Hyundai Motor Q3 Revenue 28.8672 Trillion KRW, Up 4.7% YoY
Operating Profit Successfully Returns to Black
[Asia Economy reporters Changhwan Lee and Jehun Yoo] Hyundai Motor Company succeeded in defending its third-quarter performance despite the severe semiconductor supply crisis.
Hyundai Motor announced on the 26th that it recorded sales of KRW 28.8672 trillion and an operating profit of KRW 1.6067 trillion in the third quarter. Sales increased by 4.7% compared to the same period last year, and operating profit turned positive.
Domestic and Overseas Vehicle Sales Decline Due to Semiconductor Crisis
Hyundai sold 898,906 units on a wholesale basis in the global market in the third quarter. This is a 9.9% decrease compared to the same period last year.
In the domestic market, despite strong sales of new SUVs such as Ioniq 5, GV70, and Tucson, sales decreased by 22.3% year-on-year to 154,747 units due to factors such as the significant increase in sales during the same period last year caused by individual consumption tax cuts and reduced production this year due to semiconductor supply shortages.
In overseas markets, sales increased in emerging markets such as Latin America and the Middle East, where sales were depressed last year due to COVID-19. However, sales in major markets showed weakness due to production disruptions caused by semiconductor supply shortages, resulting in a 6.8% decrease compared to the same period last year, with 744,159 units sold.
Sales amounted to KRW 28.8672 trillion, up 4.7% from the same period last year. The improvement in the sales mix centered on Genesis and electric vehicles offset the impact of the overall volume decline and the depreciation of the Korean won against the US dollar. The average KRW/USD exchange rate in Q3 2021 was 1,157 won, down 2.6% from the same period last year.
The cost of sales ratio rose by 0.5 percentage points year-on-year to 81.9%. Despite the decrease in global wholesale sales, the increase was limited due to the mix improvement effect centered on high value-added models. The ratio of selling and administrative expenses to sales decreased by 7.1 percentage points year-on-year to 12.6%, influenced by a reduction in quality-related costs.
As a result, operating profit in Q3 2021 turned positive compared to the same period last year, recording KRW 1.6067 trillion. The operating profit margin was 5.6%. Ordinary profit and net profit were KRW 1.937 trillion and KRW 1.4869 trillion, respectively.
A Hyundai Motor official said, "Sales in the third quarter decreased compared to the same period last year due to production disruptions caused by the global shortage of automotive semiconductors," adding, "Operating profit increased year-on-year despite the decrease in sales volume and unfavorable exchange rates, thanks to improvements in the sales mix and reductions in quality costs."
He continued, "Although the increase in sales proportion in emerging markets, which had been somewhat sluggish due to COVID-19, had some impact on the average selling price (ASP), the expansion of sales proportions of high value-added models such as Genesis and SUVs led to improved profitability."
Concerns Over Prolonged Semiconductor Supply Shortage
Regarding future business environment prospects, Hyundai expects demand recovery due to economic improvements in major countries and improvements in the COVID-19 situation following vaccinations.
However, it forecasts that difficult business conditions such as production disruptions due to delays in the normalization of global semiconductor supply and global inventory shortages will continue.
In particular, Hyundai anticipates that the global shortage of automotive semiconductors may be prolonged. While shortages of some semiconductor items are expected to gradually improve from the fourth quarter of this year, the overall impact of the semiconductor shortage is expected to persist, and it will take a long time to return to normal production.
Additionally, external factors such as increased exchange rate volatility and the ongoing COVID-19 situation are expected to pose burdens on business activities.
In this regard, Hyundai emphasized plans to focus on ▲continuing efforts to secure additional parts supply by mobilizing company-wide capabilities ▲minimizing sales decline through production and sales optimization ▲expanding market share and defending profitability through mix improvement centered on high value-added models ▲and managing liquidity-centered operations through close monitoring of external uncertainties.
Furthermore, Hyundai explained that it will continue to expand sales of eco-friendly vehicles, including E-GMP-based dedicated electric vehicles such as the Ioniq 5 and Genesis GV60 launched this year, to strengthen its electrification leadership in the rapidly changing global automotive market.
Meanwhile, Hyundai revised its annual performance guidance introduced earlier this year to build investor trust and enhance transparency. Due to the impact of semiconductor supply disruptions, it lowered its 2021 sales forecast from 4.16 million units to 4 million units.
The target growth rate for automotive sales revenue was raised from the previous 14-15% year-on-year to 17-18%, and the operating profit margin target was adjusted upward from 4-5% to 4.5-5.5%.
Investment plans were changed from KRW 8.9 trillion to KRW 8 trillion (R&D investment KRW 3.3 trillion, CAPEX KRW 3.9 trillion, strategic investment KRW 800 billion) to secure liquidity amid increasing external volatility while sustaining future growth. The shareholder return target to maintain dividends at levels equal to or higher than the previous year, announced at the beginning of the year, was maintained.
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