Kia Motors' Q4 Operating Profit Slows... Last Year's Operating Profit Up 145.1% YoY (Update)

The Hyundai Motor Group headquarters building in Seocho-gu, Seoul./Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kiho Sung] Kia Motors reported an increase in sales revenue in the fourth quarter of last year, but operating profit declined. However, the full-year performance showed that despite a decrease in total sales volume due to a shortage of automotive semiconductors, sales revenue and profit increased thanks to higher sales of premium vehicles and favorable exchange rate effects.

Kia announced on the 26th that its sales revenue for the fourth quarter of last year was 17.1884 trillion KRW, with an operating profit of 1.1751 trillion KRW. Compared to the previous year, sales revenue increased by 1.6%, but operating profit decreased by 8.3%. The number of vehicles sold in the fourth quarter was 647,949 units, down 12.8% from the previous year.

A Kia official commented on the fourth-quarter results, stating, “The global semiconductor shortage caused an overall supply shortage of vehicles, leading to reduced sales,” but added, “We minimized the decline in profitability through an increase in average selling price and mix improvement by focusing on high-margin models such as RVs.”

Regarding operating profit, favorable factors included strong sales of new models such as the EV6 and Sportage, improved product competitiveness, enhanced brand awareness, record-high average selling price increases, and significant reductions in incentives. However, these gains were offset by decreased sales volume and increased costs such as expanded R&D expenses and performance bonuses.

Kia’s annual sales last year recorded 535,016 units domestically, a 3.1% decrease from the previous year. Overseas sales increased by 9.1% to 2,241,343 units, resulting in a global market total of 2,776,359 units, up 6.5% year-on-year.

Annual sales revenue rose 18.1% year-on-year to 69.8624 trillion KRW, driven by expanded sales of high-margin RVs and new models, mix improvement, and increased sales of eco-friendly vehicles.

Annual operating profit reached 5.0657 trillion KRW, a 145.1% increase from the previous year, supported by a base effect from quality costs incurred in 2020, expanded sales volume and mix improvement leading to higher average selling prices per unit, and reduced incentives, resulting in an improved overall profitability structure. The operating profit margin was 7.3%.

Regarding this year’s business environment, Kia expects global automobile demand to recover as the impact of COVID-19 eases, despite concerns over reduced consumer purchasing power due to inflation and intensified competition among major companies. The eco-friendly vehicle market, especially electric vehicles, is expected to expand significantly.

Accordingly, Kia plans to achieve substantial sales growth by quickly resolving the backlog of undelivered vehicles through increased production linked to improved semiconductor supply conditions, while continuing to strengthen profitability based on enhanced brand and product competitiveness. Additionally, Kia will focus on expanding sales of eco-friendly vehicles such as the EV6 and the new Niro, concentrating on the transition to electric vehicles.

In the mid to long term, Kia aims to secure profitability by expanding production and sales of electrified models and to concretize new revenue and business areas such as software and services.