Car Stocks, Will They Dodge the Wuhan Pneumonia?

Hyundai Motor Group's luxury brand Genesis has officially launched its first SUV (Sport Utility Vehicle), the 'GV80'. On the 15th, Hyundai Motor Group held a new car launch event at KINTEX in Goyang, Gyeonggi Province, and began official sales.
Goyang=Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Kum Boryeong] Market attention is focused on whether automobile stocks can avoid the impact of the "Novel Coronavirus Infection (Wuhan Pneumonia)".

According to the Korea Exchange on the 29th, Hyundai Motor's stock price rose by 500 won (0.38%) from the previous session to 131,000 won. This contrasts with the KOSPI, which fell by more than 69.41 points (3.09%) on the same day due to the impact of Wuhan Pneumonia.

It is expected that the negative impact of Wuhan Pneumonia on Hyundai Motor and Kia Motors will be relatively small. Unlike major competitors such as Honda, Nissan, GM, and Renault, they do not have production plants in the Wuhan area. Song Seonjae, a researcher at Hana Financial Investment, explained, "Since the operating rates of Hyundai and Kia's plants in China are already low, even if there is a temporary shutdown, it will not cause additional losses."

Also, according to Hyundai Motor and Kia Motors, the proportion of China in their retail sales has relatively decreased to 16% and 11%, respectively, compared to 23% and 22% in 2016.

Looking at past epidemics, it is analyzed that Wuhan Pneumonia is unlikely to have a strong impact on automobile demand. Researcher Song said, "During the 2002-2003 Severe Acute Respiratory Syndrome (SARS), 2009-2010 Novel Flu, and 2012-2015 Middle East Respiratory Syndrome (MERS), both Chinese and global automobile sales did not show negative growth," adding, "Currently, consumer sentiment is weakened as Chinese automobile sales have been in negative growth for nearly a year and a half, so the epidemic may have a more negative impact than in the past, but since it is entering a low base period, the possibility of a shock in the monthly sales growth rate is not high."

Automobile stocks have been expected to continue improving performance this year. In Hyundai Motor's case, product mix improvement is expected through continuous new car launches such as Tucson, Avante, and Genesis, and the full-scale overseas sales of already launched new cars. Cost reduction due to the expansion of models applying the 3rd generation platform also contributes to expectations for profitability improvement. Kia Motors is in a similar situation. Kwon Sunwoo, a researcher at SK Securities, said, "Considering the expansion of vehicles launched last year and the scheduled launch of major volume models such as Sorento, Carnival, and Sportage, profitability improvement is expected to continue."