," Hyundai and Kia said in a financial report announcement.
Hyundai Motor also stated that as global demand for electric vehicles slows and uncertainty over U.S. electric vehicle policies increases, the company will expand its lineup of hybrid vehicles. U.S. Republican presidential candidate and former President Donald Trump has criticized Democratic President Joe Biden's electric vehicle policies and said he would "end the electric vehicle mandate" if he wins.
Hyundai Motor CFO Lee Seung Jo told analysts on the earnings call, "Even if Trump wins the election, we don't think the Inflation Reduction Act (IRA) will be abolished."
Lee Seung Jo stated that Hyundai Motor will continue to focus on various possibilities and plans to increase its lineup of hybrid vehicles "to prepare for a potential reduction in the Inflation Reduction Act." Hyundai Motor said that although its pure electric vehicle sales fell by nearly a quarter, the profitability of its hybrid models is similar to that of gasoline vehicles, and their contribution to the company's profits is increasing.
In the second quarter, Hyundai Motor's car sales in the U.S. slightly increased by 2.2%, with high-margin SUV sales accounting for about 80% of the company's total sales in the U.S., and hybrid vehicle sales increasing by 42% year-on-year.
