Hyundai Motor and Kia Set 7.47 Million Unit Target for This Year... The Key is 'Semiconductors'

26% Increase Planned Compared to Last Year... "Expansion of Sinsa and Resolution of Waiting Inventory"
Combined Sales of Both Companies Expected to Reach 217 Trillion Won Once Semiconductor Supply Issues Are Resolved

[Asia Economy Reporter Hyunseok Yoo] Hyundai Motor Company and Kia have set a global sales target of 7.47 million units for this year. They plan to increase sales by 26.10% compared to the previous year through strengthening vehicle lineups such as electric vehicles and resolving backlog orders. However, uncertainties remain due to semiconductor supply issues and the spread of Omicron, a variant of COVID-19.

According to the completed vehicle industry on the 27th, Hyundai Motor and Kia have set their global sales target for this year at 7,473,000 units, a 26.10% increase from last year's 5,926,359 units. Individually, Hyundai Motor aims for 4,323,000 units, and Kia targets 3,150,000 units.

If Hyundai Motor achieves 4.32 million units, it will reach the level of 2019 (4,425,528 units). In particular, Kia is likely to record its highest-ever sales volume. The previous record was 3,049,972 units in 2015.

Hyundai Motor and Kia expect that expanding new vehicle lineups and resolving backlog orders will contribute to the increase in sales volume this year. Hyundai plans to maximize sales by strengthening its electric vehicle lineup through the launch of models such as the GV60, GV70 electrified versions, and Ioniq 6, as well as optimizing production and sales.

In a recent Q4 earnings conference call, Hyundai Motor stated, "We plan to launch the Ioniq 6 in the domestic market in the second half of the year," adding, "We will sequentially release the GV60, G80 EV, and GV70 EV in major global markets such as the United States, Western Europe, and China to strengthen our electric vehicle lineup." They also noted, "Improving profitability through sales mix enhancement will be a key focus."

Kia plans to target the market with recreational vehicles (RVs) and electric vehicles. It will also implement a sales mix improvement strategy by selling high value-added vehicles. To meet production targets, Kia is considering introducing overtime work. During a conference call held the previous day, Kia said, "To achieve 3.15 million units, we need to produce about 3.3 million units, which means producing 270,000 units per month. This would result in a domestic operating rate of about 106% and an overseas rate of about 99%, with overtime planned for the excess portion."

However, concerns remain over the Omicron variant of COVID-19 and semiconductor supply. In South Korea, daily COVID-19 cases have surpassed 10,000, and globally cases are increasing, indicating the spread of Omicron. Kang Hyun-seok, Vice President and Head of Hyundai Motor’s Finance Division, said, "In the first quarter, supply shortages will continue due to the spread of the Omicron variant and increased orders from major brands aiming to secure inventory."

The semiconductor supply issue has not yet been fully resolved. On the 25th (local time), the U.S. Department of Commerce released results from a survey conducted in November last year of 150 semiconductor manufacturers and demand companies, reporting that industry insiders expect semiconductor supply problems will not disappear within the next six months.

Financial analysts have analyzed that semiconductor supply must be resolved for Hyundai Motor and Kia to achieve their sales and earnings forecasts. Hyundai and Kia expect gradual improvement in semiconductor supply starting from the second quarter this year and anticipate sales revenue of approximately KRW 133 to 134 trillion and KRW 83.1 trillion, respectively.

Junseong Kim, a researcher at Meritz Securities, stated regarding Kia, "For the guidance to be met, it is necessary to confirm early normalization of semiconductor procurement differentiated from global competitors and an increase in average selling price (ASP) starting from the beginning of the year." Sunwoo Kwon, a researcher at SK Securities, explained about Hyundai Motor, "The ongoing production disruptions caused by parts supply issues lower the visibility of the guidance presented for this year's sales growth rate, operating profit margin, and wholesale sales of 4.32 million units."