Sold Less but Earned More... Kia Achieves Record-High Operating Profit Margin (Update)

Kia Announces 2024 Q1 Business Results
Domestic and Overseas Sales Decline but Profitability Rises

Kia announced on the 26th that its consolidated operating profit for the first quarter of this year was 3.4257 trillion KRW, a 19.2% increase compared to the same period last year. This is the highest quarterly operating profit recorded.

Sales reached 26.2129 trillion KRW, up 10.6% year-on-year, and net profit was 2.8091 trillion KRW, a 32.5% increase. Although domestic and overseas sales volume in the first quarter decreased by 1.0% to 765,150 units compared to the same period last year, profitability improved significantly due to reduced material costs and favorable exchange rate effects. The operating profit margin reached 13.1%, marking the highest quarterly level ever.

Looking at sales volume, domestic sales were 137,871 units (wholesale basis, same below), down 2.9% from the same period last year. Overseas sales also decreased by 0.6% to 622,644 units. The decline in sales volume was attributed to reduced electric vehicle sales domestically and the sale of older models mainly in regions such as India, Asia, and the Middle East overseas. Geopolitical factors were also considered to have had an impact.

Kia Yangjae Office Building
Photo by Hyundai Motor Group

Despite the decrease in sales volume, revenue increased thanks to higher average selling prices (ASP) driven by strong sales of eco-friendly vehicles such as hybrids and recreational vehicles (RVs). Additionally, the depreciation of the Korean won boosted overseas sales revenue. According to the company, the ASP was 33 million KRW domestically, up 3.8% from the first quarter of last year, and 36.1 million KRW globally, a 12.2% increase.

Furthermore, the prices of key raw materials such as battery cells stabilized at lower levels, reducing material costs and improving profitability. Comparing the factors contributing to the increase in operating profit from the first quarter of last year, the reduction in material costs had a decisive impact of 465 billion KRW. Exchange rate effects contributed 308 billion KRW, and mix improvement effects focused on higher-priced models added 256 billion KRW. Despite increased selling and administrative expenses such as incentives this year, profitability improved.

The operating profit margin surpassed the previous record of 13.0% set in the second quarter of last year. Since the fourth quarter of 2022, the company has consistently recorded double-digit quarterly operating profit margins. This level is comparable to, or not lower than, those of major mass-market and premium car brands. For reference, Tesla, known for its strong profitability, posted an operating profit margin of 5.5% in the first quarter of this year, which is half of last year’s figure.

Kia EV5 and local strategic model Sonet exhibited at 2024 Auto China held in Beijing, China
[Photo by Hyundai Motor Group]

Eco-friendly vehicles increased significantly, centered on hybrids. Sales reached 157,000 units, an 18.1% increase compared to the same period last year. The share of eco-friendly vehicles in total sales rose by 3.5 percentage points to 21.6%. By type, hybrids grew by more than 30%, electric vehicles also increased by nearly 8%, while plug-in hybrids decreased by 5%.

Despite the strong performance, the company expects the business environment to remain challenging. It anticipates intensified competition among manufacturers and a slowdown in electric vehicle demand growth, making the operating environment difficult. The company plans to increase sales domestically focusing on hybrids such as the Sorento and Carnival, and to maintain steady sales by launching new models like the EV3 and the improved EV6 in the second half of the year.

In the United States, the company intends to maintain efficient incentive levels by adjusting production according to demand. It also aims to enhance profitability with new models such as the Carnival Hybrid and K4, which are high-margin vehicles. In Europe, new electric vehicles including the EV3 will be added.

A company representative explained, "Although sales slightly decreased, profitability expanded due to price increases and mix improvements centered on high-margin vehicles, reduced material costs from lower raw material prices, and positive exchange rate effects from the weak Korean won."