Hyundai Kia Motors Achieved 'V-Shaped Recovery' Last Year... Continues Rebound Trend This Year (Comprehensive)

[Asia Economy Reporter Su-yeon Woo] Hyundai Kia Motors achieved a V-shaped performance rebound last year due to an improved sales mix focused on sport utility vehicles (SUVs) and favorable exchange rate effects. This year, the company is expected to continue improving its performance through new SUV models and the Genesis brand's premiumization strategy.

On the afternoon of the 22nd, Hyundai Kia Motors held a 2019 business performance conference call at its headquarters in Yangjae-dong, Seoul, and announced its annual results. Hyundai Motor recorded sales of KRW 105.79 trillion, up 9.3% from the previous year, and operating profit of KRW 3.68 trillion, an increase of 52.1%.

◆ Hyundai Kia Motors' 2019 Performance, Successful V-shaped Rebound= Hyundai Motor's sales exceeded KRW 100 trillion for the first time since its founding. Despite large one-time costs related to recalls in the third quarter of last year, the improved sales mix of SUVs and luxury models (KRW 1.404 trillion) offset these costs, and positive exchange rate effects (KRW 987 billion) also contributed partially.

For Kia Motors, sales increased by 7.3% year-on-year to KRW 58.15 trillion, and operating profit surged by 73.6% to KRW 2.01 trillion. Kia also improved profitability thanks to a better sales mix driven by increased sales of high-margin SUV models such as the Telluride in the U.S. market, new models, and exchange rate effects. The effect of wage arrears reversal in the first quarter also boosted operating profit.

Last year, operating profit margins, which had fallen to 2.5% for Hyundai Motor and 2.1% for Kia Motors, rose to 3.5% respectively. Hyundai Motor's operating profit margin target for this year is 5%, and Kia Motors has set a target of 6% by 2025.

Hyundai Kia Motors Annual Performance (Unit: Units, 100 Million KRW)

◆ GV70, Tucson, Avante, Sorento, Carnival, New Models Lined Up for Launch= This year, Hyundai Kia Motors plans to continue its performance rebound by maximizing the new car cycle that began last year. Hyundai Motor has set a sales target of 4.576 million units, a 3.4% increase from the previous year. Domestic sales are conservatively estimated at 732,000 units, considering last year's strong sales of models like the Palisade. Overseas sales targets are set at 3.844 million units, a 4.4% increase from the previous year, driven by sales growth in emerging markets such as India and Latin America.

To achieve this, Hyundai Motor plans to strengthen sales momentum through the successful market entry of the GV80, launched last week, and the full model change of volume models such as the Avante and Tucson. The company will also focus on efficient incentive strategies tailored to regional characteristics and improving profitability of eco-friendly vehicles through parts commonization.

Furthermore, Hyundai Motor aims to make this year the first year of securing leadership in future markets by enhancing capabilities in future technologies such as electrification, autonomous driving, and mobility services. It will accelerate its transformation into a smart mobility solutions provider and actively expand investments to build a new mobility ecosystem.

The Genesis brand has announced an annual sales target of 116,000 units, exceeding 100,000 units for the first time since the brand's launch. The second SUV of Genesis, the GV70, is scheduled for release in the second half of this year, and the brand's first electric vehicle is also expected to launch next year.

Lee Yong-woo, head of the Genesis division, said, "We set aggressive sales targets because we believe that SUVs such as the GV80, launched earlier this year, and the GV70, scheduled for release in the second half, have market competitiveness. We are working to capture the optimal timing ahead of launches in Europe and China this year."

Genesis GV80

Kia Motors plans to maximize the effect of the so-called 'golden cycle' that began last year. In the U.S. market last year, the large SUV Telluride was popular, selling nearly 60,000 units, and the Seltos also performed well in the Indian market, leading to a positive market foothold.

Kia's sales target for this year is 2.96 million units (including CKD), a 4.9% increase from the previous year. Domestic sales are expected to remain similar to last year at 520,000 units, while overseas sales are targeted at 2.44 million units, about a 6% increase from last year's results.

Domestically, new models such as the new K5, Sorento, and Carnival, launched at the end of last year, will be sequentially introduced. In the U.S. market, Kia will continue to increase production of the Telluride and introduce competitive new models such as the Seltos, K5, and new Sorento.

In the European market, Kia will establish a sales strategy for eco-friendly vehicles to actively respond to strengthened carbon emission regulations. However, as internal combustion engine vehicle sales are expected to decrease by about 70,000 units and electrified vehicle sales targets increase by about 50,000 units, the total sales target is set at 498,000 units, down by about 20,000 units.

Joo Woo-jung, head of Kia Motors' finance division, said, "The decrease in internal combustion engine vehicles is mainly in some small gasoline models that do not significantly affect profitability, so there is no need to worry about profitability at the market level. Popular electric models like the Niro are so in demand that backorders of 7 to 9 months occur in some countries."