Automobile Stocks Unable to Accelerate... Semiconductor Supply Remains Uncertain in the Second Half

Still Uncertain Semiconductor Supply Recovery
Concerns Over Momentum Slowdown in Automakers

[Asia Economy Reporter Gong Byung-sun] Completed car stocks, which were expected to rise in the second half of the year, are underperforming. Contrary to expectations, semiconductor supply issues have not been resolved, and the speed of production normalization is expected to determine the future direction of stock prices.

As of 9:10 a.m. on the 6th, Hyundai Motor recorded 224,000 KRW, up 0.45% (1,000 KRW) from the previous day. Although it rebounded slightly that day, Hyundai Motor has been sluggish since the second half of the year. It has fallen about 6.47% from the beginning of July to that day. Kia also recorded 86,100 KRW that day, down 3.9% since the second half of the year began.

Last month, securities firms predicted that completed car stocks such as Hyundai Motor and Kia would sail smoothly from the second half of the year. Both Hyundai Motor and Kia saw their global sales in the second quarter increase by 46.5% and 46.1% respectively compared to the same period last year, leading to expectations of foreign buying interest due to record-breaking performance. However, contrary to expectations, foreigners net sold Hyundai Motor stocks worth 553.3 billion KRW and Kia stocks worth about 75.2 billion KRW in the second half of the year.

The reason their investment attractiveness has declined is that the recovery of semiconductor supply, a condition for stock price increases, remains uncertain. It appears that long-term issues continue to have a negative impact rather than short-term factors such as heavy snow and fires that occurred earlier this year. As global completed car manufacturers show interest in electric vehicles, semiconductor demand is increasing, but because automotive semiconductors have low profitability, semiconductor production lines are not expanding accordingly. The proportion of automotive semiconductors in the sales of Taiwan’s foundry (contract manufacturing) company TSMC is only 3%, indicating low profitability, so foundry companies have no incentive to expand production.

The semiconductor supply issue is also affecting momentum. According to the seasonally adjusted annual rate (SAAR) of U.S. automobile sales announced on the 4th (local time), the completed car market is showing a trend of peaking and then declining. The SAAR in April reached 18.6 million units but dropped to 14.7 to 15 million units in July. As a result, concerns are growing that momentum for completed car stocks may weaken, with General Motors’ stock price plunging 8.91% that day.

In the securities industry, supply issues in the second half of the year have been identified as a key factor in investment decisions for completed car stocks. Moon Yong-kwon, a researcher at Shin Young Securities, said, "The problem is sales disruptions caused by semiconductor supply imbalances rather than a slowdown in new car demand," adding, "The second half performance and stock price direction of completed car manufacturers will be determined by the speed of production normalization."