Despite Positive Reviews for New Cars, Hyundai and Kia Face Consecutive Slumps
Demand Remains Steady but Production Disruptions Continue Due to COVID-19
Production Normalization Possible with Semiconductor Supply Recovery... Entry into a Virtuous Cycle Feasible
[Asia Economy Reporter Minwoo Lee] The stock prices of automobile companies such as Hyundai Motor and Kia have been continuously sluggish. Although new models have received favorable reviews, the supply disruption caused by the persistent shortage of automotive semiconductors has not been resolved. Therefore, while the third-quarter earnings are expected to be weak in the short term, there is a forecast that once production normalizes, the companies can enter a virtuous cycle.
According to the Korea Exchange on the 29th, the closing prices of Hyundai Motor and Kia stocks fell by 5.2% and 5.9%, respectively, from the end of last month to the previous day. This decline exceeds the KOSPI's drop of -3.2% during the same period. The stocks also showed a sluggish trend in the morning session. As of 9:01 AM, Hyundai Motor's stock price was 197,500 KRW, down 1.99% from the previous day. Kia also dropped 1.50% to 78,900 KRW compared to the previous day.
In Kia's case, the foreign buying trend that had continued since the beginning of this month reversed. Foreign investors, who had been net buyers on all but one day until the 23rd of this month, turned to net selling for three consecutive trading days starting from the 24th, selling a total of 55 billion KRW worth of shares. This amount ranks fourth in foreign net selling during the same period. Hyundai Motor also sold shares worth 46.4 billion KRW during this period.
Despite unveiling its independent electric vehicle platform (E-GMP) and receiving positive reviews for recently launched new models, the stock prices continue to decline. Concerns have arisen that the normalization of production may be delayed due to the spread of the COVID-19 Delta variant in Southeast Asia. This has increased uncertainty about second-half earnings. NH Investment & Securities expects that the third-quarter earnings of both Hyundai Motor and Kia will fall short of market consensus. In particular, Hyundai Motor's operating profit is forecasted to be 1.642 trillion KRW, which is 26.5% below the market consensus of 2.234 trillion KRW.
With global automobile inventory at an all-time low and demand remaining robust, the timing of production normalization is crucial. It is anticipated that from as early as the fourth quarter, the impact of COVID-19 will ease and production of E-GMP vehicles will ramp up, enabling mid- to long-term growth. Soo-hong Cho, a researcher at NH Investment & Securities, stated, "Global automobile demand, which had decreased to about 78.5 million units due to COVID-19, is expected to recover to approximately 95 million units by 2023. The corporate status and market share in advanced markets such as the U.S. and Europe are already strengthening, and with successful business structure transitions to electric and hydrogen vehicles, the industry is expected to enter a virtuous cycle."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
