Kia Reports Record High Operating Profit of 11.6 Trillion KRW Last Year

60.5% Increase Compared to 2022
Double-Digit Profit Margin 'Surprise'

Kia recorded its highest-ever business performance last year. The operating profit margin, a profitability indicator for automakers, rose to double digits, indicating a profitable business. Despite challenging domestic and international market conditions recently, Kia plans to increase sales focusing on expensive models such as electric vehicles, raising this year’s operating profit target by 3.4% to 12 trillion won.

On the 25th, Kia announced that its operating profit last year was 11.6079 trillion won (IFRS consolidated basis), up 60.5% from the previous year. Sales increased by 15.3% to 99.8084 trillion won. The operating profit margin rose by 3.2 percentage points to 11.6% compared to 8.4% in 2022. This is the first time the annual operating profit margin has reached double digits. Double-digit profit margins are considered a profitability indicator that even high-end brands like Mercedes-Benz and Tesla find difficult to achieve. Kia recorded double-digit profit margins for five consecutive quarters since Q4 2022.

Domestic and overseas vehicle sales totaled 3,087,384 units, a 6.4% increase over the same period. Various management indicators such as sales, operating profit, and sales volume reached their highest levels ever. Sales and operating profit significantly surpassed the previous record set in 2022. The number of vehicles sold also exceeded the previous peak in 2015 (3,049,972 units).

The increase in sales and profits exceeding the growth in vehicle sales volume is largely due to the higher sales of relatively expensive vehicles such as recreational vehicles (RVs) and electric vehicles. In the mid-2010s, when sales volume was high, small sedans were mainly sold in developing countries like China, but recently, the proportion of environmentally friendly vehicles such as sports utility vehicles (SUVs), electric vehicles, and hybrids with higher unit prices has increased. Last year, the share of eco-friendly vehicles in total sales was 19.1%, up 2.3 percentage points from the previous year. The main markets have also shifted to advanced countries such as North America and Europe.

Additionally, Kia reduced costs by maintaining incentives at the industry’s lowest level. This means cars sold well even without separate promotional activities. The long-standing weak won trend also helped through favorable exchange rates.

However, signs of a challenging market environment appeared as operating profit in Q4 last year decreased by 6% compared to the previous year. Operating profit for Q4 was 2.4658 trillion won. This is the first time in two years since Q4 2021 that operating profit declined year-over-year. A company official explained, "Competition among companies intensified, increasing incentives, and the negative exchange rate impact due to won appreciation caused profitability to slightly decrease compared to a year ago."

Despite reduced pent-up demand and difficult market conditions such as economic recession and high interest rates, Kia decided to tighten its reins by raising this year’s targets compared to last year. Kia set this year’s sales target at 3.2 million units, a 3.6% increase from last year, with sales and operating profit targets of 101.1 trillion won and 12 trillion won, up 1.3% and 3.4%, respectively.

Song Hoseong, President of Kia, is giving a presentation at the CES 2024 Media Conference held on the 8th. [Photo by Yonhap News]

The company stated, "We will increase sales focusing on popular and eco-friendly vehicles in the U.S. and Europe, where demand for high value-added vehicles is high. Although there are concerns about a slowdown in the electric vehicle market, we will solidify our eco-friendly vehicle leadership by fully launching overseas sales of the EV9 and offering competitively priced small and mid-sized electric vehicles."

Meanwhile, the company announced it would repurchase 500 billion won worth of treasury shares to enhance shareholder value and, if management targets are met by Q3, will cancel 100% of the repurchased shares. Initially, it planned to cancel 50%, but this was increased. The year-end dividend was set at 5,600 won, up 2,100 won from last year.