Q2 Operating Profit 1.886 Trillion Won... Highest Since 2014
[Asia Economy Reporter Changhwan Lee] Hyundai Motor Company posted a surprise performance in the second quarter, exceeding market expectations. The company showed significant improvement in earnings, driven by the base effect from COVID-19 and increased sales of key models such as SUVs (Sport Utility Vehicles) and Genesis.
Hyundai Motor announced on the 22nd that its sales in the second quarter reached 30.3261 trillion KRW, and operating profit was 1.886 trillion KRW.
Compared to the previous year, sales increased by 38.7%, and operating profit rose by 219.5%.
This is the first time Hyundai’s quarterly sales have exceeded 30 trillion KRW. It is also the first time since the fourth quarter of 2014, when operating profit was 1.875 trillion KRW, that quarterly operating profit has surpassed 1.8 trillion KRW.
The operating profit margin rose by 3.5 percentage points from the same period last year to 6.2%, marking the highest level in 19 quarters since the second quarter of 2016 (7.1%).
A Hyundai Motor official explained, "Operating profit continued to recover despite semiconductor supply shortages and unfavorable exchange rate impacts, thanks to increased sales volume and profitability-focused sales. Although the sales mix slightly deteriorated due to recovery in emerging markets such as India and Latin America, profitability improved through a sales strategy centered on profitability."
Hyundai sold 1,031,349 units globally on a wholesale basis in the second quarter, a 46.5% increase compared to the same period last year.
In the domestic market, sales decreased by 11.0% year-on-year to 200,682 units. This decline was due to a significant increase in sales in the same period last year caused by individual consumption tax cuts and a reduction in production due to semiconductor supply shortages.
In overseas markets, sales grew by 73.6% year-on-year to 830,667 units, boosted by the base effect from COVID-19 last year and the new model effect of key vehicles.
Semiconductor Supply Shortage Expected to Improve from Q3
Regarding future business environment prospects, Hyundai expects demand recovery to continue due to economic improvements in major countries and the base effect from COVID-19. However, it anticipates that difficult business conditions will persist due to delays in global semiconductor supply normalization, rising raw material prices, and global inventory shortages caused by fewer business days in the third quarter.
Hyundai expects the global automotive semiconductor supply shortage to peak in the second quarter and gradually improve from the third quarter, but full normalization will take a long time. The shortage of semiconductors for some items is expected to continue through the third quarter and gradually improve from the fourth quarter.
In this regard, Hyundai plans to increase production in the second half of the year to compensate for some production disruptions in the first half by ▲ mobilizing company-wide capabilities to secure additional quantities ▲ proactively securing inventory through annual orders ▲ promoting partnerships with major semiconductor companies.
Additionally, Hyundai explained that external factors such as increased exchange rate volatility centered on emerging markets and rising raw material prices will also pose challenges to business activities in the second half of the year.
Meanwhile, Hyundai emphasized that despite the difficult business environment with ongoing external risks, it will strive to maintain the trend of improving profitability and competitiveness through the successful global market launch of key new models such as the GV70, Santa Cruz, and Genesis-exclusive electric vehicles.
Furthermore, Hyundai stated that from the second half of the year, it will continue to expand sales of eco-friendly vehicles by normalizing production of the Ioniq 5 and launching Genesis’s first dedicated electric vehicle, thereby strengthening its position in the global eco-friendly vehicle market and actively responding to environmental regulations.
A Hyundai Motor official said, "With rising vaccination rates in major countries and continued economic stimulus measures by governments, demand for automobiles in major global markets is expected to continue recovering. Although the impact of the global semiconductor shortage is somewhat easing, the shortage of semiconductors for some items will continue into the third quarter, and it is expected to take a long time to fully normalize."
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